Xero gave staff 30 days to accept terms as investors focused on the company’s 43% stock-based pay ratio. Sydney, July 12, 2026, 23:11 (AEST)
Xero Limited ASX:XRO has told employees rated “Below Expectation” to either take voluntary severance or go on a 30-day performance-improvement plan. The company is getting stricter as it ramps up its push into artificial intelligence and U.S. payments. CEO Sukhinder Singh Cassidy wrote to staff, “As AI changes how work gets done, we have the chance to redefine how small business finance works.” The change follows a 58% spike in non-cash share-based payment expense to NZ$240.1 million, or 43.3% of Xero’s free cash flow. That’s up from 30.0% a year ago. Forbes Australia
This is key because Xero’s FY27 guidance shows revenue growing much faster than profit. At the midpoint, Xero sees sales up 33.5% to NZ$3.675 billion, but adjusted EBITDA rising only 17.5% to NZ$890 million. That would mean a margin of 24.2%, down from last year’s 27.5%. The outlook also factors in as much as NZ$55 million for U.S. brand spending and expects more profit booked in the second half.
| Metric | FY26 actual | FY27 midpoint | Change |
|---|---|---|---|
| Revenue | NZ$2.753 billion | NZ$3.675 billion | +33.5% |
| Adjusted EBITDA | NZ$757.4 million | NZ$890.0 million | +17.5% |
| Adjusted EBITDA margin | 27.5% | 24.2% | -3.3 percentage points |
Company filings. FY27 numbers use the midpoint from Xero’s guidance ranges.
Xero’s headcount numbers point to tighter conditions ahead of the latest moves. The company finished March with 5,114 full-time-equivalent staff, up 11%, but 578 were from Melio. Without Melio, Xero’s staffing dropped by 74 to 4,536. Revenue per year-end employee hit about NZ$538,000, up 18%. Melio didn’t contribute for the full period, so this figure should be treated as a trend, not a strict performance metric.
| Operating measure | FY25 | FY26 | Change |
|---|---|---|---|
| Xero headcount, Melio not included | 4,610 | 4,536 | -1.6% |
| Revenue per staff at year end | NZ$456,000 | NZ$538,000 | +18.0% |
| Free cash flow | NZ$506.7 million | NZ$554.0 million | +9.3% |
| Free cash flow margin | 24.1% | 20.1% | -4.0 percentage points |
| Share-based pay expenses | NZ$151.9 million | NZ$240.1 million | +58.1% |
| Share-based pay as % of free cash flow | 30.0% | 43.3% | +13.4 percentage points |
Company filings and reporter calculations using revenue, year-end headcount, free cash flow, and share-based comp data.
Executive pay adds to the pressure. For 2024, Singh Cassidy’s annual target came in at US$15.2 million, plus a one-off grant of 575,000 options — giving her the right to buy shares at A$171.11. The options were valued at US$26.49 million at grant. Xero’s annual report put the FY26 accounting-value at NZ$28.9 million, while Singh Cassidy’s take-home pay was NZ$7.5 million. At Friday’s close of A$73.40, the option exercise price is 133% higher than the market. “The Board is committed to linking pay with performance,” Chair David Thodey said when the package was agreed. ASX Announcements
Xero is willing to spend up to A$550 million by FY27 on market buybacks to counter staff equity awards, including older grants. At Friday’s price, that could buy about 7.5 million shares, or 4.4% of the 170.6 million on issue as of April 9, though the final number depends on where shares trade. The buyback plan is aimed at capping dilution, but it doesn’t have to cut the share count.
Xero rose 1.6% this week, going from the July 3 close to finish at A$73.40 on Friday, even after a 1.3% drop in the last session. Shares are still down 59.8% from the 52-week high. The company rolled out new AI tools at Xerocon London and appointed Maninder Sawhney chief business officer last week. Even so, the small gain kept doubts around execution in place.
WiseTech Global Limited ASX:WTC picked up 3.2%, matching Xero’s move as both stocks featured in turnaround talk Friday. Founder Richard White left the executive chair post July 7, handing it to Raelene Murphy, now an independent chair. White is still chief innovation officer. Governance is the main question for WiseTech’s share price rebound. Over at Xero, the story is about U.S. growth and equity incentives.
Xero showed up as undervalued on a Simply Wall St DCF screen out Saturday, but the same report pointed out its high P/E ratio and soft recent earnings. Discounted cash flow models depend heavily on growth forecasts and discount rates. For Xero, the focus is on whether Melio and U.S. marketing can keep free cash flow up while margins shrink.
The stricter staff approach could have a mixed effect. It might help with accountability, but risks shaking up Xero’s product and sales teams as it absorbs Melio and spends as much as NZ$55 million more on U.S. branding. RBC Capital Markets analyst Garry Sherriff said at the Melio deal’s launch, “It will take time to process the intricacies of the deal and the pathway forward”; slower U.S. customer growth would leave the lighter FY27 margin with less cushion. Forbes Australia
The ASX opens again Monday, July 13, after the weekend. No Xero results are due this week. The next date for Xero investors is the Aug. 27 annual meeting, then half-year results on Nov. 12. Investors want details on pay, share buys, and if the new performance system changes hiring or retention, but those won’t come until later.
