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Xero Ltd shares trade near $80.82 as of writing, down almost 16% on the session and hovering near their lowest levels since early 2023. Early trading briefly pushed the stock below $82, underlining the intensity of the sell-off.
For a company that once traded close to $200 per share, the move signals a sharp shift in market sentiment. What sparked such a dramatic fall?
Tech Sector Weakness Sets the Scene
The decline unfolded amid heavy selling across technology stocks. The S&P/ASX All Technology Index fell 7.77%, reflecting broad pressure on ASX-listed software companies. Investors reduced exposure across the sector rather than targeting Xero alone.
The move mirrored weakness in global markets, where technology shares also struggled following earnings disappointment from major U.S. firms. As a result, Xero moved in line with peers rather than against them.
AI Anxiety Hits Software Valuations
Concerns around artificial intelligence played a central role in the sell-off. Investors fear that rapid AI development could disrupt traditional software models by automating accounting and bookkeeping tasks faster and at lower cost. Subscription-based platforms faced particular scrutiny, as markets reassessed long-term pricing power.
This shift in expectations prompted investors to step back from premium software stocks. Could AI tools reshape the competitive landscape sooner than expected?
Xero’s Business Model Under Review
Xero operates a cloud-based accounting platform that serves small and medium-sized businesses globally. While the company maintains a strong reputation and loyal customer base, its premium valuation left little margin for uncertainty.
Some investors now question how traditional accounting software will coexist with emerging AI-driven solutions. This reassessment has encouraged short-term risk reduction, even as Xero continues to invest in innovation.
Investor Briefing Adds Context
Earlier in the week, Xero held an investor briefing outlining its growth strategy. Management highlighted long-term opportunities tied to artificial intelligence and progress in the United States following the Melio acquisition. However, the company also confirmed that Melio will not reach adjusted EBITDA breakeven until the second half of FY28.
That timeline raised concerns about near-term margins, particularly during a period when investors demand clearer profitability pathways.
Broker Views Show a Split Outlook
Broker reactions reflect a divided outlook. Macquarie retained an outperform rating and lifted its price target to around $234, pointing to Xero’s competitive positioning and long-term growth potential. In contrast, Jefferies lowered its target to about $101, citing margin pressure and slower profitability linked to Melio.
Even that reduced target remains above current prices, suggesting analysts see value beyond the immediate turmoil.
Broader Market Impact Emerges
Other technology stocks felt similar pressure. TechnologyOne fell more than 8%, while WiseTech Global dropped over 7%. These moves followed a 1.4% decline in the Nasdaq overnight, driven partly by PayPal’s sharp earnings-related fall.
Analysts linked the selling to a global retreat from software stocks as investors reassessed competitive risks. For Xero, the drop reflects sector-wide caution rather than a sudden deterioration in operations.
What Comes Next for Xero?
Xero’s share price collapse highlights how quickly sentiment can shift in technology markets. Investors now watch for clearer signals on AI monetisation, cost control, and U.S. expansion progress.
Until markets regain confidence in software business models, volatility may remain elevated. The question remains: will fundamentals regain control, or will AI uncertainty continue to dominate the narrative?
