ETFs to Tap As Cloud Powers Microsoft Fiscal Q1 Earnings
After the closing bell on Tuesday, the world's largest software maker — Microsoft MSFT —delighted investors with better-than-expected first-quarter fiscal 2022 results. It continued a long track of beating earnings estimates and topped the revenue estimate driven by the demand for its software and cloud computing services for remote work and study (see: all the Technology ETFs here).
Earnings per share came in at $2.71, outpacing the Zacks Consensus Estimate of $2.06 and improving 25% 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 22% year over year to $45.3 billion, topping the consensus estimate of $43.87 billion. This marks the fastest pace of revenue growth since 2018.
Growing demand for cloud computing services and software tools that support at-home workers led to the robust performance. Microsoft Cloud generated $20.7 billion in revenues for the first time in the quarter, up 36% year over year, suggesting a good start to fiscal 2022. Growth of the flagship Azure computing platform rose 50% in the fiscal first quarter, just shy of 51% growth in the fiscal fourth quarter. Sales of Office 365 Commercial and Dynamic 365 climbed 23% and 48%, respectively. Microsoft’s gaming revenues jumped 16% year over year.
The robust earnings results pushed shares of Microsoft higher as much as 2% in after-market hours. The stock currently has a Zacks Rank #2 (Buy) and Growth Score of B.
ETFs to Buy
Investors seeking to invest in this software leader could tap ETFs with a lower level of risk. While several ETF options are available, we have highlighted six with double-digit exposure to Microsoft that could be compelling choices.
Select Sector SPDR Technology ETF XLK
This most-popular technology ETF follows the Technology Select Sector Index and has $46.7 billion in AUM. The fund charges 12 bps in fees per year from investors and trades in a heavy volume of around 9.7 million shares a day, on average. It holds about 75 securities in its basket, with Microsoft occupying the second position at 21.5%. XLK has a Zacks ETF Rank #1 with a Medium risk outlook (read: 4 ETF Areas for Investors to Make the Most of Q4).
iShares Dow Jones US Technology ETF IYW
This ETF tracks the Dow Jones U.S. Technology Capped Index, giving investors exposure to 151 U.S. electronics, computer software and hardware, and informational technology companies. Of these, Microsoft occupies the second position in the basket with 16.3% of the assets. The fund has AUM of $9 billion and charges 41 bps in fees and expenses. Volume is good as it exchanges nearly 507,000 shares a day. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
Vanguard Information Technology ETF VGT
This fund manages about $52.5 billion in its asset base and provides exposure to 342 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the second position with a 16.8% share. The ETF has 0.10% in expense ratio, while volume is solid at nearly 598,000 shares. It has a Zacks ETF Rank #1 with a Medium risk outlook.
MSCI Information Technology Index ETF FTEC
This fund is home to 350 technology stocks with AUM of $6.6 billion. It follows the MSCI USA IMI Information Technology Index. MSFT is the second firm with a 16.8% allocation. The ETF has 0.08% in expense ratio, while volume is solid at 237,000 shares a day. It carries a Zacks ETF Rank #1 with a Medium risk outlook.
iShares Global Tech ETF IXN
This product provides exposure to electronics, computer software and hardware, and informational technology companies by tracking the S&P Global 1200 Information Technology Sector Index. Holding 130 stocks in its basket, Microsoft occupies the second spot with 17.1% share. The ETF has amassed $5.6 billion in its asset base and trades in a good volume of 350,000 shares a day on average. The expense ratio is 0.43%.
iShares Evolved U.S. Technology ETF IETC
This is an active ETF, having accumulated $149.6 million in its asset base. It employs data science techniques to provide exposure to 240 technology stocks. Microsoft is the top firm with a 15% allocation. IETC trades in a light volume of 14,000 shares and charges 18 bps in annual fees (read: 5 Tech ETFs Outperforming the Market This Year).
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Microsoft Corporation (MSFT) : Free Stock Analysis Report
Technology Select Sector SPDR ETF (XLK): ETF Research Reports
Fidelity MSCI Information Technology Index ETF (FTEC): ETF Research Reports
iShares U.S. Technology ETF (IYW): ETF Research Reports
Vanguard Information Technology ETF (VGT): ETF Research Reports
iShares Global Tech ETF (IXN): ETF Research Reports
iShares Evolved U.S. Technology ETF (IETC): ETF Research Reports
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