Sydney, February 3, 2026, 16:55 AEDT — After-hours
- Xero jumped 2.6% following an investor briefing that highlighted opportunities in AI and U.S. payments
- The company aims for Melio to reach breakeven on an adjusted-EBITDA run-rate basis by the second half of FY28
- Xero’s next test comes with its full-year results on May 14, when the company intends to update its guidance framework
Xero shares closed up 2.57% at A$96.10 on Tuesday, following an investor briefing where the cloud accounting firm outlined its AI strategy and plans for its U.S. payments business. Throughout the session, the stock fluctuated between A$93.19 and A$97.50.
The update arrives at a tricky time for investors. Xero’s share price hovers near the low point of its 52-week range, with the market eager for clearer signals on how the company plans to convert AI product investments and U.S. payments growth into profit.
In a market release, Xero announced the session will showcase product demos featuring several AI agents running on “JAX,” along with Melio’s multi-channel payments solution. Chief executive Sukhinder Singh Cassidy emphasized Xero’s strong commitment to seizing the global AI and US accounting plus payments markets.
Management pitched AI not just as a support tool, but as a shift from a “system of record” to a platform that actually helps users take action and make decisions. Xero reported over two million subscribers tapping into its AI features, with upwards of 300,000 engaging its newer generative-AI capabilities.
The company highlighted internal usage metrics, noting a rise in JAX messages per user over the past three months. It plans to prioritize driving adoption, enhancing product value, and monetising new AI features in FY27.
On the U.S. front, Xero has been working Melio into its operations since the deal closed in October 2025, adding basic bill-pay features directly into the Xero platform and merging their go-to-market teams. The company expects Melio to hit adjusted-EBITDA breakeven on a run-rate basis in the second half of FY28 — with “run-rate” defined as at least one month of positive contribution.
New slides from the briefing revealed pro-forma figures for the combined U.S. business. Xero reported BillPay payments revenue climbing 74%, jumping from NZ$91 million in FY24 to NZ$158 million in FY25. Total BillPay payment volume (TPV) surged 67% to NZ$31.7 billion. The gross take rate — the slice of payment volume Xero keeps — increased slightly to 0.50% from 0.48%. However, U.S. gross margin fell to 38% from 43%.
Xero confirmed its FY26 cost framework, maintaining total operating expenses around 70.5% of revenue and noting the ratio is expected to be lower in H2 than H1. The company also announced it will move to forward guidance based on adjusted EBITDA starting with the May results. Additionally, it plans to introduce a one-off FY27 revenue growth range to connect to its FY28 targets.
Xero’s move into payments puts it in a more challenging spot. In the U.S., it’s battling to expand against bigger players like Intuit, while pushing a combined “accounting plus payments” package that could boost revenue per customer—if users actually adopt it.
There are clear risks, though. Payments might boost volume but also squeeze margins and make forecasting tricky. Xero’s own pro-forma figures revealed a year-on-year dip in U.S. gross margin despite rising revenue. Then there’s AI — clients could adopt the tools, but monetising them might lag behind investor expectations.
Traders are set to see if Tuesday’s surge sticks around and if brokers adjust their models after reviewing the latest U.S. TPV, take-rate, and margin data. Another key focus is how the company plans to price new AI features—will they come bundled with subscriptions or offered as add-ons—and the impact on churn and average revenue per user.
Xero’s full-year results drop on May 14. The company plans to update on Melio, U.S. operations, and will start giving forward guidance based on adjusted EBITDA.
