Xero shares tumble as AI fears spook investors
Xero is trying to claw its way out of the software stock wreckage by leaning into the very force that helped put it there: artificial intelligence.
Xero is trying to claw its way out of the software stock wreckage by leaning into the very force that helped put it there: artificial intelligence.
The accounting software group reported operating revenue of $NZ2.8 billion ($3.9b) for the year to March 31, up 31 per cent on the year before. But net profit after tax fell 27 per cent to $NZ227m, with Xero blaming costs linked to its $NZ3.9billion acquisition of US bill-pay platform Melio.
But the story of the day was less about the numbers than how the ASX-listed company plans to defend itself against the same AI forces unsettling the software sector.
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By continuing you agree to our Terms and Privacy Policy.“We are providing a small business financial operating system for the AI era,” Xero chief executive Sukhinder Singh Cassidy said. “Xero is well positioned to be a long-term AI winner.”
The company’s results coincided with the launch of XeroForce, a natural-language custom AI agent builder for the financial workflows of small businesses and accountants.
It also talked up its recent AI integrations, including its partnership with Anthropic to bring Claude’s reasoning capability into Xero.
“We want to be where our customers want to be,” Ms Cassidy said, referring to the generative AI platform.
But that partnership carried an awkward sting. On the same day, Anthropic launched Claude for Small Business, putting its AI assistant inside tools used by business owners, including Intuit QuickBooks, PayPal, HubSpot, Canva, DocuSign, Google Workspace and Microsoft 365.
Anthropic said Claude could help plan payroll, close the month, run a sales campaign, chase invoices and more.
“It takes on the work that piles up after hours, like planning payroll, chasing invoices, or kicking off a marketing project,” Anthropic co-founder and president Daniela Amodei said.
Worse for Xero, Anthropic is launching the platform in the US, the very market Xero is trying to crack.
Investors were not impressed. Xero shares fell 9 per cent on the day, extending a 57 per cent year-on-year drubbing as the company became embroiled in the wider tech sell-off, particularly among software stocks.
The sell-off has been driven by fears that new AI tools and agents from the likes of Anthropic and Amazon could eat into demand for the workflow, accounting and customer management platforms long sold by software companies.
The outlook is not entirely bleak for Xero.
The headline numbers showed the company is still growing at pace. Customer numbers rose 11 per cent to 4.92 million, with 506,000 net additions over the year. Average revenue per user jumped 23 per cent, while free cash flow rose to $554 million.
Xero may also take heart from Atlassian’s recent “kick-ass” quarter, in the words of chief executive Mike Cannon-Brookes, after the software giant managed to stare down similar AI concerns and smash analyst expectations.
