Xero shares (ASX:XRO) have just had quite the day, adding 6.08% to close at $75.17, having hit resistance at the psychological A$80 level early in the session. This made XRO the second best performer on the ASX 200 for the day, as the company delivered a half-year result that gave holders a boost.
Despite what has been an impressive run, with a 35.9% bounce since October 1st, the stock remains deeply in the red YTD (-33%) and still 61% off the June 2025 highs. The 2 year chart below makes the recent rally look small, but it is anything but as far as momentum goes.
Results driving Xero shares higher
The move appears to reflect a combination of relief and bullish momentum, as Xero had been weighed down by concerns about the drag from its Melio payments acquisition, the broader technology sector’s struggle with AI-related multiple compression, and a share price that had drifted well below what most analysts considered fair value. Today’s result shifted the balance of evidence meaningfully enough to trigger a continuation of the relief rally.
The headline numbers from the first half of FY27 were strong, as revenue rose 46% to NZ$1.745 billion on a reported basis, or 27% on a pro-forma basis that strips out the Melio consolidation effect. Pro-forma adjusted EBITDA grew 23%. Customer additions of 226,000 took the total base to 5.146 million, and average revenue per customer climbed 25% to NZ$62.21. Annualised monthly recurring revenue reached NZ$3.84 billion, up 41%. These are not the numbers of a business losing its pricing power or its subscriber base.
Equally important was the guidance upgrade, with Xero lifting its FY27 revenue forecast to NZ$3.77-3.83 billion from NZ$3.62-3.73 billion, and tightened the lower end of its adjusted EBITDA range to NZ$880-920 million from NZ$860-920 million. Melio was a meaningful contributor to the upgrade, with the payments unit generating NZ$283 million in revenue for the half. That helps the bull case, as the market had largely been treating Melio as a cost centre rather than a growth engine.
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The board’s decision to approve an on-market buyback of up to A$1 billion over 12 months, expected to begin on or after 13 November, adds further support to the stock. This follows the completion of a separate A$550 million dilution-offset program.
The setup from here
The analyst community was already constructively positioned on Xero before today’s result, with the average price target at A$111.76 pointing to a perceived upside of more than 45% from here. Twelve of thirteen tracked recommendations are at buy or strong buy, although we will have to wait to discover if anything changes in the coming days.
On the technical side, today’s move has the characteristics of genuine range expansion rather than a low-conviction spike. Volume came in at more than twice the time-adjusted average, and the stock has pushed above the upper Bollinger Band, which reflects the force of the move. Trend strength, as measured by ADX is building, and the stock cleared the 200 day SMA at A$73.89 for the first time in a year. This all points to a firmly bullish lean to the chart, as bulls look to challenge resistance levels.
Plenty to watch in the final weeks of the year, and whilst 2026 may not have been kind to XRO holders, a corner clearly appears to have been turned.
Bull Case:
- Guidance upgrade and 23% pro-forma EBITDA growth show improving operating leverage.
- A$1 billion buyback signals board conviction and supports the share price.
Bear Case:
- Statutory NPAT fell 86%; free cash flow declined 26% year on year.
- Revenue upgrade partly currency-driven; RBC flags higher costs offsetting gains.
- CFO departure adds to a pattern of senior leadership exits over six months.
