Sydney, Feb 6, 2026, 17:31 (AEDT) — Market closed
- Xero slipped 0.4% to A$81.76, closing out a turbulent week for software shares
- This week, Xero highlighted its AI initiatives and U.S. payments strategy, while Melio is expected to reach breakeven in H2 FY28
- Traders remain focused on the latest AI headlines and their potential impact on software pricing power
Xero Limited (ASX: XRO) shares edged down 0.4% on Friday, finishing at A$81.76. Peer WiseTech Global took a bigger hit, dropping 4.7%, as caution lingered around software stocks. (Australian Securities Exchange)
The small-business accounting software maker now stands as a sharp indicator of a larger battle: will the latest AI tools boost margins for established software companies or chip away at them?
This matters now as the selloff has been swift and chaotic, showing little regard for underlying business models. Investors are scrambling to distinguish between genuine “defensive software” and mere subscriptions vulnerable to price cuts.
Xero is right in the thick of this debate. The company offers subscriptions to small businesses and bookkeepers but is also making moves to expand U.S. payments through Melio, aiming to link accounting more tightly with money movement.
CEO Sukhinder Singh Cassidy told investors on Tuesday the company is “deeply focused on capturing the global AI and US accounting plus payments TAM” — total addressable market — unveiling AI agents under its “Just Ask Xero” (JAX) brand. Xero reported over two million subscribers are already using its AI features, with more than 300,000 tapping the latest generative AI tools. The firm expects Melio to hit adjusted EBITDA breakeven on a run-rate basis in the second half of FY28. It stuck to its FY26 guidance, forecasting operating expenses around 70.5% of revenue, but plans to shift its forward guidance to adjusted EBITDA at its May results, moving away from its current operating-expense ratio metric. (ASX Announcements)
Xero plunged 16% on Wednesday, marking its steepest single-day fall since 2013, as worries about AI disruption rippled through Asian software stocks. Investors fear the fast-paced AI advancements might destabilize established business models. (Bloomberg)
Concerns flared again overnight after Anthropic launched an upgraded model, Claude Opus 4.6, along with expanded enterprise tools. This came just days after earlier product updates triggered a selloff across the sector. Scott White, Anthropic’s head of product for enterprise, said the aim is to link AI with legacy software: “We are excited to partner and actually lower the floor to get more value out of those tools.” (Reuters)
Anthropic announced that Opus 4.6 supports extended “agentic” tasks and is rolling out a 1-million-token context window in beta—letting users input vastly more text in one prompt. The firm also highlighted improvements in coding tasks, aiming to expand its reach from developers to everyday business users. (Anthropic)
For Xero, the question is practical, not philosophical. Investors are watching to see if AI features can be added without triggering higher churn, and if payments can expand without squeezing margins.
The downside remains a real risk: if customers use AI as leverage to push prices down or shift to software outside Xero’s ecosystem, subscription growth and pricing power could suffer. Payments adds complexity, too; reaching breakeven later than planned would tighten the budget for product investment just as rivals ramp up the pressure.
Once the market reopens next week, traders will look to see if the global software selloff eases or gains momentum. For Xero, the key date is May 14, when it releases FY26 results. Investors are keen for updates on adjusted-EBITDA guidance, progress with AI monetisation, and developments in U.S. payments.
