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Microsoft Q4 Earnings Beat, Shares Slip: ETFs in Focus
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The world's largest software maker — Microsoft (MSFT - Free Report) — reported strong fourth-quarter fiscal 2023 results, beating earnings and revenue estimates thanks to continued growth in its cloud computing businesses. The company provided a downbeat revenue outlook for the current quarter (see: all the Technology ETFs here).
Despite the revenue and earnings beat, shares of MSFT dropped as much as 4% in after-market hours. The slowing growth of cloud service Azure proved to be a dampener. Investors could tap the dip in this software leader through ETFs having double-digit exposure to Microsoft. These are Select Sector SPDR Technology ETF (XLK - Free Report) , MSCI Information Technology Index ETF (FTEC - Free Report) , iShares Global Tech ETF (IXN - Free Report) , Vanguard Information Technology ETF (VGT - Free Report) and iShares Dow Jones US Technology ETF (IYW - Free Report) .
Earnings in Focus
Earnings per share came in at $2.69, outpacing the Zacks Consensus Estimate of $2.54 and higher than $2.23 reported in the year-ago quarter. Revenues grew 8.4% year over year to $56.2 billion, edging past the consensus estimate of $55.4 billion. Revenue growth was driven by the improvement in its cloud computing and Office productivity software businesses.
Cloud revenues jumped 21% year over year. Sales of Office 365 Commercial and Dynamic 365 climbed 15% and 26%, respectively. The flagship Azure computing platform growth slowed to 26% from 27% in the prior quarter.
The world’s largest software maker projected that Azure gains would slow further in the current quarter, and said it would boost spending to expand data centers for new cloud services while expecting only a gradual increase in AI revenues.
Microsoft expects revenues of $53.8-$54.8 billion for fiscal first-quarter 2024, which implies 8% year-over-year growth at the middle of the range. The Zacks Consensus for fiscal first-quarter revenue is pegged at $54.95 billion. Demand for generative artificial intelligence (AI) will continue to fuel Microsoft's cloud business.
The stock hit an all-time high on Jul 18 and has risen more than 43% this year amid the growing AI hype in the tech sector. The software giant has been at the forefront of the AI conversation since announcing a $10 billion investment in the ChatGPT creator, OpenAI, in January. It has integrated AI into its Bing search product and is further weaving AI into its own products, such as the $30-a-month "Copilot" for its Microsoft 365 service that can summarize a day's worth of emails into a quick update (read: ETFs to Tap on Microsoft's New AI Subscription Drive).
Select Sector SPDR Technology ETF is the most popular and liquid ETF in the technology space, with AUM of $51 billion and an average daily volume of 6 million shares. It offers broad exposure to the technology sector and follows the Technology Select Sector Index. Select Sector SPDR Technology ETF holds about 65 securities in its basket, with Microsoft occupying the second position at 22.8%.
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.
MSCI Information Technology Index ETF is home to 310 technology stocks with AUM of $7.4 billion. It follows the MSCI USA IMI Information Technology Index. Microsoft is the second firm with a 20.6% allocation.
MSCI Information Technology Index ETF has 0.08% in expense ratio, while volume is solid at 243,000 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 4.5/22.5/45 Capped Index. Holding 114 stocks in its basket, Microsoft occupies the second spot with a 20% share.
iShares Global Tech ETF has amassed $3.7 billion in its asset base and trades in a good volume of 193,000 shares a day, on average. The expense ratio is 0.40%.
Vanguard Information Technology ETF manages about $53.5 billion in its asset base and provides exposure to 322 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the second position with a 20.5% share (read: Top-Ranked ETFs to Buy as Goldman Cuts U.S. Recession Forecast)).
Vanguard Information Technology ETF has 0.10% in expense ratio, while volume is solid at nearly 515,000 shares. It has a Zacks ETF Rank #1 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 136 securities in its basket. Of these, Microsoft occupies the second position in the basket, with 16.9% of the assets.
iShares Dow Jones US Technology ETF has AUM of $11.4 billion and charges 39 bps in fees and expenses. Volume is good as it exchanges nearly 979,000 shares a day. IYW has a Zacks ETF Rank #1 with a Medium risk outlook.
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Microsoft Q4 Earnings Beat, Shares Slip: ETFs in Focus
The world's largest software maker — Microsoft (MSFT - Free Report) — reported strong fourth-quarter fiscal 2023 results, beating earnings and revenue estimates thanks to continued growth in its cloud computing businesses. The company provided a downbeat revenue outlook for the current quarter (see: all the Technology ETFs here).
Despite the revenue and earnings beat, shares of MSFT dropped as much as 4% in after-market hours. The slowing growth of cloud service Azure proved to be a dampener. Investors could tap the dip in this software leader through ETFs having double-digit exposure to Microsoft. These are Select Sector SPDR Technology ETF (XLK - Free Report) , MSCI Information Technology Index ETF (FTEC - Free Report) , iShares Global Tech ETF (IXN - Free Report) , Vanguard Information Technology ETF (VGT - Free Report) and iShares Dow Jones US Technology ETF (IYW - Free Report) .
Earnings in Focus
Earnings per share came in at $2.69, outpacing the Zacks Consensus Estimate of $2.54 and higher than $2.23 reported in the year-ago quarter. Revenues grew 8.4% year over year to $56.2 billion, edging past the consensus estimate of $55.4 billion. Revenue growth was driven by the improvement in its cloud computing and Office productivity software businesses.
Cloud revenues jumped 21% year over year. Sales of Office 365 Commercial and Dynamic 365 climbed 15% and 26%, respectively. The flagship Azure computing platform growth slowed to 26% from 27% in the prior quarter.
The world’s largest software maker projected that Azure gains would slow further in the current quarter, and said it would boost spending to expand data centers for new cloud services while expecting only a gradual increase in AI revenues.
Microsoft expects revenues of $53.8-$54.8 billion for fiscal first-quarter 2024, which implies 8% year-over-year growth at the middle of the range. The Zacks Consensus for fiscal first-quarter revenue is pegged at $54.95 billion. Demand for generative artificial intelligence (AI) will continue to fuel Microsoft's cloud business.
The stock hit an all-time high on Jul 18 and has risen more than 43% this year amid the growing AI hype in the tech sector. The software giant has been at the forefront of the AI conversation since announcing a $10 billion investment in the ChatGPT creator, OpenAI, in January. It has integrated AI into its Bing search product and is further weaving AI into its own products, such as the $30-a-month "Copilot" for its Microsoft 365 service that can summarize a day's worth of emails into a quick update (read: ETFs to Tap on Microsoft's New AI Subscription Drive).
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 $51 billion and an average daily volume of 6 million shares. It offers broad exposure to the technology sector and follows the Technology Select Sector Index. Select Sector SPDR Technology ETF holds about 65 securities in its basket, with Microsoft occupying the second position at 22.8%.
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.
MSCI Information Technology Index ETF (FTEC - Free Report)
MSCI Information Technology Index ETF is home to 310 technology stocks with AUM of $7.4 billion. It follows the MSCI USA IMI Information Technology Index. Microsoft is the second firm with a 20.6% allocation.
MSCI Information Technology Index ETF has 0.08% in expense ratio, while volume is solid at 243,000 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 4.5/22.5/45 Capped Index. Holding 114 stocks in its basket, Microsoft occupies the second spot with a 20% share.
iShares Global Tech ETF has amassed $3.7 billion in its asset base and trades in a good volume of 193,000 shares a day, on average. The expense ratio is 0.40%.
Vanguard Information Technology ETF (VGT - Free Report)
Vanguard Information Technology ETF manages about $53.5 billion in its asset base and provides exposure to 322 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the second position with a 20.5% share (read: Top-Ranked ETFs to Buy as Goldman Cuts U.S. Recession Forecast)).
Vanguard Information Technology ETF has 0.10% in expense ratio, while volume is solid at nearly 515,000 shares. It has a Zacks ETF Rank #1 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 136 securities in its basket. Of these, Microsoft occupies the second position in the basket, with 16.9% of the assets.
iShares Dow Jones US Technology ETF has AUM of $11.4 billion and charges 39 bps in fees and expenses. Volume is good as it exchanges nearly 979,000 shares a day. IYW has a Zacks ETF Rank #1 with a Medium risk outlook.