XRO Price Has Fallen 64% in a Year: Can Xero Make a Comeback?

A high-growth ASX stock with strong business fundamentals and recent strong results, despite the recent price drop from its peak.

Xero Limited (ASX: XRO) is one of the technology-based ASX stocks, currently trading at a market capitalisation of $9.78 billion. AI is replacing the SaaS business, resulting in a price fall of ~64% in a year.

Despite the significant decline from its peak, Xero has reported strong business growth across revenue, customers, recurring revenue and EBITDA.

Xero reports strong FY26 growth

Xero Limited announced its FY26 annual result on 14 May 2026 for the period ended March 2026.

Operating revenue increased by 31% YoY to NZ$2.75 billion, while total customers grew by 11% to 4.9 million. Net customer additions doubled to 506,000, representing growth of 99% YoY.

Operating revenue showed organic growth of 21% YoY, while growth on a constant-currency basis was 19% YoY.

The average revenue per customer increased by 23% to NZ$55.4, while annualised monthly recurring revenue surged by 37% YoY to NZ$3.27 billion.

Xero's total customer lifetime value increased by 17% to NZ$21 billion.

At the segment level, ANZ revenue increased by 18% YoY to NZ$1.39 billion. The international business grew by 47% YoY, with organic growth of 25% YoY, reaching NZ$1.36 billion.

EBITDA and free cash flow continue to grow

Xero reported a gross margin of 83.9%, while EBITDA increased by 24% YoY to NZ$789 million.

Adjusted EBITDA reported organic growth of 30% YoY to NZ$757 million.

XRO reported a net profit after tax of NZ$167.4 million.

Free cash flow increased by 9% YoY to NZ$554 million, representing a free cash flow margin of 20.1%.

The Rule of 40 also increased by 4.2 percentage points YoY to 48.5%.

Strong balance sheet

Xero has a strong balance sheet, with total cash and short-term deposits of NZ$1.9 billion and convertible notes of approximately NZ$1.62 billion.

Net debt/EBITDA declined to 0.5x.

What is Xero expecting in FY27?

Xero Limited is expected to carry the same growth momentum into FY27, with operating revenue expected to be in the range of NZ$3.6 billion to NZ$3.7 billion.

The company expects adjusted EBITDA to be in the range of NZ$860 million to NZ$920 million. This includes incremental US brand spending of up to approximately NZ$55 million.

Xero expects a higher-than-historical weighting towards the second half of FY27.

The company expects depreciation and amortisation expense to be NZ$465 million in FY27, while the product capitalisation rate is expected to remain similar to its long-term range.

Xero reiterates FY28 aspirations following Melio acquisition

Xero has outlined its FY28 aspiration as part of the Melio acquisition.

The company expects the combined business to significantly accelerate US revenue growth and provide an opportunity to increase its FY25 revenue by more than twofold in FY28, excluding anticipated revenue synergies.

The outcome is expected to support Xero's aspiration to deliver a greater-than-Rule-of-40 outcome for the group in FY28.

Melio is expected to achieve adjusted EBITDA breakeven on a run-rate basis in H2 FY28.

Can XRO make a comeback?

Xero Limited is a high-growth company with strong headline revenue and AMRR growth, led by US acceleration.

The company's durable EBITDA growth is absorbing the Melio investment, making a lesser impact on net profit.

The AI integration has helped XRO to improve its productivity and operational efficiency and provides new areas of innovation.

XRO also has a solid balance sheet to support continuous expansion and tap different markets, with capital discipline funding growth.

Xero is currently heavily investing in the US market expansion, which could provide long-term value creation, subject to execution and concentration risk.

For investors following the XRO share price, the combination of strong business fundamentals, FY27 growth expectations and the company's US expansion will remain important factors to watch.