• Xero's H1 FY26 results demonstrate strong momentum, with revenue growth of 20% and a Rule of 40 outcome of 44.5%
• Successful early close of Melio acquisition, with plans to roll out Melio's bill pay offering to all US customers in December 2025
• Xero continues to invest in AI, with new features for its JAX AI financial superagent

Xero Limited (ASX: XRO) has reported its half year earnings to 30 September 2025 (H1 FY26), reinforcing the company's ability to deliver strong growth and a continued greater than Rule of 40 outcome. The results demonstrate Xero's effective strategic execution, with operating revenue growth of 20% (18% in constant currency) to $1,194 million, and an operating expense to revenue ratio of 72.8% excluding the impact of the Melio acquisition. Xero generated free cash flow of $321.1 million with a free cash flow margin expanding to 26.9%. The company added 176,000 subscribers in H1 FY26, with total lifetime value of subscribers increasing 15% to $19.6 billion. Xero's International markets continued to deliver strong growth, with revenue increasing 24% (19% in constant currency) to $530.5 million. The company also successfully completed the acquisition of Melio, a leading US SMB bill pay platform, in mid-October, providing an opportunity to accelerate integration and deliver value for US customers sooner. Xero continues to see AI as a significant opportunity, with the evolution of its AI financial superagent JAX, which now includes features such as automated bank reconciliation, advanced financial insights, and integrated web-related research. The company has also released a range of other product updates, including Analytics powered by Syft, a customisable homepage, and new Partner Hub and Xero Workpapers offerings.

Xero's FY26 outlook now includes Melio, with the operating expense to revenue ratio expected to be around 70.5% in FY26, lower than the previous expectation of around 71.5%. This ratio is expected to be lower in H2 FY26 versus H1 FY26.

As part of the Melio acquisition, Xero outlined its FY28 aspirations, which include the combined business significantly accelerating US revenue growth and giving Xero the opportunity to more than double its FY25 group revenue in FY28, excluding anticipated revenue synergies. This outcome is expected to support Xero's aspiration to deliver greater than Rule of 40 outcomes for the group in FY28.