We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Microsoft Q4 Earnings Miss, Outlook Solid: ETFs to Tap
Read MoreHide Full Article
The world's largest software maker — Microsoft (MSFT - Free Report) — reported weak fourth-quarter fiscal 2022 results. It ended its long track of beating estimates by missing on both earnings and revenues. However, Microsoft issued an optimistic growth forecast (see: all the Technology ETFs here).
Following the solid guidance, shares of MSFT jumped as much as 6% in after-market trading on an elevated volume. Investors could 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 $2.23, missing the Zacks Consensus Estimate of $2.28 and improving 2.7% from the year-ago quarter. It represents the lowest earnings growth in two years. Microsoft missed on quarterly earnings for the first time since the third quarter of fiscal 2016. Revenues grew 12.4% year over year to $51.87 billion, lagging the consensus estimate of $52.36 billion.
Lower-than-expected results were driven by a sharp slowdown in its cloud business, declining videogame sales and the effects of strong dollar (read: Fed Raises Rates by 75 bps: ETFs Set to Surge).
Intelligent Cloud business generated $20.9 billion in revenues in the quarter, up 30% year over year. Growth of the flagship Azure computing platform slowed to 40% in the fiscal third quarter, down from 46% in the previous quarter, as companies pulled back on digital infrastructure spending and dollar strengthened. Sales of Office 365 Commercial and Dynamic 365 climbed 15% and 31%, respectively.
Microsoft forecasts double-digit revenue growth for fiscal 2023, driven by demand for cloud computing services.
Select Sector SPDR Technology ETF is the most popular and liquid ETF in the technology space, with AUM of $41 billion and an average daily volume of 8 million shares. It offers a 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 21.5%.
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.
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 148 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 $6.8 billion and charges 41 bps in fees and expenses. Volume is good as it exchanges nearly 415,000 shares a day. IYW has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Vanguard Information Technology ETF manages about $44 billion in its asset base and provides exposure to 379 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the second position with an 18.8% share (read: Could a Sustained Tech ETF Rally Be in the Cards?).
Vanguard Information Technology ETF has 0.10% in expense ratio, while volume is solid at nearly 620,000 shares. It has a Zacks ETF Rank #2 with a Medium risk outlook.
MSCI Information Technology Index ETF is home to 395 technology stocks with AUM of $5.5 billion. It follows the MSCI USA IMI Information Technology Index. Microsoft is the second firm with an 18.8% allocation.
MSCI Information Technology Index ETF has 0.08% in expense ratio, while volume is solid at 256,000 shares a day. It carries a Zacks ETF Rank #1 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 132 stocks in its basket, Microsoft occupies the second spot with a 17.3% share.
iShares Global Tech ETF has amassed $3.3 billion in its asset base and trades in a good volume of 413,000 shares a day, on average. The expense ratio is 0.43%.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Microsoft Q4 Earnings Miss, Outlook Solid: ETFs to Tap
The world's largest software maker — Microsoft (MSFT - Free Report) — reported weak fourth-quarter fiscal 2022 results. It ended its long track of beating estimates by missing on both earnings and revenues. However, Microsoft issued an optimistic growth forecast (see: all the Technology ETFs here).
Following the solid guidance, shares of MSFT jumped as much as 6% in after-market trading on an elevated volume. Investors could 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 $2.23, missing the Zacks Consensus Estimate of $2.28 and improving 2.7% from the year-ago quarter. It represents the lowest earnings growth in two years. Microsoft missed on quarterly earnings for the first time since the third quarter of fiscal 2016. Revenues grew 12.4% year over year to $51.87 billion, lagging the consensus estimate of $52.36 billion.
Lower-than-expected results were driven by a sharp slowdown in its cloud business, declining videogame sales and the effects of strong dollar (read: Fed Raises Rates by 75 bps: ETFs Set to Surge).
Intelligent Cloud business generated $20.9 billion in revenues in the quarter, up 30% year over year. Growth of the flagship Azure computing platform slowed to 40% in the fiscal third quarter, down from 46% in the previous quarter, as companies pulled back on digital infrastructure spending and dollar strengthened. Sales of Office 365 Commercial and Dynamic 365 climbed 15% and 31%, respectively.
Microsoft forecasts double-digit revenue growth for fiscal 2023, driven by demand for cloud computing services.
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 $41 billion and an average daily volume of 8 million shares. It offers a 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 21.5%.
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.
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 148 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 $6.8 billion and charges 41 bps in fees and expenses. Volume is good as it exchanges nearly 415,000 shares a day. IYW has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Vanguard Information Technology ETF (VGT - Free Report)
Vanguard Information Technology ETF manages about $44 billion in its asset base and provides exposure to 379 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the second position with an 18.8% share (read: Could a Sustained Tech ETF Rally Be in the Cards?).
Vanguard Information Technology ETF has 0.10% in expense ratio, while volume is solid at nearly 620,000 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 395 technology stocks with AUM of $5.5 billion. It follows the MSCI USA IMI Information Technology Index. Microsoft is the second firm with an 18.8% allocation.
MSCI Information Technology Index ETF has 0.08% in expense ratio, while volume is solid at 256,000 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 132 stocks in its basket, Microsoft occupies the second spot with a 17.3% share.
iShares Global Tech ETF has amassed $3.3 billion in its asset base and trades in a good volume of 413,000 shares a day, on average. The expense ratio is 0.43%.