• Strong operating results with 23% revenue growth and 22% increase in adjusted EBITDA
• Continued focus on balanced profitable growth, delivering greater than Rule of 40 outcome
• Increased product velocity to bring more value to customers through 3x3 strategy

Xero Limited (ASX: XRO) has reported its full year earnings for the 12 months ended 31 March 2025 (FY25). The results highlight Xero's continued track record of strong revenue growth and increasing profitability, delivering greater than Rule of 40 outcomes. Xero's operating revenue grew 23% (20% in constant currency) to $2.1 billion, with a 22% increase in adjusted EBITDA to $640.6 million. The company also generated strong free cash flow of $506.7 million, resulting in a Rule of 40 outcome of 44.3%. Xero's focus on balanced profitable growth has enabled it to maintain strong momentum across its strategic pillars, including enhancing its offerings for the three most critical jobs for small businesses - accounting, payroll and payments - in its three key markets. Key highlights for the year included launching Xero Simple in the UK, enhancing the US product offering, acquiring Syft Analytics, and expanding its payments capabilities globally. Xero's International markets continued to deliver strong growth, with revenue increasing 24% (20% in constant currency) to $925.6 million. Looking ahead, Xero expects its total operating expenses as a percentage of revenue to be around 71.5% in FY26, with a higher ratio in H1 versus H2. The company remains focused on its aspiration to be a world-class SaaS business and deliver Rule of 40 or greater performance over time.

Xero expects its total operating expenses as a percentage of revenue to be around 71.5% in FY26, with a higher ratio in H1 versus H2. This includes an expected ~$45 million impact from the accounting treatment of option grants and sign-on from new remuneration packages, the majority of which will not recur in FY27.

Xero continues to focus on its aspiration to be a world-class SaaS business and believes it has the opportunity to both double the size of its business and deliver Rule of 40 or greater performance over time. As Xero grows, it will also seek to be more balanced between subscriber growth and ARPU expansion.