Interim results for the half ended September 30, 2026, presented in Sydney on November 12, 2026, alongside a customer and product showcase

Xero lifted its FY27 revenue outlook, raised the bottom end of its EBITDA range, and announced a buyback of up to AUD 1 billion over 12 months. CEO Sukhinder Singh Cassidy also announced that CFO Claire Bramley is leaving for a larger CFO role. Bramley will stay through the end of January, and a global search for her successor is under way. Cassidy called Bramley "an exceptional partner" who "brought greater discipline to our capital allocation framework."

Guidance upgrade and a larger FY28 revenue ambition

Xero now expects FY27 operating revenue of $3.77 billion to $3.83 billion. It attributes the increase largely to stronger Melio payments performance plus a foreign exchange benefit. Pro forma constant currency revenue growth is guided to 24% to 27%. Adjusted EBITDA guidance is $880 million to $920 million, with the bottom end raised. That implies second-half EBITDA of $518 million to $558 million, up 29% to 39% on last year's pro forma second half. Bramley said part of the revenue upside is being reinvested in AI capabilities and cloud infrastructure rather than dropping fully to EBITDA. She also noted that a weaker New Zealand dollar lifts the offshore cost base, and that payments revenue carries lower margins than subscriptions.

Management now expects a pro forma Rule of 40 outcome of around 40% for FY27, up from 36% last year and roughly a year earlier than previously signaled. The FY28 revenue aspiration rose to more than $4.6 billion from more than $4.2 billion, excluding about $70 million of expected revenue synergies. Xero reiterated that it aims to exceed the Rule of 40 in FY28. Asked by Barrenjoey's Eric Choi to translate that into FY28 EBITDA, Bramley declined to give a figure but said "you're thinking about it in the right way." She said most of the upgrade comes from underlying operating performance across both Melio and the Xero subscription business, with FX a smaller portion. Pressed on why Melio EBITDA breakeven stays at the second half of FY28, she said the FY28 revenue upgrade is not driven entirely by Melio. Melio losses will be lower in the second half of FY27 than in the first.

AUD 1 billion buyback follows the AUD 550 million program

The board approved an on-market buyback of up to AUD 1 billion. It follows the completed AUD 550 million program that offset share-based compensation dilution. Bramley said "we believe the current share price does not fully reflect Xero's long-term value and growth potential." She said the new program will both neutralize issuance and reduce absolute share count, funded from excess cash and free cash flow. Net debt to pro forma adjusted EBITDA is 1.1x, and total liquid resources are $1.5 billion. The remaining USD 200 million drawn on the revolving credit facility has been repaid since period end, leaving it fully undrawn. Bramley said Xero retains capacity for its "build, partner or buy" approach. Pro forma free cash flow rose 32% to $238 million.

XForce: from software licenses to solution selling

The most significant strategic announcement was XForce, an end-to-end offering for larger accounting and bookkeeping firms and more complex small businesses. It builds on XeroForce, the natural language agent builder currently in alpha. Cassidy said more than 100 XeroForce workflows are already running day to day, and more than 500 customers are on the waitlist for the beta. XForce adds two elements. The first is deployed engineers working alongside Xero's partner consultants to design and build workflows using XeroForce, APIs and JAX. The second is an "AI teammate" that can take on tasks "much like a junior employee." Melio previewed an early version of the latter, called Casper, for US firms at Xerocon Denver. Design partners include Nexia and Shepherd Kenson in New Zealand. Cassidy declined to give a launch date, saying Xero wants to work with design partners before commercializing.

Cassidy framed this as a new revenue model. "Historically, we monetized accountants and bookkeepers by selling bundles of licenses," she said, calling solution selling "an entirely new monetization stream for Xero." She outlined three monetization routes. The first is bundling AI into existing plans. The second is consumption through credits, add-ons and API usage, where early UK uptake of AI add-ons on lower-priced tiers is encouraging. The third is charging for custom solutions built on Xero's APIs.

On the pricing question from Choi, who cited Intuit's use of AI to step up pricing, Cassidy said broad features such as Smart Doc Capture and Auto Bank Rec will be bundled, "probably in some fashion that supports our price increases." She added, "I don't think you should assume that is read into any of our upgrades." She also said she would "not yet submit" that H1 plan mix shift was driven by AI features, because the features only launched over the past six months. Xero deliberately kept AI out of its lowest plans given price sensitivity and sees add-ons working there. Consumption metering, she said, correlates with the size and complexity of the business. Xero expects a mix of models, with some very small customers preferring certainty over metering. On model strategy, Cassidy said Xero is model agnostic and will use both proprietary and open-weight models, since many machine learning tasks "do not require a frontier model."

AI adoption metrics

About 1 million customers have used generative AI features over the last 12 months, and monthly active users are up ninefold. Auto Bank Rec is the most used feature, with around 90% of customers returning month after month. It has reconciled more than 100 million transactions with accuracy above 96%, and Xero says it roughly halves monthly reconciliation time. JAX Chat customers grew sixfold, and Smart Document Capture usage grew 4.5x in six months. Customers connecting through Claude, ChatGPT and Microsoft 365 Copilot grew about 40% month on month in September. Xero said AI adoption among Ultimate plan customers is about 5.5x the rate of Ignite and early Premium customers. Survey data showed 77% of micro businesses and 68% of small businesses across Australia, the UK and the US are at an early stage or have not adopted AI. Xero says its tools save the average practice more than 7 hours a week in Australia and the UK.

Internally, engineering velocity rose 2.5x, and 97% of engineers use at least one AI tool daily. Claude Code generates 78% of AI-assisted code changes. Revenue per FTE reached $696,000, up 36%, with headcount flat since H1 FY24.

Product showcase: Books Health and document chasing

At the pre-results showcase, Xero demonstrated XeroForce building a monthly client P&L email agent from a plain-language instruction. The agent includes a test mode in which nothing is sent and an activity log for review. Xero also previewed a Books Health score drawing on up to 50 signals, and automated document chasing from Partner Hub. Accountants can set thresholds, due dates and reminder frequency, and clients can respond by email, SMS or an in-app JAX nudge. JAX matches uploaded documents to transactions and supplier records. Customers on the panel stressed trust and consistency. Nuvo Accounting, with 31 offices and 650 staff, said it surfaces Xero data inside Claude. The CFO of Encompass Group said avoiding a move to an ERP saved the company more than $100,000.

Melio and US payments carry growth, with a lower gross margin

Operating revenue grew 46% to $1.745 billion, or 27% pro forma (22% in constant currency). Adjusted EBITDA was $362 million, up 3% reported and 23% pro forma. US pro forma revenue grew 51% to $365 million, with 455,000 customers after 31,000 additions. US pro forma gross profit was $119 million, up 43%. Payments rose to 22% of revenue. Total payment value grew 23% to $38 billion, and Melio's take rate expanded 21 basis points. Embedded Bill Pay reached annualized total contract value of USD 1 billion, with revenue up 65%, and its ARPC is $106. Cassidy said TPV per existing customer is rising month on month.

Cash flow Central now has 43 live partners, including US Bank, with more than 200 in the pipeline. PNC is planned for calendar 2027. Pro forma gross margin fell 3.1 percentage points to 76%, which Bramley attributed to Melio mix. She said core Xero gross margin is stable apart from one-time platform resilience investments. Management expects Melio gross margin to expand with take rate and payment options, and to reach run-rate EBITDA breakeven by the end of H2 FY28. US brand spend lifted unaided awareness by 4 percentage points, though Bramley called it "a multiyear journey."

Customer metrics, churn and unit economics

Xero has 5.1 million customers, up 11% pro forma, after adding 226,000 in the half. Group ARPC was $62.21, up 25%, and organic ARPC rose 14% to $56.4. Direct payments added $1.57 to ARPC since March, while targeted pricing contributed less than historically. Monthly recurring revenue churn over 12 months was 1.19%, slightly above pre-pandemic levels. Bramley called this "a mix story, not the change in existing customer behavior," pointing to a higher direct and international weighting. Cohort churn was 0.83%, up 2 basis points half on half, with 0.72% in ANZ and 1.14% internationally. LTV rose 16% to $22.7 billion, CAC payback improved to 13.1 months from 15.2, and LTV to CAC reached 6x. Operating expenses excluding M&A costs were 68.6% of revenue, and the product capitalization rate fell to 43.9% from 47.4%.

Core markets, Ultra and Making Tax Digital

Australia revenue grew 23% (17% in constant currency), with 91,000 net additions to 2.2 million customers. Cassidy cited "continued execution" rather than any specific driver. The UK grew 24% (20% in constant currency) with 85,000 additions, helped by Making Tax Digital for income tax. Bramley said that tailwind will fade as the mandate reaches smaller businesses and individuals who are not core targets. Ultra, launched for more complex mid-sized businesses, is selling mostly into the existing customer base through a new small business direct sales motion. Cassidy said new-customer take-up through performance marketing is still a minority of sales. Asked whether stand-alone Xero is growing below its prior 20% aspiration, Cassidy said she did not read weakness into the numbers, citing Ultra, AI solutions and payments.

Hedging

Responding to RBC's Tom Beadle, Bramley said Xero's hedging policy runs 12 to 24 months out and is intended to provide predictability, given that it reports in New Zealand dollars.