Xero share price falls despite strategy update and new AI solution

This growing tech star has laid out its plans for the coming years.

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The Xero Ltd (ASX: XRO) share price is falling on Thursday morning.

At the time of writing, the cloud accounting platform provider's shares are down 1.5% to $124.99.

Why is the Xero share price falling?

Investors have been selling the company's shares today after weakness in the tech sector offset the release of the company's FY25-27 strategy update ahead of its inaugural Investor Day event.

According to the release, Xero's strategy is comprised of four strategic priorities that underpin its ambitions. These are as follows:

  • Win the 3 x 3 — core accounting, payments and payroll.
  • A winning go-to-market playbook.
  • Focused bets to win the future.
  • Unleash Xero(s) to win.

Xero's CEO, Sukhinder Singh Cassidy, commented:

Our strategy is simple, focused, and purpose driven. We have solid foundations, a strong financial profile, turbocharged capabilities, and continued large global TAM to pursue, as we seek to become an even more trusted platform for small businesses and their advisors.

As we continue to build Xero for the long term, we aspire to be a world class SaaS business, and believe we have the opportunity to double the size of our business and deliver Rule of 40 or greater performance over 1 time.

As we grow, we will also seek to be more balanced between subscriber growth and ARPU expansion.

Digging deeper

In respect to its 'win the 3 x 3' priority, this includes building winning customer solutions for the three most critical jobs for small businesses – accounting, payments and payroll.

The 'winning go-to-market playbook' priority involves acquiring and onboarding subscribers to the right products efficiently, deepening customer relationships, and optimising pricing and packaging to drive customer value, usage and growth.

Xero's 'focus on bets to win the future' includes enhancing customer experience through AI and mobile, as well as realising the potential of its ecosystem and APIs.

Finally, the 'unleash Xero(s) to win' priority involves delivering a purpose and performance-driven employee value proposition and enhancing its product and technology capabilities and operating model.

Strategic BILL integration partnership

Xero has also taken today's event as an opportunity to announce a new strategic partnership in the United States with BILL.

BILL is a leading financial operations platform for small and midsize businesses, with more than 470,000 businesses using its financial automation solution.

Management believes the partnership will strengthen Xero's US payments offering, adding more value for customers. The embedded solution will allow customers to securely manage, approve and pay bills through Xero using a variety of payment options, without leaving the Xero platform.

Singh Cassidy commented:

Our partnership with BILL further strengthens Xero's US offering and illustrates our commitment to delivering a winning solution for our customers and driving deeper customer engagement.

Xero AI

Xero has also announced its new generative AI solution, Just Ask Xero (JAX).

This new solution is designed to be a smart business companion that helps customers complete key tasks.

Once available, JAX will help small businesses and their advisors automate accounting tasks, deliver personal insights and reclaim time they can spend on running their businesses.

Customers will be able to "Just Ask Xero" to complete tasks like generating an invoice either in Xero or other apps such as email or WhatsApp. It will complete the task and anticipate and propose other tasks that may follow, such as following up overdue payments or crafting emails.


Finally, Xero has reiterated its existing FY 2024 outlook.

This includes targeting an operating expense to operating revenue ratio in FY 2024 of around 75%, which will improve operating income margin compared to FY 2023.

The Xero share price is 62% over the last 12 months.

Motley Fool contributor James Mickleboro has positions in Xero. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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