Background: Xero is the Kiwi-born accounting software giant that helps small businesses and bookkeepers manage invoices, payroll, and payments. Xero was founded in 2006 and delisted from the New Zealand exchange to become solely ASX-listed in 2018.  

What happened: The past 12 months have been rough for Xero, with its share price falling more than 60%. Investors are worried that AI could replace software companies lie Xero. In response, Xero has announced that its agent, Jax, will be integrated into Microsoft 365 Copilot, adding to its existing AI partnerships with OpenAI and Anthropic.

What else: Rather than positioning Xero as just a software business, its CEO is describing it as a data company, technology company, platform company... (the list goes on). Essentially, Xero wants investors to see it as an AI-enabled infrastructure business, not just another accounting software provider.  

What's the key learning?

💡 When investors think AI might eat your business, you'd better explain fast why it can't to quash fears that AI might do the job better.

💡 For Xero, its edge is the data it collects, not just the software itself. With 4.6 million subscribers feeding invoices, payroll, and bank data into Xero daily, the company has become a trusted system of record. AKA: the source of truth for a business's real numbers.

💡 Surviving AI disruption means fixing both the product... and the narrative. AI tools like Microsoft 364 Copilot still need reliable financial data from platforms like Xero to answer business questions. So, Xero is hoping its data advantage is something AI can't replicate.