How Xero’s $1.2B Revenue and AI Superagent JAX Are Reshaping SMB Finance

Strong Growth Amid Strategic Execution

Xero Limited’s half-year results to September 2025 reveal a company firing on multiple cylinders. Revenue surged 20% year-on-year to NZD 1.2 billion, supported by a healthy mix of subscriber growth and rising average revenue per user. The addition of 176,000 subscribers pushed the total to 4.59 million, underscoring Xero’s continued appeal in its core markets of Australia, New Zealand, and international territories.

Adjusted EBITDA increased by 12% to nearly NZD 351 million, while free cash flow margin expanded significantly to 26.9%, reflecting improved operational efficiencies. These metrics combine to deliver a Rule of 40 score of 44.5%, a benchmark that balances growth and profitability and is highly regarded in the SaaS sector.

Melio Acquisition Accelerates US Ambitions

A key highlight was the successful early close of the Melio acquisition, a US-based SMB bill pay platform. Melio’s integration is already contributing to accelerated revenue growth, with underlying revenue up 68% to NZD 183 million in the first half. This acquisition not only broadens Xero’s product suite but also significantly strengthens its foothold in the lucrative US market, where it plans to roll out Melio’s bill pay offering to all US customers by December 2025.

CEO Sukhinder Singh Cassidy emphasized that Melio is a “significant milestone” that will help Xero more than double its FY25 group revenue by FY28, excluding anticipated synergies. The acquisition aligns with Xero’s “3x3” strategy, targeting growth across three core markets and three product pillars.

Harnessing AI to Redefine Financial Management

Innovation remains central to Xero’s growth story, with its AI financial superagent, JAX, at the forefront. Built on an advanced AI agentic platform and enhanced through collaboration with OpenAI, JAX now offers automated bank reconciliation, advanced financial insights, and integrated web research capabilities. These features aim to save time for small businesses and their advisors while providing actionable, personalized insights.

Additional product developments include the launch of Syft Analytics, a customizable homepage with personalized insights, and new tools like Xero Workpapers and embedded payroll solutions for the US market. These innovations demonstrate Xero’s commitment to leveraging technology to deepen customer engagement and streamline workflows.

Outlook and Operational Efficiency

Looking ahead, Xero has improved its FY26 operating expense to revenue ratio guidance to around 70.5%, down from an earlier estimate of 71.5%. This improvement reflects both the integration benefits from Melio and broader operational efficiencies. The company expects this ratio to decline further in the second half of FY26, alongside continued revenue momentum.

While Melio-related transaction costs impacted operating income in the first half, excluding these one-off expenses, operating income actually increased by 6%. This suggests that the underlying business remains robust and well-positioned for sustainable growth.