Shares of Xero Ltd (XRO.AU) surged 5.05% in intraday trading, reaching a near three-month high, as investors responded positively to the company's strong full-year results for fiscal 2025 and its optimistic outlook for the coming year.

The New Zealand-based cloud accounting software provider reported a 30% increase in net profit to NZ$227.8 million (US$134.4 million), driven by a 23% rise in revenue to NZ$2.10 billion. The company's performance was bolstered by a 6% growth in subscribers to 4.4 million, despite implementing price increases. Xero's average revenue per user also saw a significant 15% increase to NZ$45.08.

Investors were particularly encouraged by Xero's strong cash flow generation, with free cash flow rising 48% to NZ$506.7 million. The company's earnings before interest, tax, depreciation, and amortization (EBITDA) also impressed, growing 28% to NZ$638.5 million. Looking ahead, Xero provided guidance for its operating expense ratio in fiscal 2026 to be around 71.5%, which was better than some market participants had feared, especially considering potential additional remuneration packages. This outlook suggests that Xero is managing its expenses effectively while continuing to invest in growth initiatives, particularly in the U.S. market.