Xero shares rip 9% as investors buy the dip amid fifth day of outages

The Xero Ltd (ASX: XRO) share price is the fastest riser on the S&P/ASX 200 Index (ASX: XJO) on Friday.

Xero shares are up 9.2% to $80.49 as investors buy the dip after an 11.6% smashing yesterday.

The accounting software-as-a-service (SaaS) provider has had a turbulent week.

There has been volatile post-results trading and continuing intermittent outages on its platform.

Xero shares fell dramatically yesterday after the company released its full-year FY26 results.

Investors were displeased with the 27% fall in net profit after tax (NPAT), which was largely due to the acquisition costs for US payments platform, Melio.

The profit was NZD$167.4 million, supported by a 31% increase in operating revenue to NZD$2.75 billion.

Also, top broker Morgans said investors did not take comfort “with commentary around AI disruption risk versus reward“.

Xero’s FY26 results came one day after a changing of the guard for ASX 200 tech shares.

Xero overtook logistics SaaS provider Wisetech Global Ltd (ASX: WTC) as the No. 1 tech company by market cap on Wednesday.

Today, Xero has a market cap of AU$12.56 billion, while Wisetech shares are worth AU$12.32 billion.

What’s happening with Xero shares on Friday?

Xero shares are also being supported today by a strong lead from Wall Street overnight.

The Nasdaq Composite Index (NASDAQ: .IXIC) hit a new record high, largely due to advances in AI-related stocks.

Meanwhile, Xero customers have been frustrated by several intermittent platform outages since last Thursday.

According to the Xero website, another outage occurred at 11.20am today but only lasted for a few minutes.

On its System Status page, Xero said:

We’re aware of an outage affecting customers between 12:21 and 12:24 AM UTC. Xero is now stable and operating normally.

We’re sorry for the disruption, particularly given the recent outages.

Our engineering team is monitoring closely and will update this page if anything changes.

Xero also told customers that one of its recent outages was caused by a third-party hardware incident.

What’s next for Xero?

Xero is focusing on expansion in the United States, with the Melio acquisition a core part of this strategy.

The company says the US is its fastest-growing market, with revenue up 240%, or 30% on a pro-forma basis, in FY26.

In an interview with Dow Jones Newswires, Xero CEO Sukhinder Singh Cassidy said the company would target accountants and bookkeepers in more US cities in FY27.

She said:

It needs to step up to more city coverage so we can approximate something that looks like more national coverage versus just select cities.

Xero announced an additional US$50 million investment in its brand in the US for FY27.

Broker reaction to FY26 results

Morgan Stanley, Ord Minnett, Morgans, and UBS all reiterated their buy ratings on Xero shares after reviewing the FY26 report.

Their 12-month price targets are $130, $110, $111, and 127 per share, respectively.

Morgans commented:

XRO reported a better-than-expected FY26 result and FY27 outlook. Earnings momentum continues to improve relative to consensus expectations. Management were confident enough to announce a buy-back and hint at potential capital management in FY28.

However, investors didn’t take comfort with commentary around AI disruption risk versus reward.

Management has a plan to maximise the opportunity set (TAM) ahead of a path to AI monetisation. It’s early days in AI and the path to AI driven value creation will become clearer, over time.

The post Xero shares rip 9% as investors buy the dip amid fifth day of outages appeared first on The Motley Fool Australia.

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Motley Fool contributor Bronwyn Allen 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 WiseTech Global and Xero. The Motley Fool Australia has positions in and has recommended WiseTech Global and Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.