Xero Lifts Revenue Outlook and Launches A$1 Billion Share Buyback

what happened

Accounting software provider Xero raised its annual guidance for revenue and profit for the year through March. The company now expects operating revenue of between NZ$3.77 billion and NZ$3.83 billion, up from its earlier range of NZ$3.62 billion to NZ$3.73 billion, Dow Jones Newswires reported. It credited a stronger performance from the Melio business-to-business payments platform and a weaker New Zealand dollar.

The adjusted Ebitda forecast was narrowed to NZ$880 million to NZ$920 million, from NZ$860 million to NZ$920 million. Xero also said it aims to buy back up to A$1 billion of shares over the next 12 months. It will not pay an interim dividend.

First-half net profit dropped 86% to NZ$18.5 million, even though revenue climbed 46% to NZ$1.75 billion. Melio weighed on the bottom line. Analysts had expected net profit of NZ$55.8 million, according to data compiled by Visible Alpha.

why it matters

The key point for investors is the gap between strong revenue growth and a sharp fall in profit, driven by losses at Melio. The buyback could support the share price, but it does not offset the weak earnings. The New Zealand dollar also affects how the company's revenue translates in its reporting.

market impact

Xero shares: A$1 billion buyback supports the stock, but profit fell 86%

• ↔Xero shares mixed — buyback demand supports the stock while the profit drop weighs on valuation
• ▼NZD pressure down — a weaker kiwi lifts Xero's reported revenue but signals softer currency demand

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