The market has a habit of throwing out excellent businesses when sentiment turns sour. Over the past six months, we have seen exactly that play out across parts of the tech sector.
Two ASX growth shares that stand out to me right now are Catapult Sports Ltd (ASX: CAT) and Xero Ltd (ASX: XRO). Both are down more than 30% over the past six months. And in both cases, I think the share price weakness says far more about market mood than business quality.
Catapult Sports shares
Catapult is a stock I keep coming back to because the fundamentals continue to improve, even when the share price does not.
The company sits at the heart of elite sport, data, and software. Its technology is embedded inside professional teams across more than 40 sports globally, and once adopted, it is very hard to replace. That shows up clearly in its metrics.
In the first half of FY26, Catapult grew annualised contract value by 19% on a constant currency basis and lifted management EBITDA by 50% year on year. Retention remained above 95%, which puts it in rare company among global SaaS businesses. This is not a company struggling to find demand. It is one that is scaling with discipline.
What really excites me is the operating leverage now emerging. Contribution margins are improving, free cash flow is turning positive, and the business is moving steadily closer to its longer-term margin targets. The acquisitions of Perch and IMPECT also expand Catapult's addressable market and deepen its competitive moat, particularly in performance analytics and scouting.
After a sharp pullback, the market is once again offering a chance to buy a global SaaS leader with improving profitability and a long runway for growth.
Xero shares
Xero is another example of a business whose share price has recently disconnected from its operational performance.
In the first half of FY26, Xero delivered revenue growth of 20%, free cash flow growth of 54%, and a Rule of 40 outcome of 44.5%. Subscriber numbers rose to 4.6 million, churn remained low, and average revenue per user continued to climb. This is exactly what you want to see from a mature SaaS platform.
The acquisition of Melio strengthens Xero's position in the US, which remains its biggest long-term growth opportunity. Importantly, management continues to emphasise disciplined capital allocation and improving efficiency, with operating expenses as a percentage of revenue trending lower.
I think Xero's investment in artificial intelligence is another underappreciated driver. Its AI financial assistant, JAX, is not a marketing gimmick. It is designed to automate workflows, improve insights, and deepen customer engagement. Over time, that could support both retention and pricing power.
Despite all this, Xero shares have fallen heavily from their highs. For long-term investors, I see this as an opportunity rather than a warning sign.
Foolish Takeaway
Both Catapult Sports and Xero are high-quality ASX growth shares that are executing well in challenging market conditions. They are not without risk, but their competitive positions, recurring revenue, and improving profitability give them genuine earnings power.
If sentiment stabilises and execution continues, I would not be surprised to see both stocks outperform the share market meaningfully in 2026 and beyond.
