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ETFs to Buy as Microsoft Shares Gain 4% Post Q1 Earnings Beat
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Key Takeaways
Microsoft shares gained 4% after fiscal Q1 2027 earnings and revenues beat consensus estimates.
MSFT's cloud revenues grew 30%, while capital spending rose 29.5%, pressuring free cash flow.
ETFs including FTEC offer diversified tech exposure, with MSFT holdings ranging from 11.18% to 14.63%.
Shares of software giant Microsoft (MSFT - Free Report) rose 4% in yesterday’s extended trading session (as cited in CNBC), following the company’s better-than-expected first-quarter fiscal 2027 results. The company added 24 new data centers across five continents in the fiscal first quarter, thanks to accelerating demand. This expansion is expected to remain a key long-term growth catalyst for MSFT.
However, the company’s capital expenditure, a metric that has been worrying investors across the market in recent times, went up 29.5% year over year to $45.2 billion and subsequently dragged down its free cash flow by 27% from the prior-year level.
While management expects free cash flow to remain positive in fiscal 2027, persistent pressure on cash generation could temporarily constrain Microsoft’s financial flexibility. If sustained, this friction could even limit the company’s capacity for future infrastructure investments or raise leverage concerns among risk-averse investors — even as new data centers drive near-term revenue growth.
Against this backdrop, investors seeking exposure to Microsoft’s leadership in cloud computing — without absorbing the single-stock risk of its declining cash flow — should consider exchange-traded funds (ETFs) with significant MSFT holdings. This approach captures Microsoft’s upside while maintaining broad technology diversification.
Before exploring our top ETF picks, let us examine Microsoft’s fiscal first-quarter performance across key metrics to help investors make well-informed decisions.
A Brief Analysis of MSFT’s Q1 Results
Microsoft’s fiscal first-quarter adjusted earnings per share (EPS) beat the Zacks Consensus Estimate by 3.8%, while its revenues topped the consensus mark by 1.9%. The company delivered strong year-over-year results, with both revenues and earnings registering double-digit growth.
Segment-wise, revenues from MSFT’s Agents and Infra units grew 25%, backed by strength across the connected layers of its platform. Nevertheless, commercial bookings fell 12%, primarily due to tough year-over-year comparisons stemming from large Azure commitments in the prior-year period.
Revenues from its Devices and Consumer segment dropped 3% year over year, primarily on account of a 22% slump in its Windows OEM and Devices revenues.
As far as Microsoft’s cloud business is concerned, revenues improved 30%, backed by strong demand across Azure and M365 Commercial Cloud platforms. Azure revenues increased 48%, driven by Foundry and improved CPU monetization. M365 Commercial Cloud revenues rose 18%, driven by stronger GitHub Copilot adoption and usage.
In relation to its shareholder-friendly moves, Microsoft returned $10.2 billion to its stakeholders in the form of dividends and share repurchases in the first quarter of fiscal 2027.
Microsoft expects to witness healthy growth in its commercial bookings in the fiscal second quarter. However, quarterly growth is expected to reflect lumpiness due to large Azure commitments secured a year ago.
Business-wise, Microsoft expects M365 Commercial Cloud revenues to grow roughly 19% in constant currency (with minimal foreign exchange impact), driven by rising ARPU, seat additions, and strong traction in premium and usage-based offerings.
Its Devices and Consumer segment is projected to generate $15.9 billion to $16.4 billion in revenues in the fiscal second quarter, with search and advertising revenue (ex-TAC) forecasted to expand in the low double digits on steady volume and rate growth. Additionally, Xbox Content and Services is expected to grow in the mid-to-high single digits.
Microsoft-Heavy ETFs to Buy
Global X PureCap MSCI Information Technology ETF (GXPT - Free Report)
This fund, with net assets worth $140.8 million, offers exposure to 85 U.S.-listed companies classified within the Information Technology sector under the Global Industry Classification Standard. Of these, Microsoft carries the third spot, holding 14.63% of the fund.
GXPT has rallied 26.3% year to date. The fund charges 15 basis points (bps) in fees and traded at a volume of 0.02 million shares in the last trading session.
This fund, with net assets worth $25.13 billion, includes 148 software, semiconductors and tech hardware companies. Of these, Microsoft carries the third spot, holding 13.07% of the fund.
IYW has surged 29% year to date. The fund charges 37 bps in fees and traded at a volume of 0.85 million shares in the last trading session.
This fund, with net assets worth $246.2 million, offers exposure to 77 information technology-related companies. Of these, Microsoft carries the fourth spot, holding 11.89% of the fund.
TRUT has rallied 23.9% year to date. The fund charges 14 basis points (bps) in fees and traded at a volume of 0.15 million shares in the last trading session.
Fidelity MSCI Information Technology Index ETF (FTEC - Free Report)
This fund, with net assets worth $22.15 billion, includes 298 information technology stocks. Of these, Microsoft carries the third spot, holding 11.18% of the fund.
FTEC has risen 31.3% year to date. The fund charges 8 bps in fees and traded at a volume of 0.31 million shares in the last trading session.
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ETFs to Buy as Microsoft Shares Gain 4% Post Q1 Earnings Beat
Key Takeaways
Shares of software giant Microsoft (MSFT - Free Report) rose 4% in yesterday’s extended trading session (as cited in CNBC), following the company’s better-than-expected first-quarter fiscal 2027 results. The company added 24 new data centers across five continents in the fiscal first quarter, thanks to accelerating demand. This expansion is expected to remain a key long-term growth catalyst for MSFT.
However, the company’s capital expenditure, a metric that has been worrying investors across the market in recent times, went up 29.5% year over year to $45.2 billion and subsequently dragged down its free cash flow by 27% from the prior-year level.
While management expects free cash flow to remain positive in fiscal 2027, persistent pressure on cash generation could temporarily constrain Microsoft’s financial flexibility. If sustained, this friction could even limit the company’s capacity for future infrastructure investments or raise leverage concerns among risk-averse investors — even as new data centers drive near-term revenue growth.
Against this backdrop, investors seeking exposure to Microsoft’s leadership in cloud computing — without absorbing the single-stock risk of its declining cash flow — should consider exchange-traded funds (ETFs) with significant MSFT holdings. This approach captures Microsoft’s upside while maintaining broad technology diversification.
Before exploring our top ETF picks, let us examine Microsoft’s fiscal first-quarter performance across key metrics to help investors make well-informed decisions.
A Brief Analysis of MSFT’s Q1 Results
Microsoft’s fiscal first-quarter adjusted earnings per share (EPS) beat the Zacks Consensus Estimate by 3.8%, while its revenues topped the consensus mark by 1.9%. The company delivered strong year-over-year results, with both revenues and earnings registering double-digit growth.
Segment-wise, revenues from MSFT’s Agents and Infra units grew 25%, backed by strength across the connected layers of its platform. Nevertheless, commercial bookings fell 12%, primarily due to tough year-over-year comparisons stemming from large Azure commitments in the prior-year period.
Revenues from its Devices and Consumer segment dropped 3% year over year, primarily on account of a 22% slump in its Windows OEM and Devices revenues.
As far as Microsoft’s cloud business is concerned, revenues improved 30%, backed by strong demand across Azure and M365 Commercial Cloud platforms. Azure revenues increased 48%, driven by Foundry and improved CPU monetization. M365 Commercial Cloud revenues rose 18%, driven by stronger GitHub Copilot adoption and usage.
In relation to its shareholder-friendly moves, Microsoft returned $10.2 billion to its stakeholders in the form of dividends and share repurchases in the first quarter of fiscal 2027.
Microsoft expects to witness healthy growth in its commercial bookings in the fiscal second quarter. However, quarterly growth is expected to reflect lumpiness due to large Azure commitments secured a year ago.
Business-wise, Microsoft expects M365 Commercial Cloud revenues to grow roughly 19% in constant currency (with minimal foreign exchange impact), driven by rising ARPU, seat additions, and strong traction in premium and usage-based offerings.
Its Devices and Consumer segment is projected to generate $15.9 billion to $16.4 billion in revenues in the fiscal second quarter, with search and advertising revenue (ex-TAC) forecasted to expand in the low double digits on steady volume and rate growth. Additionally, Xbox Content and Services is expected to grow in the mid-to-high single digits.
Microsoft-Heavy ETFs to Buy
Global X PureCap MSCI Information Technology ETF (GXPT - Free Report)
This fund, with net assets worth $140.8 million, offers exposure to 85 U.S.-listed companies classified within the Information Technology sector under the Global Industry Classification Standard. Of these, Microsoft carries the third spot, holding 14.63% of the fund.
GXPT has rallied 26.3% year to date. The fund charges 15 basis points (bps) in fees and traded at a volume of 0.02 million shares in the last trading session.
iShares U.S. Technology ETF (IYW - Free Report)
This fund, with net assets worth $25.13 billion, includes 148 software, semiconductors and tech hardware companies. Of these, Microsoft carries the third spot, holding 13.07% of the fund.
IYW has surged 29% year to date. The fund charges 37 bps in fees and traded at a volume of 0.85 million shares in the last trading session.
VanEck Technology TruSector ETF (TRUT - Free Report)
This fund, with net assets worth $246.2 million, offers exposure to 77 information technology-related companies. Of these, Microsoft carries the fourth spot, holding 11.89% of the fund.
TRUT has rallied 23.9% year to date. The fund charges 14 basis points (bps) in fees and traded at a volume of 0.15 million shares in the last trading session.
Fidelity MSCI Information Technology Index ETF (FTEC - Free Report)
This fund, with net assets worth $22.15 billion, includes 298 information technology stocks. Of these, Microsoft carries the third spot, holding 11.18% of the fund.
FTEC has risen 31.3% year to date. The fund charges 8 bps in fees and traded at a volume of 0.31 million shares in the last trading session.