Why is Xero crashing to 7-year lows while NEXTDC raises $1.1bn?

Xero is facing heavy selling despite strong FY26 results, while NEXTDC is raising funds to support its rapid data centre growth and strong customer demand. The two ASX companies are taking very different paths, with Xero dealing with pressure from the software sell-off and AI concerns, while NEXTDC continues to expand its data centre capacity.

The contrasting performance also highlights how differently ASX tech stocks can respond to changing market expectations, even when companies continue to report operational growth.

Xero Reports Strong FY26 Results Despite Share Price Decline

Xero Limited (ASX: XRO) reported FY26 revenue of $2.8 billion, up 31%, or 28% in constant currency. Adjusted EBITDA increased 18% to $757.4 million, while free cash flow reached $554.0 million.

The company also reported strong growth across several key operating metrics. AMRR increased 37% to $3.3 billion, while organic growth reached 25%.

Xero added 506,000 customers during the year, taking total LTV to $21.0 billion. Average monthly churn was 1.14%.

Growth was also recorded across its key geographic markets. Australia and New Zealand revenue increased 18% to $1.4 billion, while International revenue rose 47% to $1.4 billion.

The US was a major contributor to growth, with revenue increasing 240%, or 30% organically when excluding Melio. UK revenue also increased 26%.

AI Growth Adds Another Dimension to Xero

Xero's technology development continued during FY26.

JAX reached more than 40 million reconciled transactions with 97% reported accuracy, while GenAI-specific features reached 500,000 users. XeroForce was also announced as an invite-only alpha.

Looking ahead, Xero provided FY27 revenue guidance of $3.62–$3.73 billion and adjusted EBITDA guidance of $860–$920 million.

The company also authorised up to A$550 million of share purchases to offset share-based compensation dilution.

Despite these numbers, Xero shares have continued to decline and recently reached a seven-year low following a sharp September sell-off.

Why Is Xero Under Heavy Selling Pressure?

The decline has come despite there being no profit warning, earnings downgrade or major operational update behind the selling.

The stock has also been affected by the wider software sell-off, as investors question the impact of AI on the sector. This has created additional uncertainty around how established software businesses will be valued as artificial intelligence becomes increasingly integrated into business applications.

Melio has added another source of pressure. The acquisition has increased Xero's US payments exposure while also bringing additional costs and lower-margin revenue.

As a result, the share price decline has occurred against the backdrop of strong reported FY26 results and continued growth across several parts of the business.

NEXTDC Raises A$1.1 Billion as Data Centre Demand Grows

While Xero is facing pressure in the market, NEXTDC Limited (ASX: NXT) is raising significant capital as it continues expanding its data centre operations.

On 18 September 2026, NEXTDC announced that its A$1.1 billion subordinated convertible notes, due in 2031, had settled on 17 September.

The notes carry 1.75% annual interest, paid semiannually, and can convert into fully paid ordinary shares.

Cash-settled capped call transactions were also completed, while the Delta Placement settled on 14 September without NEXTDC issuing shares or receiving proceeds.

The notes began trading on the Vienna MTF on 18 September.

The capital raising comes as NEXTDC continues to invest heavily in expanding its data centre footprint and meeting growing customer demand.

NEXTDC Reports Strong FY26 Growth

NEXTDC's FY26 results showed continued growth across revenue, EBITDA and data centre capacity.

Net revenue increased 16% to A$405.0 million, while underlying EBITDA rose 15% to A$248.8 million.

The company invested heavily in expansion, with capital expenditure reaching A$3.397 billion.

Contracted utilisation reached 740.1MW, while built capacity increased to 287.9MW. Billing utilisation reached 175.0MW, supported by a 565.1MW Forward Order Book.

Contracted EBITDA is expected to exceed A$1.0 billion, while pro forma liquidity stood at A$8.7 billion.

These figures show the scale of NEXTDC's current expansion pipeline, with contracted capacity significantly exceeding its existing built and billing capacity.

NEXTDC Targets Further Expansion in FY27

NEXTDC expects its growth to continue into FY27.

The company has provided net revenue guidance of A$615–640 million and underlying EBITDA guidance of A$385–410 million.

Capital expenditure is expected to reach A$5.25–5.75 billion, highlighting the scale of its planned expansion.

NEXTDC expects 197MW to convert to billing in FY27, followed by another 221MW in FY28.

Development work is continuing across Sydney, Melbourne, Kuala Lumpur, Tokyo, Auckland and other locations.

The company also said its existing operating portfolio and Forward Order Book remain unaffected by proposed power reforms.

Xero and NEXTDC Are Moving in Very Different Directions

Xero and NEXTDC are currently facing very different market narratives.

Xero has reported strong FY26 financial and operational growth, but its shares have continued to fall amid the wider software sell-off, concerns around AI and pressure associated with the Melio acquisition.

NEXTDC, meanwhile, has raised A$1.1 billion through subordinated convertible notes while continuing to invest heavily in expanding its data centre capacity.

For Xero, the focus remains on how the market responds to its growth, AI developments and Melio exposure. For NEXTDC, the focus is on executing its expansion plans while converting its contracted capacity into future billing.

The two companies therefore present different business developments for investors to monitor: Xero is navigating changing expectations around software and AI, while NEXTDC is scaling its infrastructure to meet contracted demand.

Source: Company Report