Some share price falls make me nervous. Others make me want to look much more closely at what has actually changed inside the business.
One ASX growth share has fallen more than 60% over the past 12 months, yet I think its long-term opportunity may be getting stronger.
That share is cloud accounting platform provider Xero Ltd (ASX: XRO).
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Beaten-down ASX growth share
Xero shares are now trading around $57 after a brutal year for shareholders.
Part of the concern has centred on artificial intelligence (AI) and what increasingly capable software could mean for traditional accounting platforms. Growth stocks have also faced pressure from higher interest rates and weaker market sentiment.
I can understand why investors are asking harder questions. But I think the market may be overlooking how Xero itself is changing.
Becoming more than accounting software
For years, the Xero investment case largely revolved around convincing more small businesses to move their accounting into the cloud.
That opportunity still exists, but the company now has broader ambitions.
Its acquisition of Melio has pushed Xero further into payments, particularly in the United States, while the company has also launched integrated payroll through Gusto. That means this ASX growth share can increasingly sit across accounting, payments, and payroll rather than solving only one part of a small business owner's financial life.
I think that could make the platform more valuable to customers and give Xero more ways to grow revenue from the businesses already using it.
The US is particularly important here. It remains a much less mature market for Xero than Australia or New Zealand, so successfully bringing these services together could significantly expand the company's opportunity.
What about AI?
AI is often presented as a threat to accounting software because it could automate tasks that users currently rely on platforms like Xero to perform.
But Xero is investing heavily in the same technology. Its Just Ask Xero (JAX) platform is designed to automate financial workflows and provide insights to small businesses and accountants, while Xero has also integrated with tools such as Anthropic's Claude.
For me, AI could ultimately make financial software stronger if it allows customers to do more with the information already sitting inside the platform.
Xero now serves around 5 million customers globally, giving it an enormous base from which to introduce those capabilities.
Is the business still growing?
Importantly, the share price decline has not been accompanied by a collapse in the underlying business.
FY26 operating revenue increased 31% on a headline basis and 21% organically, while adjusted EBITDA increased 18%, or 30% organically, despite the investment associated with Melio.
That does not mean the risks have disappeared.
Xero still needs to integrate Melio successfully, prove it can gain ground in the US, and show that AI strengthens rather than undermines its competitive position.
But those are very different concerns from a business whose growth story has simply run out.
Foolish takeaway
After such a steep fall, I think this ASX growth share deserves another look.
The share price is telling a much more pessimistic story than it was a year ago, while the company is expanding the role it can play for small businesses.
If Xero can turn payments, payroll, and AI into meaningful new growth engines, I think today's price could look surprisingly cheap several years from now.
Because of this, I would be willing to buy and give that strategy time to develop.
