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Cloud Drives Microsoft Fiscal Q3 Earnings: ETFs to Buy

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The world's largest software maker — Microsoft (MSFT - Free Report) — delighted investors with robust third-quarter fiscal 2022 results. It continued a long track of beating earnings estimates and topped the revenue estimate driven by strong growth in its Azure platform in the booming cloud computing space. Microsoft also issued an optimistic growth forecast (see: all the Technology ETFs here).

Following the results, shares of MSFT jumped as much as 6.9% in after-market trading 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 $2.22, outpacing the Zacks Consensus Estimate of $2.18 and improving 14% from the year-ago quarter. Investors should note that Microsoft has not missed on quarterly earnings since the third quarter of fiscal 2016. Revenues grew 18% year over year to $49.36 billion, topping the consensus estimate of $49 billion.

Higher demand for the software giant's cloud-based services from the pandemic-triggered shift to hybrid work models led to the robust performance. Microsoft Intelligent Cloud business generated $19.1 billion in revenues in the quarter, up 26% year over year. Growth of the flagship Azure computing platform rose 46% in the fiscal third quarter. Sales of Office 365 Commercial and Dynamic 365 climbed 17% and 35%, respectively.

Microsoft forecasts double-digit revenue growth for the next fiscal year, driven by demand for cloud computing services.

The world's largest software maker announced its plan to buy gaming giant Activision Blizzard for $68.7 billion during the quarter, the largest transaction in Microsoft’s 47-year history (read: 5 ETFs to Cash in on Microsoft-Activision Deal).

ETFs to Buy

Select Sector SPDR Technology ETF (XLK - Free Report)

Select Sector SPDR Technology ETF is the most popular and liquid ETFs in the technology space, with AUM of $43 billion and an average daily volume of 12 million shares. It offers broad exposure to the technology sector and follows the Technology Select Sector Index. Select Sector SPDR Technology ETF holds about 75 securities in its basket, with Microsoft occupying the second position at 22.1%.

Select Sector SPDR Technology ETF charges 10 bps in fees per year from investors and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: 6 Solid Sector ETFs to Buy Now).

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 1514 securities in its basket. Of these, Microsoft occupies the second position in the basket with 15.9% of the assets.

iShares Dow Jones US Technology ETF has AUM of $7.7 billion and charges 41 bps in fees and expenses. Volume is good as it exchanges nearly 602,000 shares a day. IYW has a Zacks ETF Rank #1 with a Medium risk outlook.

Vanguard Information Technology ETF (VGT - Free Report)

Vanguard Information Technology ETF manages about $46 billion in its asset base and provides exposure to 357 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the second position with a 17.7% share.

Vanguard Information Technology ETF has 0.10% in expense ratio, while volume is solid at nearly 634,000 shares. It has a Zacks ETF Rank #1 with a Medium risk outlook (read: 5 ETFs That Saw Inflows Last Week).

MSCI Information Technology Index ETF (FTEC - Free Report)

MSCI Information Technology Index ETF is home to 365 technology stocks with AUM of $5.9 billion. It follows the MSCI USA IMI Information Technology Index. Microsoft is the second firm with a 17.7% allocation.

MSCI Information Technology Index ETF has 0.08% in expense ratio, while volume is solid at 340,000 shares a day. It carries a Zacks ETF Rank #1 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 131 stocks in its basket, Microsoft occupies the second spot with 17.6% share.

iShares Global Tech ETF has amassed $4.5 billion in its asset base and trades in a good volume of 334,000 shares a day, on average. The expense ratio is 0.43%.

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