Looking to buy a few promising S&P/ASX 200 Index (ASX: XJO) tech shares to potentially boost your returns in 2025?
Then you'll want to read what Daylight Financial Group's Elio D'Amato had to say when asked about which stocks he believes are well-placed to outperform in the year ahead (courtesy of The Bull).
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Surging ASX 200 tech share tipped for more gains in 2025
The first ASX 200 tech share D'Amato tipped for outperformance in 2025 is software-as-a-service provider Technology One Ltd (ASX: TNE). The Technology One share price has soared 110% since this time last year.
He noted that the company's business model delivered 90% recurring revenue, with total annual recurring revenue up 20% year on year in FY 2024 to $470 million.
D'Amato said Technology One's annual recurring revenue was forecast to top $500 million in the first half of FY 2025. The tech company is aiming for $1 billion in annual recurring revenue by FY 2030.
The ASX 200 tech share has cash reserves of $280 million and no debt.
According to D'Amato:
Technology One is set to excel in 2025, driven by its strong financial performance and strategic growth initiatives.
TNE's profitability underscores its strength, with net profit before tax of $153 million in fiscal year 2024, up 18% on the prior corresponding period. Operating margins averaged 29%.
D'Amato is bullish on the growth potential of Technology One's strategic acquisitions, including CourseLoop. The company's 25% revenue allocation to R&D should continue to deliver new innovations.
"Additionally, a 70% surge in annual recurring revenue in the UK highlights its international momentum. TNE's blend of innovation, financial health and market leadership ensures its trajectory as a top performer," D'Amato said.
Balancing growth with profitability
The second ASX 200 tech share D'Amato expects to outperform in 2025 is business and accounting software provider Xero Ltd (ASX: XRO). Xero shares have surged 64.5% over the past 12 months.
D'Amato noted that Xero's first-half revenue for FY 2025 was up 25% year on year to NZ$996 million. And annualised monthly recurring revenue of NZ$2.2 billion was up 22%.
And he said the 51% boost in half-year earnings before interest, taxes, depreciation and amortisation (EBITDA) to NZ$312 million reflected "strong operational execution".
According to D'Amato (quoted by The Bull):
The company balances growth with profitability. Xero's strategic investments drive its market leadership, with 4.2 million subscribers and a 15% rise in average revenue per user to NZ$43.08.
He's also bullish on the potential boost for the ASX 200 tech share from the rapid evolution of artificial intelligence and the company's recent strategic acquisition of Syft Analytics.
"With a robust NZ$2 billion cash position amid plans to double its business size while maintaining profitability, Xero's strategic initiatives and disciplined capital allocation ensure its resilience and growth," D'Amato concluded.
