Xero Earnings: Business Success Remains Determined by Network Effects

We raise our fair value estimate for narrow-moat Xero by 4% to AUD 78 per share following interim fiscal 2024 results. Subscriber growth was in line with our expectations while growth in average revenue per user, or ARPU, was slightly stronger than expected. Our upgrade is primarily driven by lower-than-expected churn in Xero’s international segment which may hint at a maturing customer base. At current prices, Xero shares remain materially overvalued.