Changes are happening - please bear with us while we update our site.

Changes are happening - please bear with us while we update our site. Click here to give us your advice and feedback.

Xero (ASX:XRO) share price in focus on growth ambitions, AI

The Xero Limited (ASX:XRO) share price is under the spotlight after the ASX software share announced new initiatives at its investor day.

The Xero Limited (ASX: XRO) share price is under the spotlight after the ASX software share announced new initiatives at its investor day.

The company provides software to businesses around the world, with a particular focus on Australia, New Zealand and the UK.

FY25 to FY27 growth initiatives

The company believes it has the opportunity to double its revenue and deliver the ‘rule of 40’ (or greater) performance. In FY23 it made revenue of NZ$1.4 billion and had annualised revenue of NZ$1.6 billion.

For Xero, the rule of 40 means the annual growth rate percentage, plus the annual free cash flow percentage (of revenue), adds up to at least 40.

As the business grows, it will aim to be more balanced between subscriber growth and average revenue per user (ARPU) expansion.

Xero said its top three ‘super jobs’ – accounting, payments and payroll – represent around $100 billion across Australia, New Zealand, the US, the UK and Canada. It wants to win in these areas.

One of the things the company wants to do is “optimise pricing and packaging to drive customer value, usage and growth”.

It also wants to enhance the customer experience through AI and mobile, while realising the potential of Xero’s ecosystem and APIs, as well as growing in other markets efficiently.

BILL integration partnership

Xero is extending its bill payments in the US by working with BILL, which is a “leading financial operations platform” for small and mid-size businesses with more than 470,000 businesses using its financial automation solution.

The ASX software share said the partnership will strengthen its US payments offering and add more value for US customers. Subscribers will be able to manage, approve and pay bills through Xero without leaving the Xero platform – it will avoid the need for manual bank processes and makes it easier to reconcile transactions.

More growth in the US would be helpful for the Xero share price.

Just Ask Xero (JAX) generative AI

Xero introduced JAX, its new generative AI offering, to help customers complete tasks. Once available, JAX can help small businesses and their advisors automative accounting tasks and deliver personal insights.

Tasks it could help with include generating an invoice either in Xero or other apps, such as email or WhatsApp. JAX will be able to complete the task and then propose other tasks, such as following-up on overdue payments or creating emails.

Xero is “initially” focused on invoicing, quoting and contacts, due to the importance of those jobs for customers. It also intends to extend into bills, cash flow forecasting and reporting.

JAX will be available in beta later in 2024.

Outlook for the Xero share price

Xero is still aiming for an operating expense to operating revenue ratio in FY24 of around 75%, which will improve the operating profit compared to FY23.

I think Xero has a very exciting future, particularly if it can reach the rule of 40 numbers that it’s suggesting.

If its profit margins keep increasing, I think the Xero share price can keep rising as the market sees how much profit this business can make.

It’ll be interesting to see what other partnerships the business can find in the US to improve its offering.

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, Jaz does not have a financial or commercial interest in any of the companies mentioned.
Skip to content