Xero revenue up 23% to $1.26b in FY25

Xero Limited, a software company based in New Zealand, reported a 23% increase in operating revenue for its fiscal year ending March 31, 2025.

The company generated NZ$2.1 billion (US$1.26 billion) in revenue, up from NZ$1.71 billion (US$1.03 billion) in FY24.

It also achieved a 22% growth in adjusted EBITDA, totaling NZ$640.6 million (US$384.4 million).

The company noted a strong free cash flow of NZ$506.7 million (US$304 million), representing a free cash flow margin of 24.1%.

Xero’s Rule of 40 metric, which combines revenue growth and free cash flow margin, improved to 44.3% for FY25, up from 41.0% the previous year.

Xero added 414,000 net subscribers during the year, excluding inactive accounts. This brought its total subscriber count to 4.41 million.

Average revenue per user (ARPU) rose by 15% to NZ$45.08 (US$27.05) due to pricing adjustments and product enhancements.

🔗 Source: Xero

🧠 Food for thought

1️⃣ Xero’s balanced growth strategy mirrors SaaS market evolution

Xero’s emphasis on the Rule of 40 metric reflects a broader shift in the SaaS industry from “growth at all costs” to balanced profitability and expansion.

The company has successfully delivered a 44.3% Rule of 40 outcome while maintaining 23% revenue growth, positioning it well in an environment where companies are increasingly scrutinizing SaaS investments for ROI1.

This performance is noteworthy given that organizations have reduced their cloud application portfolios by an average of 18% between 2022 and 2024, indicating more selective SaaS spending1.

Xero’s strong cash position ($1.95 billion in reserves) provides stability at a time when the SaaS market is expected to reach approximately $300 billion by 2025 but faces increased consolidation pressure2 3.

The company’s high P/E ratios (134.79 trailing, 86.96 forward) suggest investors continue to value its growth potential despite the broader market’s shift toward profitability metrics2.