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ETFs in Focus Post Microsoft Q1 Earnings Beat, Soft View
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The world's largest software maker — Microsoft (MSFT - Free Report) — reported strong first-quarter fiscal 2022 results, wherein it beat both revenue and earnings estimates. However, it was unable to lure investors as the company posted its weakest quarterly revenue growth in five years and issued downbeat second-quarter revenues (see: all the Technology ETFs here).
Following the weak outlook and slower revenue growth, shares of MSFT dropped as much as 8% in after-market trading on an elevated volume. 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 $2.35, outpacing the Zacks Consensus Estimate of $2.29 but deteriorating 13% from the year-ago quarter. Revenues grew 11% year over year to $50.1 billion, edging past the consensus estimate of $49.47 billion. It represents the lowest revenue growth in five years. The ongoing shift to hybrid work powered demand for MSFT’s cloud-based services and helped to cushion a slump in the personal computers’ business.
Revenue growth was dampened by a surging U.S. dollar and a slump in the sales of Windows software to personal-computer makers. Macroeconomic headwinds are hurting the cloud business in addition to the PC unit (read: Least-Hurt Top-Ranked Tech ETFs You May Consider Now).
Cloud revenues jumped 24% year over year. Sales of Office 365 Commercial and Dynamic 365 climbed 11% and 24%, respectively. The flagship Azure computing platform grew 35%, down from its prior quarter gains in the mid-to-high 40% range. As the global economy teeters on the brink of a recession, sales of Windows software to PC makers plunged 15%.
Microsoft forecasts revenues of $52.35-$53.35 billion for fiscal second-quarter 2023, which implies 2% growth at the middle of the range.
Select Sector SPDR Technology ETF is the most popular and liquid ETF in the technology space, with AUM of $36.6 billion and an average daily volume of 8 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 22.6%.
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 144 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 billion and charges 39 bps in fees and expenses. Volume is good as it exchanges nearly 1 million shares a day. IYW has a Zacks ETF Rank #2 with a Medium risk outlook.
Vanguard Information Technology ETF manages about $37.9 billion in its asset base and provides exposure to 371 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the second position with an 18.2% share (read: Time to Buy Tech ETFs on the Dip?).
Vanguard Information Technology ETF has 0.10% in expense ratio, while volume is solid at nearly 822,000 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 $4.8 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 193,000 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 129 stocks in its basket, Microsoft occupies the second spot with an 18.1% share.
iShares Global Tech ETF has amassed $2.8 billion in its asset base and trades in a good volume of 308,000 shares a day, on average. The expense ratio is 0.40%.
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ETFs in Focus Post Microsoft Q1 Earnings Beat, Soft View
The world's largest software maker — Microsoft (MSFT - Free Report) — reported strong first-quarter fiscal 2022 results, wherein it beat both revenue and earnings estimates. However, it was unable to lure investors as the company posted its weakest quarterly revenue growth in five years and issued downbeat second-quarter revenues (see: all the Technology ETFs here).
Following the weak outlook and slower revenue growth, shares of MSFT dropped as much as 8% in after-market trading on an elevated volume. 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 $2.35, outpacing the Zacks Consensus Estimate of $2.29 but deteriorating 13% from the year-ago quarter. Revenues grew 11% year over year to $50.1 billion, edging past the consensus estimate of $49.47 billion. It represents the lowest revenue growth in five years. The ongoing shift to hybrid work powered demand for MSFT’s cloud-based services and helped to cushion a slump in the personal computers’ business.
Revenue growth was dampened by a surging U.S. dollar and a slump in the sales of Windows software to personal-computer makers. Macroeconomic headwinds are hurting the cloud business in addition to the PC unit (read: Least-Hurt Top-Ranked Tech ETFs You May Consider Now).
Cloud revenues jumped 24% year over year. Sales of Office 365 Commercial and Dynamic 365 climbed 11% and 24%, respectively. The flagship Azure computing platform grew 35%, down from its prior quarter gains in the mid-to-high 40% range. As the global economy teeters on the brink of a recession, sales of Windows software to PC makers plunged 15%.
Microsoft forecasts revenues of $52.35-$53.35 billion for fiscal second-quarter 2023, which implies 2% growth at the middle of the range.
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 $36.6 billion and an average daily volume of 8 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 22.6%.
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 144 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 billion and charges 39 bps in fees and expenses. Volume is good as it exchanges nearly 1 million 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 $37.9 billion in its asset base and provides exposure to 371 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the second position with an 18.2% share (read: Time to Buy Tech ETFs on the Dip?).
Vanguard Information Technology ETF has 0.10% in expense ratio, while volume is solid at nearly 822,000 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 $4.8 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 193,000 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 129 stocks in its basket, Microsoft occupies the second spot with an 18.1% share.
iShares Global Tech ETF has amassed $2.8 billion in its asset base and trades in a good volume of 308,000 shares a day, on average. The expense ratio is 0.40%.