Category: Stock Market

Qoria Ltd (ASX: QOR) shares have returned from their trading halt with an almighty bang.

In morning trade, the ASX tech stock is up 50% to 50.5 cents.

Why is this ASX tech stock rocketing?

Investors have been fighting to get hold of the cyber monitoring company’s shares after it entered into a binding merger implementation deed with Aura Consolidated Group.

According to the release, the agreement will see Qoria acquired by Aura through an Australian scheme of arrangement, subject to the satisfaction of certain conditions and the listing of Aura on the Australian share market.

Aura is a US-based provider of intelligent online safety solutions to individuals and families. Its advanced suite of products includes all-in-one protection from identity theft, scams, and online threats, alongside tools that help parents protect children from predators, cyberbullying, and technology-driven mental health risks.

The two parties believe their combination will establish a world-leading safety and online security platform for home, work, and school, unlocking cross-market cross-sell potential and innovation scale.

They note that this platform is expected to deliver immediate value via an enhanced product distribution network, an expanded global portfolio, operational synergies, and robust cross-selling opportunities in a vast, growing addressable market.

What are the terms?

The ASX tech stock revealed that Aura will acquire all Qoria shares through an all-scrip deal at a price equivalent to 72 cents per share. This represents a 111% premium to where the company’s shares ended last week. Though, it is worth noting that due to a heavy decline in recent weeks, it is only marginally higher than where Qoria’s shares were trading a month ago.

Nevertheless, it values the combined business at approximately $3 billion.

The Qoria board is unanimously recommending shareholders vote in favour of the scheme. Each director intends to vote all their shares in favour of the scheme, subject to there being no superior proposal and the independent expert’s report.

The ASX tech stock’s managing director, Tim Levy, said:

The internet was created to connect us, yet online safety has eroded, making trust paramount for parents, guardians and organisations, in general, for the protection of our activities online. The combination of Aura and Qoria pioneers a lifelong digital safety ecosystem; a new category that meets the urgent need for technology, education, and trust to protect people – confidently and safely, throughout their entire lives.

Aura’s founder CEO, Hari Ravichandran, adds:

Today’s announcement marks a definitive step forward in our mission to deliver holistic online safety to everyone. In a world where our digital lives are fragmented across home, school, and work, threats easily exploit the gaps between them. By uniting Aura’s AI-powered protection with Qoria’s school safety leadership, we unlock a new standard of safety – seamless, continuous protection for every setting and stage of life.

The post ASX tech stock rockets 50% on Aura takeover deal appeared first on The Motley Fool Australia.

More reading

• Bell Potter says this ASX stock can rebound 80% after its selloff
• Why 4DMedical, ARB, Inghams, and Qoria shares are tumbling today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Neuren Pharmaceuticals Ltd (ASX: NEU) shares are having a tough time on Tuesday.

In morning trade, the ASX 200 healthcare share was down as much as 22% to $12.66.

The pharmaceuticals company’s shares have recovered a touch since then but remain down 12% at the time of writing.

Why is this ASX 200 healthcare share crashing?

Investors have been hitting the sell button today after it was dealt a major blow in Europe.

This morning, Neuren Pharmaceuticals advised that its licensee, Acadia Pharmaceuticals Inc. (NASDAQ: ACAD), has provided an update on its marketing authorisation application (MAA) for trofinetide for the treatment of Rett syndrome in the European Union (EU).

According to the release, Acadia was informed by the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) of a negative trend vote on its MAA for trofinetide, following its recent CHMP oral explanation.

Subject to the outcome of the CHMP vote in February, Acadia intends to request a re-examination of the opinion by the CHMP upon its formal adoption.

Acadia’s CEO, Catherine Owen Adams, was disappointed with the news, but remains hopeful that approval will be achieved in time. She said:

While the negative trend vote is disappointing and not what we hoped for, we believe the strong data that supported the approval of trofinetide for the treatment of Rett syndrome in the United States, Canada, and Israel speak to the meaningful benefits that trofinetide can deliver. We now have more than 1,000 patients on active treatment globally, from newly diagnosed 2-year-olds to adults who have lived with their disease for decades.

Our ongoing real-world experience study in the U.S. continues to show outcomes that closely mirror the impact observed in rigorous randomized clinical trials conducted across a broad age range. We look forward to working with the EMA and other stakeholders to advance trofinetide as an important potential treatment option in the EU. Our commitment to the Rett syndrome community in the EU remains steadfast, and we are fully dedicated to making trofinetide available to individuals and families who urgently need a new therapeutic option.

What’s next?

Neuren notes that pursuant to EU legislation, an applicant has the right to request a re-examination of a CHMP opinion within 15 calendar days of receipt of the opinion. This is followed by submission of the grounds for the request for re-examination within 60 calendar days of receipt of the opinion.

The CHMP then has up to 60 days after receipt of these grounds to re-examine its opinion.

Neuren’s CEO, Jon Pilcher, commented:

Given the totality of experience with trofinetide in clinical trials and real world use over many years, this negative trend vote is frustrating for us and the Rett syndrome community in the EU. We fully support Acadia’s intention to seek re-examination of the CHMP opinion in February, if necessary.

The post Guess which ASX 200 healthcare share is crashing 22% on Tuesday on European blow appeared first on The Motley Fool Australia.

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• The next 3 years could be huge for this ASX healthcare stock. Here’s why

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

I’m a big advocate of ASX dividend shares because they can provide investors with excellent passive income.

The best dividend businesses can provide investors with both a good dividend yield and capital growth over time.

I consider the three ASX dividend shares below as three of the best options – I thought that five years ago, I think that today, and I’m confident they will be great dividend income picks in five years.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

I view Soul Patts as one of the very best passive income businesses because of the incredible dividend growth streak it has provided.

Soul Patts has increased its regular annual payout every year since 1998. No other ASX share has a growth streak that started in the previous century.

On top of that, the investment house has paid an annual dividend every year since it listed more than 120 years ago, including through world wars, global pandemics and economic recessions.

This S&P/ASX 200 Index (ASX: XJO) share doesn’t rely on one core activity for its earnings – it has a diversified portfolio across a range of ASX shares, privately-owned businesses, property and credit. It has maximum investment flexibility to find the best opportunities with its money and create a portfolio that generates cash flow in all economic conditions.

I’m expecting the ASX dividend share’s FY26 payout to be a grossed-up dividend yield of around 4%, including franking credits, at the time of writing.

They are the key reasons why I’ve made this business my largest ASX dividend shareholding.  

Future Generation Australia Ltd (ASX: FGX)

I’ve held this listed investment company (LIC) in my portfolio for several years and I expect it be a holding for many years to come.

There are multiple reasons to like the LIC. For starters, there are no management fees involved – instead, it donates 1% of its net assets each year to youth charities. It’s invested in a variety of funds from different fund managers who all work for free to enable those charitable donations.

The fact it’s invested across more than ten funds means it provides investors with significant diversification across hundreds of underlying holdings.

In terms of being a top ASX dividend share, it has grown its annual payout every year for the last decade and currently offers investors a grossed-up dividend yield of 7.7%, including franking credits, at the time of writing.

MFF Capital Investments Ltd (ASX: MFF)

MFF built a reputation as one of the leading LICs on the ASX by investing in a portfolio of high-quality shares, namely some of the leading global US tech shares and payment giants.

The business recently expanded into funds management by making an acquisition, giving it another growth avenue and providing more investment team capabilities to MFF.

One of its main goals is to increase its dividend each year. It has hiked regular payout each year over the last several years at an impressive double-digit rate thanks to the strong performance of its portfolio.

I’m predicting MFF will increase its annual payout to 21 cents per share in FY26, translating into a forward grossed-up dividend yield of 6.2%, including franking credits, at the time of writing.

The post 3 of the best ASX dividend shares to buy for income appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Future Generation Australia, Mff Capital Investments, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Mff Capital Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Droneshield Ltd (ASX: DRO) has become one of the ASX’s most talked-about defence technology stocks, and it’s easy to see why. 

The company builds cutting-edge counter-drone technology products supported by geopolitics and defence spending, both themes that investors believe could drive strong long-term growth for the DroneShield share price.

This comes after a tough week for DroneShield investors, where shares fell around 25% as markets reacted to mixed signals on the company’s future sales pipeline, insider selling, and a broader pullback in defence stocks after a strong run.

The sell-off reflects a reset in expectations about future performance rather than a deterioration in fundamentals, reinforcing that anticipated future earnings remain the key driver of where the share price heads next.

Valuation is built on tomorrow, not today

As a growth stock, DroneShield’s value is not based on past earnings and results. 

Instead, the share price reflects what the market believes DroneShield can earn several years from now.

For a stock that is trading with a P/E ratio above 400, expectations become critical. 

When investors become more confident that revenue growth will translate into scalable, repeatable profits, the valuation multiple expands. 

Conversely, any sign that margins, revenue, or the future size of the market may disappoint can quickly compress the share price.

EPS growth is the credibility test

For DroneShield, earnings per share (EPS) growth is the ultimate proof point.

Recent results from DroneShield suggest that, although growth remains strong, the future revenue pipeline may be smaller than originally anticipated, prompting investors to reassess their assumptions about this stock. 

What are the experts saying? Well, Bell Potter still expects DroneShield’s EPS growth to be 331% in 2026 and 53% in 2027, meaning that expectations remain sky-high. 

Small changes in forecasts can move the stock

Because much of DroneShield’s valuation is tied to future earnings, even modest changes in analyst forecasts can have an outsized impact. 

A small upgrade to future EPS expectations can justify a much higher share price today, but the reverse is also true.

That’s why investors should keep an eye out for any indications of what the market may look like in the future, how efficient DroneShield is in converting revenue into earnings, and whether new technologies are on the horizon that may make DroneShield’s products obsolete. 

Foolish bottom line

DroneShield’s long-term opportunity remains compelling, but the stock’s performance will ultimately be decided by whether current expectations about the future are realistic or optimistic. 

As demonstrated in last week’s results, even a small adjustment to these expectations can have an outsized impact on the stock price.

The post Why Droneshield’s future earnings matter more than ever appeared first on The Motley Fool Australia.

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Motley Fool contributor Mark Verhoeven has positions in DroneShield. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended DroneShield. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

There are a lot of ASX shares for investors to choose from, but not all are necessarily buys.

To narrow things down, let’s see what analysts are saying about three popular shares, courtesy of The Bull.

Here’s what you need to know about them:

Insurance Australia Group Ltd (ASX: IAG)

The team at Baker Young thinks that investors should be selling this insurance giant’s shares this week.

The broker highlights that IAG shares are trading above its estimate of fair value and feels investors should be taking profit. It explains:

The decision by competition regulator, the Australian Competition and Consumer Commission (ACCC), to block IAG’s proposed acquisition of RAC Insurance (RACI) from the Royal Automobile Club of Western Australia highlights the rising barriers to inorganic growth for IAG. Further, the ACCC decision reflects a desire to stimulate greater competition in the general insurance market. With IAG trading above our valuation, we would be inclined to take profits around current levels.

Mineral Resources Ltd (ASX: MIN)

Analysts at Morgans highlight that this mining and mining services company’s shares have risen very strongly since April. Unfortunately, the broker believes the run is now over and has rated Mineral Resources shares as a hold.

Commenting on the high-flying company, Morgans said:

MIN is a diversified resources company in Western Australia. It has extensive operations in lithium, iron ore, energy and mining services. Mineral Resources enters 2026 with improved stability after a volatile period, supported by progress at Onslow Iron. On January 29, 2026, the company upgraded lithium volume guidance and maintained cost guidance at both operations.

It reduced net debt to about $4.9 billion as at December 31, 2025. We remain confident management can successfully execute its strategy and expect strong earnings growth in the current commodity price environment. The shares have risen from $14.40 on April 9, 2025 to trade at $61.18 on January 29, 2026. At this point, we believe the stock is fully valued.

Westpac Banking Corp (ASX: WBC)

Morgans thinks that this banking giant’s earnings growth could be challenging in the near term. As a result, it feels that investors should sell Westpac shares this week.

The broker believes there are better opportunities for investors elsewhere in the market. It said:

Weaker consumer sentiment in an uncertain policy environment cloud the earnings outlook. Recent economic commentary highlights creeping pessimism among Australian consumers. Uncertainty around interest rate expectations creates a challenging setting for major banks to profitably grow credit. Westpac’s long term projections show acceptable returns.

However, in our view, near term momentum appears constrained by operational adjustments, margin pressure and a more cautious economic tone. Given limited earnings catalysts on the horizon, we see better opportunities elsewhere.

The post Buy, hold, sell: IAG, Mineral Resources, and Westpac shares appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

It’s no secret that investors are increasingly incorporating environmental, social, and governance (ESG) considerations into their decisions. 

Many Aussie investors now target financial success alongside positively impacting the world through their investment choices.

This can look different for many investors. 

For some, this can focus on targeting companies aiming for certain environmental targets. 

It can also mean eliminating companies engaged in certain practices like weapons or tobacco manufacturing, gambling, etc. 

This is called negative screening.

These broader investment styles are also known as socially responsible, sustainable, green, or impact investing. 

Essentially, it will look a little different for each investor as they balance financial and ESG goals. 

If you are looking to add an ESG-themed fund to your portfolio, here are three of the most popular for investors in 2026. 

Betashares Australian Sustainability Leaders ETF (ASX: FAIR)

According to Betashares, this fund aims to track the performance of an index (before fees and expenses) that includes Australian companies that have passed screens to exclude companies with direct or significant exposure to fossil fuels or engaged in activities deemed inconsistent with responsible investment considerations.

The Fund’s methodology also preferences companies classified as ‘Sustainability Leaders’ based on their involvement in business activities aligned to the United Nations Sustainable Development Goals.

The fund does not invest in any of the big four banks, or large Australian mining companies.

It has a management fee per annum (p.a.) of 0.49%. 

iShares Core MSCI World All Cap ETF (ASX: IWLD)

This ASX ETF provides investors with an opportunity to invest in non-Australian companies. 

The Fund aims to provide investors with the performance of the MSCI World Ex Australia Custom ESG Leaders Index. 

The index is designed to measure the performance of global, developed-market large and mid-capitalisation companies with better sustainability credentials relative to their sector peers.

More info about the index can be found here.

However, for example, it negatively screens companies engaged in industries like: 

• Adult entertainment
• Alcohol
• Weapons
• Gambling
• Oil & gas drilling
• Tobacco and more.

At the time of writing, it is made up of more than 600 holdings, and comes with a management fee of 0.09% p.a. 

Betashares Climate Change Innovation ETF (ASX: ERTH)

This ASX ETF is worth listing because rather than using negative screening and eliminating negative companies, it actually targets companies actively engaged in climate solutions. 

That might sound similar on the surface, but they’re actually very different strategies. 

Negative screening only removes “bad” companies – it doesn’t actively pick “good” ones.

Suppose an ESG ETF excludes fossil fuels, tobacco, and weapons.

What’s left could still be a bunch of companies that are neutral or even minimally impactful – like banks, supermarkets, or software firms that aren’t actively solving environmental or social problems.

You might end up with a portfolio of companies that simply aren’t doing harm, but also aren’t contributing anything positive, like renewable energy, clean tech, or social-impact ventures.

However the ERTH ETF provides a portfolio of up to 100 leading global companies that derive at least 50% of their revenues from products and services that help to address climate change and other environmental problems through the reduction or avoidance of CO2 emissions. 

This covers clean energy providers, along with leading companies tackling green transport, waste management, sustainable product development, and improved energy efficiency and storage.

It comes with a management fee p.a. of 0.65%. 

The post 3 of the most popular ethical/ESG ASX ETFs in 2026 appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Bell has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

ASX lithium shares have snapped out of their funk. After languishing near multi-year lows, prices have surged in recent months as battery demand rebounds and supply tightens.

Benchmark spodumene prices are breaking levels not seen in years, and Australian lithium stocks are moving fast in response.

ASX lithium shares like Liontown Resources Ltd (ASX: LTR), IGO Ltd (ASX: IGO), and Core Lithium Ltd (ASX: CXO) have all ripped to fresh 52-week highs as the market begins to price in a new demand-driven cycle.

Investors are starting to believe the brutal 2023–24 bear market is finally in the rear-view mirror. But can the lithium rally be sustained?

Liontown Resources

This ASX lithium share is the comeback story. Written off during the downturn, the company has re-emerged as a poster child for the lithium rebound thanks to its Kathleen Valley project.

Shares have surged 173% over the past 12 months as higher spodumene prices combine with shipments under long-term offtake agreements. A strong cash position and strategic deals with battery makers add credibility to the rally.

That said, Liontown’s earnings remain highly sensitive to lithium prices, and cost inflation could bite if the cycle turns. If prices hold firm, the ASX stock could keep grinding higher. But this remains a momentum-fuelled story.

Brokers’ sentiment is divided. However, Bell Potter remains bullish on this lithium miner, assigning a buy rating and a $2.42 price target. That points to potential 34% upside over the next 12 months.

The broker says the company is well positioned to capitalise on rising lithium prices, pointing to the strength and quality of its Kathleen Valley project.

IGO

This ASX lithium stock offers a steadier way to play the theme. Unlike pure lithium miners, IGO leans on diversified exposure to nickel and copper, helping cushion commodity swings.

Recent results showed a sharp lift in EBITDA, highlighting the strength of its broader operations even as lithium processing challenges linger. Its stake in Greenbushes and downstream refining provides long-term leverage, but also operational complexity.

Investors chasing stability over explosive upside may prefer IGO, especially if base metals remain supportive.

Analysts are cautious and most rate the ASX lithium share neutral with a 12-month average price target of $8.32, identical to the share price at the time of writing.

Core Lithium

Core Lithium is the high-risk, high-reward option. After shelving production at the depths of the downturn, the ASX lithium share is now gearing up for a restart of the Finniss project. It’s backed by higher reserves and lower-cost plans.

The market has jumped on the turnaround narrative, sending shares sharply higher – 164% in the past 12 months. Execution risk remains significant, and funding is always a hurdle. If lithium prices stay elevated and the restart delivers, the upside could be dramatic.

In January, Canaccord Genuity reiterated its buy rating on the ASX lithium share and lifted its price target from 27 cents to 40 cents.

This suggests a potential upside of more than 65% over 12 months.

The post Are ASX lithium shares running out of steam? appeared first on The Motley Fool Australia.

More reading

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Motley Fool contributor Marc Van Dinther has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Global demand for critical minerals has increased in recent years due to electric vehicles (EVs), renewable energy, defence technology etc.

It’s hard to argue the relevance of this sector for investors. 

However, the challenge has been to time the market based on the changing landscape of supply, demand, and global geopolitics.

A new report from Betashares has outlined the importance of critical minerals in the age of AI and tariffs.

What are critical minerals?

According to the Australian Government, a critical mineral is a metallic or non-metallic element that has two characteristics:

• It is essential for the functioning of our modern technologies, economies, or national security
• There is a risk that its supply chains could be disrupted

Critical minerals are used in the manufacturing of advanced technologies like:

• Mobile phones
• Computers
• Fibre-optic cables
• Semi-conductors
• Banknotes
• Defence, aerospace, and medical applications

Many critical minerals are also used in low-emission technologies such as electric vehicles, wind turbines, solar panels, and rechargeable batteries. 

Common critical minerals include: 

• Lithium: batteries for electric vehicles and energy storage
• Rare earths elements (e.g. neodymium, praseodymium, dysprosium): EV motors, wind turbines, defence systems
• Nickel: high-energy-density batteries and stainless steel
• Cobalt: battery cathodes and aerospace alloys
• Graphite: battery anodes and industrial applications
• Copper: electrification, renewable energy, and grid infrastructure

Where do investors fit into this equation?

Investors may choose to target critical minerals because demand is structurally rising from emerging themes like electric vehicles, renewable energy, defence, and advanced manufacturing.

Demand gives these commodities strategic value, policy support, and the potential for outsized returns when supply tightens.

According to Betashares, the convergence of AI expansion and the green transition may produce a historic ‘supercycle’ in critical minerals, reshaping industries worldwide and testing supply chains already stressed by renewable energy and electric vehicle (EV) growth.

Vinnay Cchoda, Manager – Responsible Investments at Betashares, Ex Ellerston Capital and Venture Insights said: 

For investors, the structural demand story remains compelling. But the means of capturing that value has shifted. The path to monetising this megatrend now runs through policy, geopolitics, supply chain diversification and industrial strategy as much as through geology.

What’s perhaps even more prudent for investors is grasping the current Australian repositioning from a raw-materials exporter to a strategic partner.

By using public finance, policy support, and alliances – particularly with the US – Australia is positioning to build processing, refining, and downstream manufacturing capability in critical minerals. 

How to gain exposure

Like many thematic classes, investors have plenty of individual companies that will provide exposure to critical minerals. 

Some of the most recognisable ASX-listed companies include: 

• PLS Ltd (ASX: PLS) – lithium and battery minerals producer
• IGO Ltd (ASX: IGO) – diversified battery metals miner with lithium and nickel exposure
• Liontown Resources Ltd (ASX: LTR) — lithium exploration and development company

Another option is to invest in a basket of these companies using an ASX ETF.

Two options to consider for ASX ETFs featuring critical minerals companies are: 

• Betashares Energy Transition Metals ETF (ASX: XMET) – provides exposure to global producers of copper, lithium, nickel, cobalt, graphite, manganese, silver, and rare earths elements.
• Global X Green Metal Miners ETF (ASX: GMTL) – provides exposure to global companies that produce critical metals for clean energy infrastructure and technologies, including lithium, copper, nickel, and cobalt.

The post The growing case for critical minerals – Expert appeared first on The Motley Fool Australia.

More reading

• Are ASX lithium shares running out of steam?
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• Here are the top 10 ASX 200 shares today
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• Buy, hold, sell: Life360, Liontown, and Mineral Resources shares

Motley Fool contributor Aaron Bell has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Xero Ltd (ASX: XRO) share price is in focus today as the company showcases its progress in global AI and US payments, with over two million subscribers now using its AI features and key advances following the Melio integration.

What did Xero report?

• Over two million Xero subscribers now benefitting from AI features, with 300,000 using new GenAI tools.
• Melio’s US payments functionality successfully integrated, strengthening Xero’s presence stateside.
• Xero reiterates FY26 guidance: operating expenses expected at around 70.5% of revenue (including Melio).
• Melio expected to reach Adjusted-EBITDA breakeven in H2 FY28 (on a run-rate basis).
• More than four million customers now using Xero’s platform globally.

What else do investors need to know?

Xero is focusing squarely on driving the adoption and value of AI features in its products, aiming to make small business accounting smarter and easier. Its AI strategy rests on four main goals: helping customers get assistance quickly, saving them time, supporting smarter business decisions, and unlocking new growth.

In the US, the combination with Melio is already delivering benefits, with unified teams and improved payments integration enabling Xero to target higher revenue per customer and stronger unit economics. Xero has also started reporting more detailed US business metrics, covering payment volumes and customer profitability.

What did Xero management say?

CEO Sukhinder Singh Cassidy commented:

We are deeply focused on capturing the global AI and US accounting plus payments TAM. Xero is well positioned to shepherd SMBs into the AI era and take advantage of this technology. We are already a trusted system of record and are now orchestrating multiple agents to evolve into the key system of action and decision making for our customers. Combined with our deep domain knowledge, unique data platform and go-to-market strengths, we have a clear AI strategy that supports our long-term growth opportunity.

What’s next for Xero?

Looking ahead, Xero plans to accelerate its AI rollout, deepen product adoption, and begin monetising new AI-powered features during FY27. The company will also move to an Adjusted-EBITDA framework for forward guidance, aiming to give investors a clearer picture of ongoing profitability.

Xero’s FY28 goal is ambitious—more than doubling FY25 group revenue and delivering Rule of 40 outcomes at group level, supported by US growth and efficiencies from the Melio acquisition.

Xero share price snapshot

Over the past 12 months, Xero shares have declined 49%,  trailing the S&P/ASX 200 Index (ASX: XJO) which has risen 5% over the same period.

View Original Announcement

The post Xero highlights AI progress and Melio momentum in US market update appeared first on The Motley Fool Australia.

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Motley Fool contributor Laura Stewart 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. This article was prepared with the assistance of Large Language Model (LLM) tools for the initial summary of the company announcement. Any content assisted by AI is subject to our robust human-in-the-loop quality control framework, involving thorough review, substantial editing, and fact-checking by our experienced writers and editors holding appropriate credentials. The Motley Fool Australia stands behind the work of our editorial team and takes ultimate responsibility for the content published by The Motley Fool Australia.

If you’re trying to beat the S&P/ASX 200 Index (ASX: XJO), it helps to be honest about the playing field.

Australia’s largest companies like Commonwealth Bank of Australia (ASX: CBA) and BHP (ASX: BHP) are heavily researched, widely owned, and constantly scrutinised by analysts and institutions. By the time an opportunity becomes obvious in the top 200, it is often already reflected in the share price.

That doesn’t mean outperformance is impossible. It just means investors looking for stronger returns may need to broaden their search. For many, that search leads to ASX small-caps.

Why small caps can offer more opportunity

The ASX small-cap universe is far larger and more diverse than the headline indices suggest. It includes emerging leaders, niche operators, turnaround stories, and businesses still flying under the radar.

This part of the market is also less efficiently priced. Many small companies are followed by few analysts, and institutional ownership is often limited. As a result, share prices can lag behind fundamentals — creating potential opportunities for patient investors.

Small-caps also tend to respond more dramatically to changes in earnings expectations, sentiment, or economic conditions. While that volatility can be unsettling, it is also what creates the possibility of outsized gains.

Rotation can leave quality businesses behind

Markets move in cycles. Capital rotates between sectors, styles, and company sizes as conditions evolve.

When investors crowd into popular themes, other areas of the market can be left behind. ASX small-caps often feel this effect more acutely, with entire segments sold down regardless of individual company performance.

At times, this can result in high-quality businesses trading at prices that reflect pessimism rather than reality. For investors willing to look past short-term noise, rotation can open the door to opportunities that are harder to find in larger, more stable stocks.

Depressed valuations can support future returns

After several years of lagging large caps, parts of the small-cap market have been trading on noticeably lower valuations.

That does not guarantee a rebound. Markets can stay out of favour longer than expected. Still, when expectations are already low, companies often need less “good news” to surprise on the upside.

If earnings stabilise or improve, valuations can recover alongside profits. Over time, that combination has the potential to support stronger returns than those available in more fully priced parts of the market.

Small companies can change faster

Large companies can grow, but their size often limits how quickly they can transform.

Small-caps, by contrast, can materially change their trajectory in a short period. That might involve reaching profitability, expanding into new markets, securing a major contract, or strengthening the balance sheet.

These inflection points tend to have a greater impact on smaller businesses, which is why returns across the small cap universe are far more dispersed. Some companies struggle. Others go on to deliver substantial gains as their prospects improve.

M&A activity can act as a tailwind

Another factor supporting interest in ASX small caps is mergers and acquisitions.

When organic growth is hard to find, larger companies often look to acquisitions to expand earnings. Smaller, well-run businesses can become attractive targets — particularly when valuations are reasonable and growth elsewhere is scarce. Just look at some of 2025’s small cap takeover winners like RPM Global (ASX: RUL).

Foolish takeaway

ASX small-caps are not without risk.

They can be more volatile, less liquid, and more sensitive to economic shocks than large caps. That is the price investors pay for the potential upside.

For many, the question isn’t whether small-caps are better than large-caps. It’s whether small-caps can play a role in a diversified portfolio — particularly for investors seeking opportunities beyond the most crowded parts of the market.

For investors willing to think long term and accept volatility, ASX small-caps could be where the next wave of returns comes from.

The post ASX small-caps could be where the next wave of returns comes from appeared first on The Motley Fool Australia.

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Motley Fool contributor Leigh Gant 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 RPMGlobal. The Motley Fool Australia has recommended BHP Group and RPMGlobal. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.