Xero Posts NZD 2.1 Billion Revenue, 22% EBITDA Growth in FY25
Xero Limited reported a robust FY25 with 23% revenue growth and a 22% rise in adjusted EBITDA, underpinned by subscriber and ARPU gains across key markets. The company is doubling down on AI integration and disciplined capital allocation to sustain momentum.
- FY25 revenue up 23% to NZD 2.103 billion
- Adjusted EBITDA grows 22% to NZD 641 million
- Subscriber base expands 6% to 4.41 million with 15% ARPU increase
- Strong growth across Australia, New Zealand, UK, North America, and Rest of World
- Strategic focus on AI, product velocity, and disciplined capital allocation
Robust Financial Performance
Xero Limited has delivered a strong FY25 performance, reporting a 23% year-over-year increase in operating revenue to NZD 2.103 billion. Adjusted EBITDA rose 22% to NZD 641 million, reflecting disciplined capital allocation and operational leverage. The company’s Rule of 40 metric, which combines revenue growth and free cash flow margin, improved to 44.3%, underscoring a healthy balance between growth and profitability.
Subscriber Growth and ARPU Expansion
The subscriber base grew 6% to 4.41 million, while average revenue per user (ARPU) increased 15% to NZD 45.08. This growth was broad-based, with strong contributions from Australia, New Zealand, the UK, North America, and Rest of World segments. Notably, Xero removed 160,000 long idle subscriptions during the year, allowing sales teams to focus on higher-value customers and improve subscriber quality.
Market-Specific Highlights
Australia and New Zealand continued to show robust growth, with Australia benefiting from new product plans and payroll functionality enhancements. The UK market saw quality execution with new product offerings like Xero Simple for Making Tax Digital (MTD) for Income Tax, supporting subscriber growth. North America experienced improved US subscriber growth, although Canadian uptake remained limited. The Rest of World segment, led by South Africa, maintained solid revenue growth.
Strategic Priorities and Innovation
Xero’s FY25–27 strategy focuses on the '3x3' markets (Australia, UK, US) and key jobs to be done (accounting, payroll, payments). The company is accelerating AI integration, exemplified by the rollout of the JAX beta and investments in a world-class AI team. Product velocity has increased, with new features and partnerships enhancing customer value. Capital allocation remains disciplined, with operating expenses expected to be around 71.5% of revenue in FY26, reflecting continued investment balanced with operational efficiency.
Outlook and Aspirations
Xero aspires to double the size of its business and consistently deliver Rule of 40 or greater performance over the medium term. The company plans to accelerate AI adoption, enhance customer experience, and expand its product ecosystem. While forward-looking statements are aspirational and subject to uncertainties, Xero’s strong balance sheet and strategic focus position it well to pursue growth opportunities through a Build, Partner, or Buy approach.
Bottom Line?
Xero’s FY25 results set a strong foundation for ambitious growth, with AI and disciplined investment shaping the next phase of its evolution.
Questions in the middle?
- How will Xero balance subscriber growth with ARPU expansion amid competitive pressures?
- What impact will accelerated AI integration have on customer retention and acquisition?
- How will macroeconomic factors and regional market dynamics influence Xero’s medium-term growth?
