But the portfolio manager thought investors over-reacted to yesterday's news, and his firm backed up the truck.
"We bought stock back post the result and the stock price correction," Solly said.
"In our view, the Xero management team are doing the right thing investing for growth."
Jarden analyst Elise Kennedy struck a similar theme. Kennedy said investors were both too optimistic about Xero's first-half profit prospects, and too negative about fundamentals, which were heading in the right direction.
Kennedy said while Xero missed the consensus profit/loss forecast, its subscriber numbers and costs were better than expected.
Xero's total addressable market (TAM) of sole traders and small businesses was larger than initially thought, so it made sense to push for growth over profit.
"If you had market leadership in an estimated $74b [industry] but had captured only 1.1 per cent share, would you continue to invest to capture more or focus on monetising existing customers?" Kennedy wrote in a note to clients.
She reiterated her buy rating, and kept her 12-month target at A$150.00.
Although it reported a A$5.9m first-half loss for the six months to September 30, (vs the year-ago interim profit of A$34.5m), and ebitda fell 19 per cent to A$98.1m, revenue rose 23 per cent to A$505.7m.
Subscriber numbers were also up by 23 per cent (or 560,000 users) as Xero subs topped the 3 million mark for the first time (the firm closed the half with 3.01 million paying subs).
Average monthly revenue per user (arpu) slipped in Australia and New Zealand but increased internationally. Overall, arpu was up 5 per cent to A$31.32.
Staff numbers increased by 1000 against the year-ago period to 4200, with many of the newcomers taken on through Xero's string of recent acquisitions.
At its first-half result briefing, Xero announced its acquisition of US cloud-based inventory management provider Locate Inventory for US$19m.
Xero said the deal would help it meet increased small business demand for inventory and cashflow management tools.
Locate was Xero's third major acquisition of 2021.
Near the start of the outbreak, Fisher Funds senior portfolio manager Sam Dickie told the Herald that while Xero faced the challenge of Covid hitting its small business customers, the firm's strong cash position meant it could also make gains during the pandemic as rivals were laid low.
That proved to be the case as Xero has piled on customers, and made a number of deals to increase and diversify its business.
In March, Xero scooped up Planday, a Danish maker of employee scheduling software, for an upfront payment of €155.7m in its largest-ever deal.
In April, it bought Swedish e-invoicing firm Tickstar for A$23m.
And earlier, in August 2020, Xero paid A$80m for Waddle, an Australian startup that offered quick loans to small businesses secured against their accounts receivables - helping to tide them over until an invoice is paid.
More deals could be ahead. Although its net cash position fell to A$125m from the year-ago A$178m, Xero still has an undrawn credit facility of A$150m and total liquidity of A$1.2b.
With pandemic uncertainty lingering, Xero chief executive Steve Vamos again only offered limited guidance, focusing on costs.
Total operating costs - excluding acquisition integration costs - would be the range of 80 to 85 per cent of revenue - or flat against the second half of FY2021.
Acquisition integration costs were expected to increase operating expenses by another 2 per cent above that in the second half.
And, broadly, Vamos indicated that the push for growth over profit would continue in the short term.
"Xero will continue to focus on growing its global small business platform, and maintain a preference for reinvesting cash generated," the CEO said.
Shares were staging a recovery in early-afternoon Friday trading on the ASX, up 2.5 per cent to A$141.66.
