Sydney, Feb 4, 2026, 16:50 AEDT — Market closed
- Xero tumbled 15.7% to A$81.06, hitting a 52-week low and ranking as the benchmark’s worst performer.
- The decline mirrored a widespread sell-off across listed software stocks, with Technology One and WiseTech Global each sliding roughly 10%
- Investors are turning to U.S. tech earnings this week and Xero’s May results update for the next sign of market direction
Xero shares dropped 15.65%, closing at A$81.06 in Sydney on Wednesday, marking a 52-week low despite the S&P/ASX 200 climbing 0.8%. Technology One and WiseTech Global also took hits, tumbling 10.47% and 10.26%, respectively.
This matters because Xero is caught between two volatile trades: high-growth software valuations and the market’s changing take on AI’s competitive impact. Once investors see software as “at risk” instead of “must own,” prices can tank quickly.
Wall Street set the tone overnight as U.S. stocks tumbled sharply Tuesday. Investors fretted that AI might ramp up competition for software makers after Anthropic rolled out a legal tool for its Claude chatbot. Alphabet and Amazon earnings are also looming this week. “We’re seeing a lot of software companies across the spectrum get hit,” said Art Hogan of B. Riley Wealth. Intuit plunged 11%, while Nvidia and Microsoft each slid nearly 3%. Reuters
Xero, the New Zealand-born accounting software firm listed on the ASX, spent Tuesday highlighting its growth drivers. In a market release from Wellington, the company detailed plans to expand its AI capabilities and U.S. payments business, notably through integrating Melio, which it acquired in October 2025. CEO Sukhinder Singh Cassidy said Xero is “deeply focused” on tapping into the global AI and U.S. “accounting plus payments” total addressable market. The company noted over two million subscribers already use its AI features, with more than 300,000 engaging with its newer generative AI tools. Xero stuck to its FY26 guidance, expects Melio to hit adjusted EBITDA breakeven on a run-rate basis in H2 FY28, and signaled a shift to providing adjusted EBITDA guidance at its FY26 results due May 14.
Rate concerns are adding pressure. On Tuesday, the Reserve Bank of Australia lifted its cash rate by 25 basis points to 3.85%, marking its first increase in two years. Markets quickly priced in another hike for May. “We continue to forecast a follow-up 25bp hike in May,” said Sally Auld, chief economist at National Australia Bank. Reuters
Investors will be watching closely in the next session to see if the tech sell-off continues to spread and if overseas software stocks can steady after another AI-fueled scare. A rebound in U.S. software might ease some pressure, but the mood remains fragile.
There’s a downside risk as well. If investors start to view AI as a force that will commoditise sections of business software, the instinct to sell first and ask questions later could stick around despite any company progress. For Xero, the stock remains vulnerable if AI implementation drives costs up quicker than revenue grows, or if the U.S. payments expansion drags on before delivering profits.
