Xero Ltd (ASX: XRO) shares were sold down heavily on Thursday after the company released its FY26 results.
But while the market saw something it did not like, I still see a global software platform with a large market opportunity, improving scale, and several ways to become more valuable over time.
Here are three reasons I would buy the stock after its results.
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The core business is still growing strongly
The first reason is simple: Xero is still growing at a very healthy rate.
This is not a business that has run out of room. In FY26, operating revenue increased 31% to NZ$2.8 billion, while adjusted EBITDA rose 18% to NZ$757.4 million. The company also generated free cash flow of NZ$554 million.
That combination is important. Plenty of tech companies can grow revenue quickly. Fewer can do it while also producing meaningful cash flow.
Xero also added 506,000 customers during the year, taking total customers to 4.92 million. Average revenue per user increased 23%, and annualised monthly recurring revenue rose 37% to NZ$3.3 billion.
For me, that points to a platform that is becoming more valuable as it scales.
Small businesses need accounting, payroll, payments, invoicing, compliance, and reporting tools. Xero is building deeper relationships with those customers and giving them more reasons to stay inside its ecosystem.
That is exactly the kind of software business I want to own for the long term.
The US opportunity looks more interesting
The second reason I would buy Xero shares is its growing US opportunity.
Australia and New Zealand remain strong markets for the company, but the US is where the long-term upside could be much larger.
Xero said its US momentum was strong, with revenue increasing 240%, or 30% on an organic basis excluding Melio. The Melio acquisition also gives Xero a stronger position in bill payments, helping it combine accounting and payments on one platform for US small businesses.
I think this could be a meaningful step.
The US small business market is enormous, and Xero has historically been much smaller there than in Australia, New Zealand, and the UK.
If Xero can build a stronger payments offering, improve brand awareness, and deepen its accountant and bookkeeper relationships, the US could become a much bigger contributor over time.
There is execution risk. The company is investing heavily, including extra US brand spend in FY27. Melio also needs to be integrated well.
But I think Xero is right to invest where the opportunity is largest.
AI could make Xero more useful
The third reason is artificial intelligence (AI).
I do not think investors should buy Xero simply because it mentions AI. Plenty of companies are doing that.
What interests me is that Xero has the ingredients to use AI in practical ways.
It has millions of small-business customers, years of financial data, relationships with accountants and bookkeepers, and workflows that are often repetitive and time-consuming.
That creates room for AI to improve the product rather than just sit beside it.
Xero said its JAX beta has already reconciled more than 40 million transactions with a reported accuracy of 97%. It also said customer adoption of new GenAI-specific features launched over the past 18 months reached 500,000 users.
The company has also announced XeroForce, a natural language AI agent builder designed to help accountants, bookkeepers, and small businesses automate finance and accounting tasks.
If Xero can use AI to save customers time, reduce manual work, and make the platform more valuable, I think it can strengthen its competitive position.
Foolish Takeaway
Xero shares may remain volatile after the result. But I think the sell-off has created an opportunity.
The tech stock is still growing strongly, producing free cash flow, expanding in the US, and building a more complete financial platform for small businesses.
For patient investors, I think this is the kind of ASX tech share worth buying when the market takes a short-term view.
