ASX tech shares that are rapidly growing could be the right way to go for investors seeking strong capital gains.
Technology businesses are some of the most compelling ASX stock, because of how easy it is for them to grow and achieve high profit margins.
Tech companies usually provide software, which typically does not have any physical limitations. They don't need a new warehouse, a new shop or other things to expand. They just need to sell to more clients/subscribers.
This is an exchange-traded fund (ETF) which aims to invest in companies at the leading edge of next-generation technology. It's offered by one of the larger ETF providers – Global X.
It invests in a portfolio of 10 positions of many of the most attractive US tech giants. I'm calling it an ASX tech share because Aussies can buy it on the ASX.
Those ten names are: Netflix, Crowdstrike, Broadcom, ServiceNow, Microsoft, Nvidia, Meta Platforms, Amazon.com, Alphabet and Apple.
These businesses provide exposure to trends like online advertising, cloud computing AI, online video, e-commerce, social media, smartphones and so on.
The companies in the portfolio are some of strongest businesses, with leading global market positions, great balance sheets, impressive profit margins and so on.
While past performance is certainly not a guarantee of future returns, this ETF has returned an average of 30% per year for the past 5 years.
Cloud-accounting ASX tech share Xero is one of the most impressive businesses in the ASX, in my view.
It has grown from a small New Zealand software player into a global giant with large positions in New Zealand, the UK and Australia. It also has growing subscriber numbers in places like North America, South Africa, Singapore and many more.
The latest update from the business was the FY25 result, which was for the 12 months to 31 March 2025. That report saw operating revenue increase 23%, operating profit (EBIT) grew 28%, net profit increased 30% and free cash flow surged 48%.
With a gross profit margin that has now reached 89% (up from 88.2% in FY24), I'm expecting the operating profit and free cash flow to rise at a pleasing pace.
The ASX tech share recently announced a significant US acquisition that could help the business expand in the United States. This could become significant market for Xero if it can establish a meaningful competitive position there.
In five years, I believe the business will be much more profitable. This could make it a good investment to own today.
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