Xero Ltd (ASX: XRO) shares have had a run. Over the past 12 months, the ASX tech stock has swung between a low of $61.45 and a high of $166.00. At the time of writing, Xero shares sit at $62.78, hovering just above that 52-week low and a full 62% below the year's record high.
The recent trend hasn't been kind either. Xero shares finished the week as one of the big losers with a loss of 4% on Friday. The stock is down 9% over the past five trading days, 24% over the past month, and a painful 45% so far in 2026.
And yet, through all of that, brokers remain stubbornly bullish. Here's why.
Xero isn't just trying to sell more accounting subscriptions anymore. The team at Macquarie Group Ltd (ASX: MQG) has flagged US growth and AI monetisation as catalysts for Xero shares to watch.
The company estimates the US small-business payments market alone represents a US$29 billion opportunity. The acquisition of Melio has expanded what Xero can chase. The ambition now is bigger than bookkeeping. Xero wants to put accounting, payments, payroll and expenses under a single roof.
It effectively tries to become the financial operating system for millions of US small businesses. Xero says the Melio deal delivered an approximately threefold increase in North American revenue from day one.
It's also stretching its reach beyond small businesses into self-employed customers and medium-sized businesses too. With Melio, pro forma FY26 US revenue reached NZ$530 million, up 50%, and pro forma gross profit rose 36% to NZ$186 million.
Melio supplies the payments engine, Xero adds payroll and other financial tools, and a new US leadership structure is being built specifically to accelerate customer acquisition and integrate the two businesses.
Layer artificial intelligence on top, and the strategy gets more interesting. Xero is developing JAX, its agentic AI platform, aiming to move beyond reporting financial information toward automating financial work.
AI-powered analytics are also being embedded across the platform, with the long-term goal of shifting Xero from a system of record into a system of action.
Put it together, and the bull case for Xero shares becomes a formula: win more US customers, sell more products to each one, grab a slice of a large payments market, and use AI to make the whole platform more valuable.
If Xero pulls this off, the upside case stops being about accounting software altogether. It becomes about owning a much bigger slice of the small-business financial stack.
Despite the casualties in the share price, broker's sentiment hasn't cracked.
TradingView's poll of the past three months shows a buy consensus. There are 6 buy or strong buy ratings, just 1 hold, and zero sells on Xero shares. The average 12-month target sits at $111.24. That suggest roughly 76% upside from current levels. The target implies potential upside of 130%.
Individual calls back that up. Citi has reiterated its buy call with a $113.60 target, implying around 81% upside. Morgan Stanley sees $130, and UBS sits at $127.
Ord Minnett and Morgans are more conservative at $110 and $111, while RBC Capital and Jefferies bring up the cautious end at $85 and $77. Even so, these targets imply upside of 35% and 23%, respectively, from the current share price.