Xero shares just crashed to COVID-era lows. Is this ASX 200 tech stock broken?

This ASX 200 tech stock has crashed to multi-year lows.

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Xero Ltd (ASX: XRO) shares are having another tough session on Tuesday as selling pressure continues to build on the ASX 200 tech stock.

At the time of writing, the Xero share price is down 3.19% to $66.43. By comparison, the S&P/ASX All Technology Index (ASX: XTX) is 1.14% lower to 2,891 points.

Earlier in the session, Xero shares fell as low as $66.30. That puts the stock around levels last seen during the early stages of the COVID market sell-off in March 2020.

It has been a brutal run for shareholders. Xero shares are now down more than 40% since the start of 2026 and around 65% lower than this time last year.

Man on computer looking at graphs.

Image source: Getty Images

Why Xero shares are being sold off

There hasn't been any new price-sensitive announcement from Xero today.

Instead, the latest fall looks to be part of the wider sell-off in tech shares, with growth stocks still out of favour.

Xero is still one of the biggest software names on the ASX, but the market is clearly not willing to pay the same price it once did.

That comes as investors focus more closely on earnings, margins, and how much companies are spending to grow.

Xero's latest result showed another year of strong revenue growth. However, lower statutory profit, acquisition costs, and the Melio deal have given the market more to think about.

The business is still growing

Keep in mind, the sell-off doesn't mean Xero has stopped growing.

In its FY26 result, Xero reported operating revenue of NZ$2.8 billion, up 31% on the prior year. Excluding Melio, organic revenue growth was 21%.

Its customer base also increased 11% to 4.92 million, with the company adding 506,000 net customers during the year.

Adjusted EBITDA rose 18% to NZ$757.4 million, while free cash flow came in at NZ$554 million.

Xero is also putting more focus on artificial intelligence (AI) and automation. This includes adding AI features to its platform and partnering with Anthropic to bring Claude into Xero.

Can the Xero share price recover from here?

The biggest question now is whether the share price fall has gone too far.

Xero is still growing revenue, adding customers, and producing free cash flow. The company has also guided to adjusted EBITDA of NZ$860 million to NZ$920 million in FY27.

However, the market still has a few reasons to be cautious.

The Melio deal still needs time, and the market may not be ready to pay up for software stocks just yet.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. 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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