Xero’s FY25 Delivers 23% Revenue Growth

Xero Limited (ASX: XRO) has reported its full year earnings to  31 March 2025 (FY25).

The results highlight Xeroʼs continued track record of strong revenue growth and increasing profitability, delivering greater than Rule of 40 outcomes.₁

Xeroʼs strong operating results included operating revenue growth of 23% (20% in constant currency (CC)) to $2.1 billion and an operating expense to revenue ratio of 71.8%. This resulted in a 22% increase in adjusted EBITDA compared to FY24 to $640.6 million, with EBITDA of $638.5 million. The company also generated strong free cash flow of $506.7 million with a free cash flow
margin of 24.1%, improving from 20.0% in the prior period. As a result, Xero once again delivered a greater than Rule of 40 outcome, with 44.3% in FY25.

CEO Sukhinder Singh Cassidy said: “Our FY25 results demonstrate Xeroʼs macro-resilient growth and effective execution of our strategy. Our focus on balanced profitable growth has enabled us to again deliver strong EBITDA growth and a greater than Rule of 40 outcome. We have achieved this while maintaining strong momentum across our strategic pillars and, importantly, have increased our product velocity to bring more value to customers through our focused 3x3 strategy. All this is underpinned by our continued investment in our product and people, and operating discipline to deliver on our aspirations.”

“We remain excited about the large, untapped opportunity to help SMBs and accountants and bookkeepers globally to digitise, and we continue to focus on making life better for people in small business, their advisors, and communities around the world.”

FY25 and Financial highlights (All $ figures are in NZD, and comparisons are made against FY24)

Xero delivered robust AMRR growth of 22% to $2.4 billion. Adjusting for the removal of long idle subscriptions, AMRR was driven by both strong ARPU and subscriber growth (up 11% and 10%₄ respectively).

Xeroʼs ARPU growth was driven by multiple levers, including improving product mix across new and existing customers, pricing changes to reflect product value, and continued payments growth.

Excluding the impact of removing long-idle subscriptions, 414,000 subscribers were added in FY25, up 10%. Average monthly churn on this basis was 1.03% and remains historically low, underscoring Xeroʼs macro resilience and the customer value it provides. Total LTV, after removing long-idle subscriptions, increased 16% (13% in CC) to $17.9 billion.

Xero continued to focus on its Win the 3x3 strategy throughout FY25 by improving its offerings for the three most critical jobs for small businesses — accounting, payroll and payments — in its three key markets.

With increased product velocity for customers, selected highlights for the year included:

Accounting — launching Xero Simple to support UK customers with Making Tax Digital for Income Tax; enhancing Xeroʼs US product offering by increasing direct bank feeds from 20 to over 700 in the past two years, and releasing end-of-period reconciliation; acquiring Syft Analytics and launching early access of Analytics powered by Syft for select US customers as part of wider rollout plans.

Payroll — enhancing auto super capabilities in Australia; a beta of Rostering, powered by Deputy — fully integrated in Xero Payroll in Australia; UK payroll enhancements: a new payroll manager, providing holiday entitlement calculator improvements and a streamlined process for payroll migration; deeper partnership with Gusto to deliver an embedded US payroll solution in FY26.

Payments — launching Tap to Pay in the Xero Accounting mobile app for Australian, UK and US small₅ businesses to accept instant payments from their smartphone; migrated all Xero invoicing customers to a new invoicing product; expanded UK bill payments solution through a partnership with Crezco to include scheduled domestic and (in April 2025) international bill payments; and a new embedded US bill payment solution, powered by BILL.

Xero also launched Just Ask Xero (JAX), its GenAI-powered smart business companion, to help customers run their business more efficiently, and expanded beta access to all business edition customers globally by the financial year end.₆

Market highlights:

Australia and New Zealand — Australia and New Zealand continued to deliver strong results with double-digit revenue growth, up 21% (20% in CC) to $1.18 billion. ARPU increased 10% (9% in CC) to $41.66, and total subscribers grew to 2.6 million.

International — Ongoing growth continued in Xeroʼs International markets, with revenue increasing 24% (20% in CC) to $925.6 million, ARPU rising 21% (14% in CC) to $49.82, and subscribers growing to 1.8 million.

FY26 Outlook:
Total operating expenses as a percentage of revenue is expected to be around 71.5% in FY26. This₇ ratio is expected to be higher in H1 FY26 versus H2 FY26.₈

Aspiration₉:

Xero continues to focus on the aspirations outlined in February 2024: to be a world-class SaaS business; and Xero believes it has the opportunity to both double the size of its business₁₀ and deliver Rule of 40 or greater performance, over time. As Xero grows, it will also seek to be more balanced between_{11, 12} subscriber growth and ARPU expansion. 

Disclosures:

This feature (including graphics) has been adapted from media source and market release materials furnished by Xero. Referenced source materials or content appearing within this Insightful Accountant feature were adapted and are furnished solely for educational purposes.

About Xero
Xero (ASX: XRO) is a global small business platform with 4.2 million subscribers. Xero's smart tools help small businesses and their advisors to manage core accounting functions like tax and bank reconciliation, and complete other important small business tasks like payroll and payments. Xero's extensive ecosystem of connected apps and connections to banks and other financial institutions provides a range of solutions from within Xero's open platform to help small businesses run their business and manage their finances more efficiently.

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