ASX tech shares typically have good growth potential. Technology is the way the world is going and bringing new technology to industries has the potential to create good profit margins.
There are some businesses in the tech space that have particularly promising futures with how much they may be able to grow their businesses in the coming years.
Xero Limited (ASX: XRO)
Xero is one of the world’s largest cloud accounting businesses. It makes the software easy to use and understand for business owners, accountants, bookkeepers and advisors.
The business has built a very strong market position in both New Zealand and Australia.
But it’s the growth internationally that is particularly exciting. It is growing subscriber numbers rapidly in places like the UK, South Africa and Singapore. Xero is also making steady progress in the USA.
Global subscriber growth could continue for many years for the ASX tech share. In FY21, revenue grew by 18% to $848.8 million. Subscribers rose by 20% to 2.74 million.
I like Xero’s commitment to steadily invest in its products and offerings, which will keep it ahead of the competition.
One of the most attractive things about Xero is its gross profit margin of 86% (in FY21). This means that a lot of the new revenue turns into operating profit, which can be reinvested for more growth.
Temple & Webster Group Ltd (ASX: TPW)
Temple & Webster is another fast-growing ASX tech share.
It’s a leading online retailer of furniture and homewares. The company sells a very large array of products for people to choose from.
The company has a goal of becoming the largest in the furniture and homewares market.
Temple & Webster is aiming to invest money across its business in areas like augmented reality so that potential shoppers can see the possible piece in their room.
It’s looking to invest across the business in various parts of the company to improve efficiencies and increase its ability to serve customers.
Over the long-term, management think that the company can achieve higher profit margins over time as it becomes larger.
In the first couple of months of FY22, the company said that it had managed to grow its revenue by a further 49% year on year. That was on top of huge growth in FY21.
I think this is one of the most promising ASX tech shares around if it can keep growing revenue at a good pace.
