Microsoft vs Xero: Revenue, Profit and Business Model
Microsoft had $331.8B of annual revenue in FY2026 and $133.7B of net income. Xero had ~$1.6B of annual revenue in FY2026 and ~$97.1M of net income.
Latest financial snapshot
Financial summary
Microsoft
Microsoft's FY2026 revenue rose 17.8% to $331.8 billion, operating income rose 21% to $155.2 billion, and GAAP net income rose 31% to $133.7 billion. Fourth-quarter revenue was $90.0 billion (up 18%) with net income of $35.8 billion, helped by a $3.2 billion gain on its Anthropic investment. Microsoft Cloud revenue reached $59.3 billion in Q4, up 27%. The main pressure point is capital intensity: AI data center spending has pushed free cash flow growth well below earnings growth. Microsoft crossed the $3 trillion market valuation threshold in 2024, driven by its leadership in cloud computing and artificial intelligence.
Xero
For the year ended 31 March 2026 Xero reported operating revenue of ~$1.59 billion (NZ$2.75 billion), up 31%, net profit of ~$96.9 million (NZ$167 million), down 27% because of Melio acquisition costs, and free cash flow of ~$321 million (NZ$554 million). Subscribers rose 11% to 4.92 million and average revenue per customer rose 23% to NZ$55.44.
Revenue and profit by year
Microsoft
| Year | Revenue | Net income | Margin | Growth | Source |
|---|---|---|---|---|---|
| FY2026 | $331.8B | $133.7B | 40.3% | +17.8% | Source |
| FY2025 | $281.7B | $101.8B | 36.1% | +14.9% | Source |
| FY2024 | $245.1B | $88.1B | 36.0% | +15.7% | Source |
| FY2023 | $211.9B | $72.4B | 34.1% | +6.9% | Source |
| FY2022 | $198.3B | $72.7B | 36.7% | +18.0% | Source |
| FY2021 | $168.1B | $61.3B | 36.5% | +17.5% | Source |
| FY2020 | $143B | $44.3B | 31.0% | +13.6% | Source |
| FY2019 | $125.8B | $39.2B | 31.2% | +14.0% | Source |
| FY2018 | $110.4B | $16.6B | 15.0% | +14.3% | Source |
| FY2017 | $96.6B | $25.5B | 26.4% | — | Source |
Xero
| Year | Revenue | Net income | Margin | Growth | Source |
|---|---|---|---|---|---|
| FY2026 | ~$1.6B | ~$97.1M | 6.1% | +30.9% | Source |
| FY2025 | ~$1.2B | ~$132.1M | 10.8% | +22.7% | Source |
| FY2024 | ~$994M | ~$101.3M | 10.2% | +22.4% | Source |
| FY2023 | ~$811.9M | ~-$65.8M | -8.1% | +27.6% | Source |
| FY2022 | ~$636.2M | ~-$5.3M | -0.8% | — | Source |
Where the revenue comes from
Microsoft
- Productivity And Business ProcessesMajor
Office, Microsoft 365, LinkedIn, Dynamics, and related cloud services.
- Intelligent CloudMajor
Azure, server products, enterprise services, and cloud infrastructure.
- More Personal ComputingMajor
Windows, devices, gaming, search, and advertising.
- AI Services And CopilotsGrowth
AI features and model-powered services embedded across Azure, Microsoft 365, GitHub, security, and developer tools.
Xero
- Subscriptions and platform88
Recurring subscription revenue from accounting plans, add-ons and other platform services.
- Melio payments12
Transaction revenue from Melio's US bill pay and receivables platform, which contributed ~$193 million (NZ$332 million) in FY26.
Business model and strategy
Microsoft
How it makes money
Microsoft reports three segments. Intelligent Cloud covers Azure, SQL Server, Windows Server, GitHub, Nuance, and enterprise services; server products and cloud services alone brought in $129.4 billion in FY2026, and Azure passed $100 billion in annual revenue for the first time.
Growth strategy
Microsoft's growth plan centers on AI capacity and AI subscriptions. It is spending heavily on data centers and chips to meet Azure demand that management says remains capacity constrained, and it is selling Microsoft 365 Copilot as a paid add-on, which passed 30 million paid seats by the end of FY2026.
Competitive advantage
Microsoft's main advantage is distribution inside enterprises. Identity (Entra), email and documents (Microsoft 365), collaboration (Teams), developer tools (GitHub, Visual Studio), and cloud infrastructure (Azure) are often bought together, which raises switching costs and lets Microsoft attach new products such as Copilot to existing contracts.
Xero
How it makes money
Xero sells monthly software subscriptions to small businesses, sole traders, and accounting and bookkeeping firms. The core product covers bank reconciliation, invoicing, bills, payroll in several markets and financial reporting, and plans are priced in tiers by market. Most customers reach Xero through accountants and bookkeepers, who adopt it for their practice and move clients onto it.
Growth strategy
Xero's strategy centres on three jobs for small businesses (accounting, payments and payroll) in three main markets (Australia and New Zealand, the UK and the US). In the US it is combining Xero and Melio under one leadership team, adding online bill payments inside Xero and embedded payroll. It is also building AI features, including its JAX assistant, into the core product.
Competitive advantage
Xero's main advantage is its accountant and bookkeeper channel in Australia, New Zealand and the UK, which brings small business clients onto the platform. Melio adds a US payments product that it owns.
Questions about Microsoft vs Xero
Which company has higher revenue — Microsoft Corporation or Xero?
Microsoft Corporation had $331.8B (FY2026), while Xero had ~$1.6B (FY2026). By latest annual revenue, Microsoft Corporation is the larger business, with Xero showing a smaller revenue base.
What is the market cap of Microsoft Corporation vs Xero?
Microsoft Corporation's market capitalisation stands at $3.83T, while Xero's is $6.5B. Microsoft Corporation carries the higher market valuation, reflecting investors' expectations of its future earnings power relative to Xero.
How does revenue per employee compare for Microsoft Corporation and Xero?
Microsoft Corporation has $1.49M / employee in revenue per employee, while Xero has $363k / employee. Headcounts may use different dates, so the ratio alone does not establish which business operates more efficiently.
How do Microsoft Corporation and Xero make money?
Microsoft Corporation and Xero generate revenue in fundamentally different ways. Microsoft Corporation: Microsoft reports three segments. Xero: Xero sells monthly software subscriptions to small businesses, sole traders, and accounting and bookkeeping firms.
Which company is valued higher relative to revenue — Microsoft Corporation or Xero?
On a price-to-sales (P/S) basis, Microsoft Corporation trades at 11.5x P/S and Xero at 4.1x P/S. Microsoft Corporation commands a higher revenue multiple, typically indicating that investors expect faster growth or higher future margins compared to Xero. A higher multiple is not inherently better — it may also signal that the stock is priced for perfection.
Is Microsoft Corporation bigger than Xero?
By last reported revenue, Microsoft Corporation ($331.8B (FY2026)) is the larger company compared to Xero (~$1.6B (FY2026)). Revenue scale is one dimension of size — market capitalisation, employee count, and geographic reach are also relevant depending on the context.
Figures come from each company's filings and the sources linked beside them. Amounts reported in another currency are shown in US dollars at an approximate rate and marked with ~. Back to the Microsoft vs Xero overview