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ETFs in Focus on Microsoft Q2 Earnings Beat & Weak Cloud
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The world's largest software maker — Microsoft (MSFT - Free Report) — reported strong second-quarter fiscal 2022 results, beating earnings estimates. However, it missed revenue estimates and forecast weak cloud revenues (see: all the Technology ETFs here).
Shares of MSFT initially climbed 4% in after-market hours on an elevated volume and then erased all gains to close down 1% on a weak cloud forecast. Investors could keep a close eye on this software leader through ETFs having double-digit exposure to Microsoft. These are Select Sector SPDR Technology ETF (XLK - Free Report) , iShares Dow Jones US Technology ETF (IYW - Free Report) , Vanguard Information Technology ETF (VGT - Free Report) , MSCI Information Technology Index ETF (FTEC - Free Report) and iShares Global Tech ETF (IXN - Free Report) .
Earnings in Focus
Earnings per share came in at $2.32, outpacing the Zacks Consensus Estimate of $2.27 but deteriorating 6% from the year-ago quarter. Revenues grew 1.9% year over year to $52.7 billion, falling short of the consensus estimate of $52.93 billion. Revenue growth was dampened by macroeconomic headwinds, which are hurting the cloud business in addition to the PC unit.
Cloud revenues jumped 22% year over year. Sales of Office 365 Commercial and Dynamic 365 climbed 11% and 21%, respectively. The flagship Azure computing platform grew 31%.
The company’s big bet on artificial intelligence is paying off, while the economic turbulence is making Microsoft customers scrutinize their cloud spend. The software giant said revenue growth in its Azure cloud-computing business will decelerate in the current quarter and warned of a further slowdown in corporate software sales, fueling concern about a steeper decline in demand for the products that have driven its momentum in recent years. Microsoft expects third-quarter intelligent cloud business revenues in the range of $21.7 billion to $22 billion, below the analyst average forecast of $22.1 billion, according to Refinitiv.
Microsoft forecasts revenues of $50.5-$51.5 billion for fiscal third-quarter 2023, which implies 3% year-over-year growth at the middle of the range (read: ETFs to Play Nasdaq's Fastest Start Since 2019).
Select Sector SPDR Technology ETF is the most popular and liquid ETF in the technology space, with AUM of $39.4 billion and an average daily volume of 6.2 million shares. It offers broad exposure to the technology sector and follows the Technology Select Sector Index. Select Sector SPDR Technology ETF holds about 76 securities in its basket, with Microsoft occupying the second position at 20.6%.
Select Sector SPDR Technology ETF charges 10 bps in fees per year from investors and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
iShares U.S. Technology ETF provides exposure to U.S. electronics, computer software and hardware, and informational technology companies. It tracks the Russell 1000 Technology RIC 22.5/45 Capped Index, holding 140 securities in its basket. Of these, Microsoft occupies the second position in the basket, with 15.2% of the assets (read: ETFs Set to Soar on Fed 50 Bps Rate Hike, Hawkish Tone).
iShares Dow Jones US Technology ETF has AUM of $8.4 billion and charges 39 bps in fees and expenses. Volume is good as it exchanges nearly 482,000 shares a day. IYW has a Zacks ETF Rank #2 with a Medium risk outlook.
Vanguard Information Technology ETF manages about $40 billion in its asset base and provides exposure to 368 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the second position with an 18.1% share.
Vanguard Information Technology ETF has 0.10% in expense ratio, while volume is solid at nearly 696,000 shares. It has a Zacks ETF Rank #2 with a Medium risk outlook.
MSCI Information Technology Index ETF is home to 385 technology stocks with AUM of $5.2 billion. It follows the MSCI USA IMI Information Technology Index. Microsoft is the second firm with an 18.1% allocation.
MSCI Information Technology Index ETF has 0.08% in expense ratio, while volume is solid at 173,000 shares a day. It carries a Zacks ETF Rank #2 with a Medium risk outlook.
iShares Global Tech ETF provides exposure to electronics, computer software and hardware, and informational technology companies by tracking the S&P Global 1200 Information Technology Sector Index. Holding 130 stocks in its basket, Microsoft occupies the second spot with a 16.4% share (read: 3 Reasons Why Tech ETFs May Rebound in 2023).
iShares Global Tech ETF has amassed $2.8 billion in its asset base and trades in a good volume of 262,000 shares a day, on average. The expense ratio is 0.40%.
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ETFs in Focus on Microsoft Q2 Earnings Beat & Weak Cloud
The world's largest software maker — Microsoft (MSFT - Free Report) — reported strong second-quarter fiscal 2022 results, beating earnings estimates. However, it missed revenue estimates and forecast weak cloud revenues (see: all the Technology ETFs here).
Shares of MSFT initially climbed 4% in after-market hours on an elevated volume and then erased all gains to close down 1% on a weak cloud forecast. Investors could keep a close eye on this software leader through ETFs having double-digit exposure to Microsoft. These are Select Sector SPDR Technology ETF (XLK - Free Report) , iShares Dow Jones US Technology ETF (IYW - Free Report) , Vanguard Information Technology ETF (VGT - Free Report) , MSCI Information Technology Index ETF (FTEC - Free Report) and iShares Global Tech ETF (IXN - Free Report) .
Earnings in Focus
Earnings per share came in at $2.32, outpacing the Zacks Consensus Estimate of $2.27 but deteriorating 6% from the year-ago quarter. Revenues grew 1.9% year over year to $52.7 billion, falling short of the consensus estimate of $52.93 billion. Revenue growth was dampened by macroeconomic headwinds, which are hurting the cloud business in addition to the PC unit.
Cloud revenues jumped 22% year over year. Sales of Office 365 Commercial and Dynamic 365 climbed 11% and 21%, respectively. The flagship Azure computing platform grew 31%.
The company’s big bet on artificial intelligence is paying off, while the economic turbulence is making Microsoft customers scrutinize their cloud spend. The software giant said revenue growth in its Azure cloud-computing business will decelerate in the current quarter and warned of a further slowdown in corporate software sales, fueling concern about a steeper decline in demand for the products that have driven its momentum in recent years. Microsoft expects third-quarter intelligent cloud business revenues in the range of $21.7 billion to $22 billion, below the analyst average forecast of $22.1 billion, according to Refinitiv.
Microsoft forecasts revenues of $50.5-$51.5 billion for fiscal third-quarter 2023, which implies 3% year-over-year growth at the middle of the range (read: ETFs to Play Nasdaq's Fastest Start Since 2019).
ETFs in Focus
Select Sector SPDR Technology ETF (XLK - Free Report)
Select Sector SPDR Technology ETF is the most popular and liquid ETF in the technology space, with AUM of $39.4 billion and an average daily volume of 6.2 million shares. It offers broad exposure to the technology sector and follows the Technology Select Sector Index. Select Sector SPDR Technology ETF holds about 76 securities in its basket, with Microsoft occupying the second position at 20.6%.
Select Sector SPDR Technology ETF charges 10 bps in fees per year from investors and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
iShares U.S. Technology ETF (IYW - Free Report)
iShares U.S. Technology ETF provides exposure to U.S. electronics, computer software and hardware, and informational technology companies. It tracks the Russell 1000 Technology RIC 22.5/45 Capped Index, holding 140 securities in its basket. Of these, Microsoft occupies the second position in the basket, with 15.2% of the assets (read: ETFs Set to Soar on Fed 50 Bps Rate Hike, Hawkish Tone).
iShares Dow Jones US Technology ETF has AUM of $8.4 billion and charges 39 bps in fees and expenses. Volume is good as it exchanges nearly 482,000 shares a day. IYW has a Zacks ETF Rank #2 with a Medium risk outlook.
Vanguard Information Technology ETF (VGT - Free Report)
Vanguard Information Technology ETF manages about $40 billion in its asset base and provides exposure to 368 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the second position with an 18.1% share.
Vanguard Information Technology ETF has 0.10% in expense ratio, while volume is solid at nearly 696,000 shares. It has a Zacks ETF Rank #2 with a Medium risk outlook.
MSCI Information Technology Index ETF (FTEC - Free Report)
MSCI Information Technology Index ETF is home to 385 technology stocks with AUM of $5.2 billion. It follows the MSCI USA IMI Information Technology Index. Microsoft is the second firm with an 18.1% allocation.
MSCI Information Technology Index ETF has 0.08% in expense ratio, while volume is solid at 173,000 shares a day. It carries a Zacks ETF Rank #2 with a Medium risk outlook.
iShares Global Tech ETF (IXN - Free Report)
iShares Global Tech ETF provides exposure to electronics, computer software and hardware, and informational technology companies by tracking the S&P Global 1200 Information Technology Sector Index. Holding 130 stocks in its basket, Microsoft occupies the second spot with a 16.4% share (read: 3 Reasons Why Tech ETFs May Rebound in 2023).
iShares Global Tech ETF has amassed $2.8 billion in its asset base and trades in a good volume of 262,000 shares a day, on average. The expense ratio is 0.40%.