Xero Limited (ASX: XRO) has announced robust financial results for the first half of fiscal year 2027 (H1 FY27), leading to an upgraded outlook for FY27 and the initiation of an on-market share buy-back program of up to A$1 billion. Xero is a global small business platform and a trusted financial operating system for the AI era, unifying core financial operations such as accounting, payroll, and payments for businesses and their advisors. The company reported sustained momentum across its strategic initiatives, delivering strong financial outcomes for the six months ended 30 September 2026.
During H1 FY27, Xero’s revenue surged 46% to $1.7 billion (41% in constant currency), while its operating expense to revenue ratio improved by 8.1 percentage points to 68.9%. Adjusted EBITDA increased by 3% to $362 million, or 23% on a pro-forma basis, which accounts for the integration of Melio. Free cash flow also saw significant growth, rising 32% pro-forma to $238 million. This performance was underpinned by strong customer acquisition, with 226,000 net new customers added, bringing the total subscriber base to 5.1 million, alongside a 25% expansion in average revenue per customer (ARPC) to $62.21.
Following these strong results and a robust capital position, Xero’s Board approved an on-market share buy-back program of up to A$1 billion, slated for completion over the next 12 months. This is in addition to a recently concluded A$550 million program. The Board believes the current market valuation does not fully reflect Xero’s long-term value and growth potential, making the buy-back a value-accretive use of capital. Concurrently, Xero has upgraded its FY27 outlook, now expecting operating revenue between $3,770 million and $3,830 million and adjusted EBITDA between $880 million and $920 million.
CEO Sukhinder Singh Cassidy highlighted the disciplined execution of Xero’s 3×3 strategy, noting that rising customer numbers and ARPC expansion are powering growth, driven by continued small business digitisation and AI adoption. The company also anticipates achieving a pro-forma Rule of 40 outcome of approximately 40% for FY27, an improvement on previous expectations, and raised its FY28 aspiration, projecting revenue to exceed $4.6 billion, excluding synergies, and maintaining its ambition to deliver a greater than Rule of 40 outcome. Xero reiterated its guidance for Melio to reach adjusted EBITDA breakeven on a run-rate basis in the second half of FY28.
