Xero cracks $2 billion revenue for first time but subscriber growth slows

Xero chief executive Sukhinder Singh Cassidy at a Time Women of the Year leadership forum in Los Angeles in February. The Photo / Getty Images

Xero cracked $2 billion revenue for the first time and saw net profit jump by a third for the year to March 31 but also saw its subscriber growth halve and offered only limited guidance for FY2026 amid a tumultuous global environment.

The cloud accounting firm reported FY2025 revenue that increased to $2.1b from $1.7b in FY2024.

Net profit was up 30% to $227.8 million.

And ebitda climbed 28% to $638.4m (The Wellington-incorporated and domiciled ASX-listed firm reports in New Zealand dollars).

But while total subscribers increased 6% from 4.16m to 4.41m, net subscriber additions fell 39%.

There were 254,000 net new subs, down from the 419,000 in FY2024.

Xero, which had price rises across some regions and plans in September last year and April this year, said it increased average revenue per user per month by 15% (or 11% in constant currency terms) to $45.08.

A spokesman for Xero said the FY2025 totals included 160,000 paying subscribers who had been removed because they were idle. “They were very low arpu,” the spokesman said. A filing said the removed subs spent “approximately” $3.70 per month. Removing these low-yielding users had accounted for approximately 3 to 5% of the arpu boost.

The firm did not immediately provide profit/loss or revenue guidance for FY2026. The only forecast in its investor presentation was that expenses as a share of revenue would be around 71.5% versus 71.8% in the year just closed.

Tariff impact

Morningstar tech sector equity analyst Roy Van Keulen said software is exempt from US President Donald Trump’s new tariffs.

That means “most software companies won’t take a direct hit”, he said.

But he added: “Exceptions include Xero and SiteMinder [an ASX-listed hotel e-commerce platform], which have more economic sensitivity.

“Potential medium-term impacts, if global aggregate demand decreases, include lower business formation rates and higher business failure rates, both of which can affect subscriber growth for Xero,” Van Keulen told the Herald.

“Additionally, Xero’s primary profit base is Australia, which is highly leveraged to China’s economy, which appears to be the primary target of the tariffs, given it is the primary rival to the global superpower, the US.”

Australia grows faster than NZ

Australasia, where revenue grew 20% to $1.18b, continued to account for more than half of Xero’s turnover.

But it was a game of two sides, with Australian revenue increasing 24% to $995,000 and New Zealand by 11% to $222m.

New Zealand was the poorest-performing Xero market in revenue terms as its UK business grew 21%, North America by 21% and the rest of the world by 19%.

The result was released before the ASX opened.

Xero shares closed on Wednesday at A$173.86 for a market cap of A$26.7b [update: shares were up 4.0% to A$180.91 in early afternoon trading].

The stock is up 3.8% year-to-date and 42% over the past year.

Chris Keall is an Auckland-based member of the Herald‘s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.