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The world's largest software maker — Microsoft (MSFT - Free Report) — reported strong third-quarter fiscal 2023 results, beating earnings and revenue estimates. The company also provided an upbeat outlook for its nascent artificial intelligence services (see: all the Technology ETFs here).
Shares of MSFT jumped as much as 9% in after-market hours on an elevated volume. Investors couple tap the strength in 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 $2.45, outpacing the Zacks Consensus Estimate of $2.22 and higher than $2.22 reported in the year-ago quarter. Revenues grew 7% year over year to $52.9 billion, edging past the consensus estimate of $52.86 billion. Revenue growth was driven by the improvement in its cloud computing and Office productivity software businesses.
Cloud revenues jumped 22% year over year. Sales of Office 365 Commercial and Dynamic 365 climbed 14% and 25%, respectively. The flagship Azure computing platform grew 27%.
During the quarter, the software maker announced a new multibillion-dollar investment in OpenAI and said it would draw on the company’s artificial intelligence models for a new version of its Bing search engine and enhancements to the Microsoft 365 productivity software (read: ETFs to Gain on Microsoft's $13-Billion Bet on OpenAI).
Microsoft expects "another quarter of healthy revenue growth.” It expects revenues in the range of $54.85 to $55.85 billion for fiscal fourth-quarter 2023, which implies 6.7% year-over-year growth at the middle of the range. The company will continue to invest in its cloud infrastructure, particularly AI-related spending, on growing demand driven by customer transformation that would result in revenues growth over time. Microsoft expects fourth-quarter intelligent cloud business revenues in the range of $23.6 billion to $23.9 billion, implying an 8.2% sequential growth rate.
Select Sector SPDR Technology ETF is the most popular and liquid ETF in the technology space, with AUM of $42.5 billion and an average daily volume of 7 million shares. It offers broad exposure to the technology sector and follows the Technology Select Sector Index. Select Sector SPDR Technology ETF holds about 66 securities in its basket, with Microsoft occupying the second position at 23.1%.
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 139 securities in its basket. Of these, Microsoft occupies the second position in the basket, with 16.9% of the assets (read: U.S. Inflation Cools: 3 ETF Areas to Soar).
iShares Dow Jones US Technology ETF has AUM of $10.3 billion and charges 39 bps in fees and expenses. Volume is good as it exchanges nearly 630,000 shares a day. IYW has a Zacks ETF Rank #2 with a Medium risk outlook.
Vanguard Information Technology ETF manages about $45.5 billion in its asset base and provides exposure to 364 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the second position with an 18% share.
Vanguard Information Technology ETF has 0.10% in expense ratio, while volume is solid at nearly 536,000 shares. It has a Zacks ETF Rank #2 with a Medium risk outlook.
MSCI Information Technology Index ETF is home to 359 technology stocks with AUM of $6 billion. It follows the MSCI USA IMI Information Technology Index. Microsoft is the second firm with an 18.1% allocation (read: 5 Tech Stocks That Powered Nasdaq ETF in the First Quarter).
MSCI Information Technology Index ETF has 0.08% in expense ratio, while volume is solid at 208,000 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 4.5/22.5/45 Capped Index. Holding 114 stocks in its basket, Microsoft occupies the second spot with a 19.5% share.
iShares Global Tech ETF has amassed $3 billion in its asset base and trades in a good volume of 205,000 shares a day, on average. The expense ratio is 0.40%.
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ETFs to Buy on Microsoft's Q2 Earnings Strength
The world's largest software maker — Microsoft (MSFT - Free Report) — reported strong third-quarter fiscal 2023 results, beating earnings and revenue estimates. The company also provided an upbeat outlook for its nascent artificial intelligence services (see: all the Technology ETFs here).
Shares of MSFT jumped as much as 9% in after-market hours on an elevated volume. Investors couple tap the strength in 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 $2.45, outpacing the Zacks Consensus Estimate of $2.22 and higher than $2.22 reported in the year-ago quarter. Revenues grew 7% year over year to $52.9 billion, edging past the consensus estimate of $52.86 billion. Revenue growth was driven by the improvement in its cloud computing and Office productivity software businesses.
Cloud revenues jumped 22% year over year. Sales of Office 365 Commercial and Dynamic 365 climbed 14% and 25%, respectively. The flagship Azure computing platform grew 27%.
During the quarter, the software maker announced a new multibillion-dollar investment in OpenAI and said it would draw on the company’s artificial intelligence models for a new version of its Bing search engine and enhancements to the Microsoft 365 productivity software (read: ETFs to Gain on Microsoft's $13-Billion Bet on OpenAI).
Microsoft expects "another quarter of healthy revenue growth.” It expects revenues in the range of $54.85 to $55.85 billion for fiscal fourth-quarter 2023, which implies 6.7% year-over-year growth at the middle of the range. The company will continue to invest in its cloud infrastructure, particularly AI-related spending, on growing demand driven by customer transformation that would result in revenues growth over time. Microsoft expects fourth-quarter intelligent cloud business revenues in the range of $23.6 billion to $23.9 billion, implying an 8.2% sequential growth rate.
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 $42.5 billion and an average daily volume of 7 million shares. It offers broad exposure to the technology sector and follows the Technology Select Sector Index. Select Sector SPDR Technology ETF holds about 66 securities in its basket, with Microsoft occupying the second position at 23.1%.
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 139 securities in its basket. Of these, Microsoft occupies the second position in the basket, with 16.9% of the assets (read: U.S. Inflation Cools: 3 ETF Areas to Soar).
iShares Dow Jones US Technology ETF has AUM of $10.3 billion and charges 39 bps in fees and expenses. Volume is good as it exchanges nearly 630,000 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 $45.5 billion in its asset base and provides exposure to 364 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the second position with an 18% share.
Vanguard Information Technology ETF has 0.10% in expense ratio, while volume is solid at nearly 536,000 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 359 technology stocks with AUM of $6 billion. It follows the MSCI USA IMI Information Technology Index. Microsoft is the second firm with an 18.1% allocation (read: 5 Tech Stocks That Powered Nasdaq ETF in the First Quarter).
MSCI Information Technology Index ETF has 0.08% in expense ratio, while volume is solid at 208,000 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 4.5/22.5/45 Capped Index. Holding 114 stocks in its basket, Microsoft occupies the second spot with a 19.5% share.
iShares Global Tech ETF has amassed $3 billion in its asset base and trades in a good volume of 205,000 shares a day, on average. The expense ratio is 0.40%.