Xero Ltd (ASX:XRO) ended Friday's session down 0.4% at A$81.76, hovering near recent lows as software stocks faced sustained selling pressure. The accounting software provider's market capitalization stood at approximately A$13.9 billion.
Broader Tech Sector Under Pressure
The S&P/ASX 200 Tech Index was poised to finish the week roughly 12% lower, reaching levels last seen in December 2023. The decline reflects a global retreat from technology shares, with U.S. software stocks shedding nearly $1 trillion in market value since late January.
AI Investment Scrutiny and Company Strategy
Investors are increasingly scrutinizing the soaring costs associated with artificial intelligence development. In a recent filing, Xero reaffirmed its AI ambitions and its integration of U.S. accounting and payments via Melio, projecting the unit could reach adjusted-EBITDA breakeven on a run-rate basis in the second half of fiscal 2028.
"The market is now differentiating between companies that enable AI and those that may be disrupted by it," noted one strategist, following significant declines in major U.S. software names.
Monetary Policy and Inflation Watch
The sector's valuation pressure is compounded by monetary policy concerns. The Reserve Bank of Australia recently raised its cash rate by 25 basis points to 3.85%, its first increase in two years, citing persistent inflation. Market participants will monitor a speech by RBA Deputy Governor Andrew Hauser on February 11 and subsequent parliamentary testimony.
Globally, the U.S. Consumer Price Index report for January, due February 13, will be a critical signal for the future path of interest rates.
Looking ahead, Xero investors are awaiting the company's fiscal 2026 report, scheduled for release on May 14, which will provide updates on its U.S. expansion and payments strategy.
