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Xero H1 2026 earnings summary
Complete event summary combining all related documents: earnings call transcript, report, and slide presentation.H1 2026 earnings summary13 Nov, 2025
Executive summary
Achieved strong H1 FY26 results with 20% year-over-year revenue growth to $1.19b and robust free cash flow, driven by disciplined capital allocation and execution of strategic priorities.
Completed Melio acquisition, expanding US scale and payments capabilities, and accelerating growth opportunities.
Continued investment in AI and product innovation, including the rollout of JAX, enhanced analytics, and embedded payroll with Gusto.
Subscriber base grew 10% year-over-year to 4.6 million, with international markets contributing 54% of net new additions.
Maintained performance above the Rule of 40 at 44.5%.
Financial highlights
Operating revenue grew 20% year-over-year to $1,194m (18% in constant currency); subscription revenue up 18%, other operating revenue up 44%.
Adjusted EBITDA rose 12% to $351m; adjusted EBITDA margin at 29.4%.
Free cash flow increased 54% to $321m, with a margin of 26.9%.
Net profit after tax grew 42% to $135m; basic EPS rose to $0.84 from $0.62.
Gross profit margin was 88.5%, slightly down due to continued investment in customer experience.
Outlook and guidance
FY26 operating expense to revenue ratio expected to be around 70.5%, improved from previous guidance.
Ratio expected to be lower in H2 FY26 versus H1 FY26, with Melio integration providing additional efficiencies.
Combined business expected to more than double FY25 group revenue by FY28, with Rule of 40 outcomes anticipated to exceed 40% at group level.
Short-term headwinds from increased interest costs and non-cash amortization due to Melio acquisition.
Seasonality expected to drive higher H2 revenue.
Melio's impact on Rule of 40 before FY28
Drivers of FY26 OPEX ratio improvement
Explain the LTV/CAC ratio decline
Melio's path to profitability and margin expansion
Back book ARPU growth drivers and timeline
AI's role in driving future operating leverage
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Frequently asked questions
Xero Limited provides online accounting software for small and medium-sized businesses. Its flagship product is Xero, a subscription-based accounting software platform that provides a range of functionalities, including invoicing, bookkeeping, bank reconciliation, accounts payable and receivable, inventory, payroll processing, and project management. The company also offers Xero Mobile app to enable small business owners to do their business banking tasks on the go; and Xero HQ app to provide real-time information about individual client portfolios.
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