Shares in dual-listed New Zealand group Xero experienced a sharp decline, plummeting 14 per cent to a three-year low. This drop occurred amidst a broad sell-off of technology stocks, triggered by investor apprehension that artificial intelligence could pose a competitive threat to software companies. Xero is a cloud-based accounting software platform for small businesses. It provides tools for managing invoicing, bank reconciliation, bookkeeping and more.
The company’s stock slumped 14.2 per cent to $82.48, marking its lowest trading point since early 2023. This downturn follows an investor day on Tuesday where Xero announced that its Melio product was anticipated to achieve profitability sooner than expected, which initially led to a 2.6 per cent increase in Xero’s share price that day.
Citi analyst Siraj Ahmed commented on Xero’s FY27 AI monetisation strategy, deeming it sensible, with a focus on bundling features into plans and optional add-ons to encourage adoption. However, Ahmed also noted a potential risk: upfront delivery costs may temporarily surpass revenue capture, which could exert pressure on gross margins in the near term.
Other technology companies also felt the impact of the sell-off, with TechnologyOne falling 8.4 per cent and WiseTech Global declining 7.4 per cent. These movements mirrored a 1.4 per cent drop in the Nasdaq overnight, spurred by PayPal’s 20 per cent loss due to missed earnings expectations. According to Commonwealth Bank analyst Ashwin Clarke, the losses stemmed from a broader sell-off of software stocks, driven by investor worries that AI could intensify competition within the software industry.
