Xero reports NZD $2.1 billion revenue & 23% annual growth

Xero has reported its financial results for the year ended 31 March 2025, recording 23% revenue growth and achieving a Rule of 40 outcome of 44.3%.

Xero's operating revenue for FY25 reached NZD $2.1 billion, up from NZD $1.71 billion in the previous year. The company's net profit after tax rose to NZD $227.8 million, representing an increase of 30%. Operating expenses as a proportion of revenue fell to 71.8% from 73.3% last year.

Adjusted EBITDA for the year increased by 22% to NZD $640.6 million, and the company reported free cash flow of NZD $506.7 million, up 48% from NZD $342.1 million. The free cash flow margin improved to 24.1%, compared to 20.0% in FY24.

The company's subscriber base grew by 6% to 4.41 million, with 254,000 net subscriber additions. When accounting for the removal of long idle subscriptions, total net additions stood at 414,000, marking a 10% increase. Average revenue per user (ARPU) was NZD $45.08, a rise of 15%. Average monthly churn remained historically low at 1.03% on the adjusted basis.

Xero's annualised monthly recurring revenue (AMRR) grew by 22% to NZD $2.39 billion. The total lifetime value of subscribers, after adjusting for long idle subscription removals, increased 16% to NZD $17.9 billion. Gross margin also increased by 0.8 percentage points to 89.0%.

Commenting on the results, Chief Executive Officer Sukhinder Singh Cassidy said: "Our FY25 results demonstrate Xero's macro-resilient growth and effective execution of our strategy. Our focus on balanced profitable growth has enabled us to again deliver strong EBITDA growth and a greater than Rule of 40 outcome. We have achieved this while maintaining strong momentum across our strategic pillars and, importantly, have increased our product velocity to bring more value to customers through our focused 3x3 strategy. All this is underpinned by our continued investment in our product and people, and operating discipline to deliver on our aspirations."

She added: "We remain excited about the large, untapped opportunity to help SMBs and accountants and bookkeepers globally to digitise, and we continue to focus on making life better for people in small business, their advisors, and communities around the world."

The company highlighted improvements and new features delivered as part of its 3x3 strategy, concentrating on accounting, payroll, and payments in its primary markets. Key developments for accounting included the launch of Xero Simple to support UK customers with Making Tax Digital for Income Tax, and enhancements to Xero's US offering through expanded direct bank feeds and the acquisition of Sy Analytics. Payroll updates featured expanded auto super capabilities in Australia, a beta launch of Rostering in Xero Payroll, payroll enhancements in the UK, and deeper collaboration with Gusto for an embedded US payroll solution to be launched in FY26. Payments developments were marked by the introduction of Tap to Pay for mobile app users in Australia, the UK, and the US, as well as migrations to a new invoicing product and expansions of bill payment partnerships.

Xero also launched Just Ask Xero (JAX), its GenAI-powered smart business companion, which was made available in beta to all business edition customers by the end of the financial year.

By region, Australia and New Zealand delivered revenue growth of 21% to NZD $1.18 billion, with ARPU increasing 10% to NZD $41.66 and total subscribers reaching 2.6 million. In international markets, revenue rose 24% to NZD $925.6 million, ARPU increased by 21% to NZD $49.82, and subscribers totalled 1.8 million.

In terms of outlook, Xero expects its operating expense ratio for FY26 to be approximately 71.5%, with a higher ratio expected in the first half of the year due to non-recurring remuneration impacts and planned investment spend. The company reiterated its aspiration to double the size of its business while maintaining Rule of 40 or greater performance over time. This includes a focus on balancing subscriber growth with ARPU expansion.

Company founder Rod Drury commented on Xero's trajectory: "Super proud of the Xero results. $2B of revenue and $640m earnings. According to Radio New Zealand we are New Zealand's biggest listed company at around $NZ30B market cap. ... Super proud of all the Xero's that created this incredible business, much thanks for our valued customers and gratitude to our faithful shareholders who gave us the opportunity."