Xero Ltd (ASX: XRO) shares have had a tough run over the past 12 months.
During this time, the cloud accounting platform provider's shares have fallen over 60% from their high as investors grapple with rising interest rates and concerns around artificial intelligence (AI) disruption.
But for long-term investors, could this be a buying opportunity? Let's look at three reasons why it could be.
Image source: Getty Images
A significant reset in valuation for Xero shares
The first reason to consider Xero shares is the sharp decline itself.
High-quality growth companies can fall out of favour quickly when sentiment shifts. In Xero's case, fears that AI could disrupt traditional accounting software have weighed heavily on the stock.
However, while AI may change how accounting is done, it is unlikely to remove the need for trusted platforms that manage financial data, compliance, and workflows.
With the share price having reset materially, investors are now able to access Xero shares at a far more reasonable valuation than in previous years.
Turning AI from a threat into an opportunity
Another reason to be positive on Xero is how it is responding to AI disruption.
Rather than being left behind, Xero is leaning into the technology through its partnership with AI giant Anthropic.
The deal means Xero users will be able to work with their financial data directly inside a major AI platform and provides a new way for Claude to power end-to-end financial workflows for small businesses at scale.
Xero highlighted that for millions of small businesses, this will mean less time manually chasing invoices or piecing together cash flow across multiple reports, with Claude proactively surfacing the insights and actions that would otherwise take hours to find.
In this context, AI becomes less of a threat and more of a feature. If executed well, it could strengthen Xero's value proposition and deepen its competitive advantage.
A platform with room to grow
A third reason to consider Xero shares is the strength and scalability of its platform.
Xero has built a global ecosystem connecting small businesses, accountants, and third-party applications. Once embedded, switching becomes difficult due to the integration of financial data and workflows.
Looking ahead, growth is not just about adding new users. There is a significant opportunity to increase revenue per user through additional services such as payments, payroll, and financial tools.
By expanding what it offers within its existing base, Xero can continue growing even without rapid subscriber gains.
Overall, for investors willing to look beyond short-term concerns, Xero's reset valuation, proactive AI strategy, and scalable platform could make it a compelling opportunity right now.
