The NZX- and ASX-listed cloud accounting group reported net profit after tax of $NZ167.4 million for the year to March 31, a 27% slide that missed analyst expectations around $NZ232 million.
Its share price dropped 7.8% to $74.71 on Thursday, extending a 12‑month plunge of more than 50% and leaving the stock trading at roughly half last year’s level. Investors are also nervous about intensifying competition from artificial intelligence tools from groups such as Anthropic, which could eventually erode demand for Xero’s core software.
Falling shares have sharply reduced the value of equity incentives for Xero’s chief executive, whose package was restructured in December 2024 to align more closely with US peers. The total potential remuneration was set at $23.3 million, primarily in share-based awards, which could have put the executive among the highest-paid leaders on the ASX.
According to the company’s annual report, actual take-home last year came in at $NZ7.5 million ($6.1 million) because many options were underwater at the reporting date. Those stock-based awards remain worthless unless Xero’s share price more than doubles to trade above the $171.11 strike price.
Operationally, the Melio acquisition is delivering growth but at a significant cost to income. Revenue jumped 31% to about $NZ2.75 billion ($2.25 billion), helped by an acceleration in US performance and 110,000 extra customers and by stronger Australian demand.
Melio-related acquisition expenses of $50.6 million slashed operating profit, contributing to a 13% drop in operating income to $NZ316.1 million. Xero also committed a further $NZ55 million to US brand investment for the year ahead, showing it is prepared to spend heavily to entrench its presence in the American market.
To steady sentiment after its market value was hammered, with the stock down more than 53% over 12 months, the Wellington-based company has moved to support the share price. Xero announced a $550 million on-market buyback, effectively returning capital to shareholders while signalling confidence in its longer-term trajectory.
Analysts at Citi pointed out that full-year adjusted earnings of $NZ757 million ($619 million) came in slightly ahead of consensus, aided by lower operating costs and in-line revenue. The tension for investors now centres on whether US momentum and Melio’s contribution can keep justifying aggressive spend as AI-powered rivals challenge how defensible Xero’s growth story is.
