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Microsoft ETFs Tumble as Q3 Cloud Growth Slows Down
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The world's largest software maker — Microsoft (MSFT - Free Report) — disappointed investors with its fourth-quarter fiscal 2024 results, which deepened fears about the artificial intelligence (AI) boom. Though the company beat earnings and revenue estimates, growth in Azure cloud computing slowed down. Also, Microsoft offered weak guidance for the ongoing quarter (see: all the Technology ETFs here).
The stock lost about 3% in after-market hours, paring earlier losses of as much as 9.1%. ETFs having double-digit exposure to this software leader also plummeted in extended trading. Select Sector SPDR Technology ETF (XLK - Free Report) , MSCI Information Technology Index ETF (FTEC - Free Report) , Vanguard Information Technology ETF (VGT - Free Report) and iShares Dow Jones US Technology ETF (IYW - Free Report) dipped at least 1% each. iShares Global Tech ETF (IXN - Free Report) was up 0.2%.
Earnings in Focus
Earnings per share came in at $2.95, beating the Zacks Consensus Estimate of $2.90 and were higher than $2.69 reported a year ago quarter. Revenues grew 15% year over year to $64.7 billion, edging past the consensus estimate of $64.73 billion.
Intelligent Cloud revenues jumped 19% year over year to $28.5 billion. Sales of Office 365 Commercial and Dynamic 365 climbed 13% and 19%, respectively. Sales of the flagship Azure computing platform grew 29% year over year, down from 31% in the previous quarter.
The software maker has been infusing its product line with AI technology from partner OpenAI, including digital assistants called Copilots that can summarize documents and generate computer code, emails and other content. The company also is selling Azure cloud subscriptions featuring OpenAI products. Further, Microsoft is spending billions to construct new data centers to meet demand for cloud computing and power-hungry AI services.
Though Azure growth will continue to slow down in the current quarter, Chief Financial Officer Amy Hood said that investments in data centers and servers will let the company capitalize on demand and accelerate Azure growth in the second half of fiscal 2025.
Microsoft expects revenues of $63.8-$64.8 billion for the fiscal first quarter of 2025, implying 13.8% growth at the middle of the range. The Zacks Consensus Estimate is pegged at $65.16 billion.
Select Sector SPDR Technology ETF is the most popular and liquid ETF in the technology space, with AUM of $67.2 billion and an average daily volume of 5 million shares. It offers broad exposure to the technology sector and follows the Technology Select Sector Index. Select Sector SPDR Technology ETF holds about 67 securities in its basket, with Microsoft occupying the top position at 22.3% (read: Should You Buy the Dip in "Mag 7" and Big Tech ETFs?).
Select Sector SPDR Technology ETF charges 9 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 297 technology stocks with AUM of $11.3 billion. It follows the MSCI USA IMI Information Technology Index. Microsoft is the top firm with a 16.6% allocation.
MSCI Information Technology Index ETF has a 0.08% expense ratio, while volume is solid at 334,000 shares a day. It carries a Zacks ETF Rank #1 with a Medium risk outlook.
Vanguard Information Technology ETF manages about $72.6 billion in its asset base and provides exposure to 320 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the top position with a 16.6% share.
Vanguard Information Technology ETF has an expense ratio of 0.10%, while volume is solid at nearly 476,000 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 140 securities in its basket. Of these, Microsoft occupies the second position in the basket, with 15.7% of the assets.
iShares Dow Jones US Technology ETF has AUM of $18.4 billion and charges 40 bps in fees and expenses. Volume is good as it exchanges nearly 810,000 shares a day. IYW has a Zacks ETF Rank #1 with a Medium risk outlook (read: Worried About Tech Selloff? ETF Strategies to Play).
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 118 stocks in its basket, Microsoft occupies the top spot with an 18.4% share.
iShares Global Tech ETF has amassed $5 billion in its asset base and trades in a good volume of 196,000 shares a day, on average. The expense ratio is 0.41%.
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Microsoft ETFs Tumble as Q3 Cloud Growth Slows Down
The world's largest software maker — Microsoft (MSFT - Free Report) — disappointed investors with its fourth-quarter fiscal 2024 results, which deepened fears about the artificial intelligence (AI) boom. Though the company beat earnings and revenue estimates, growth in Azure cloud computing slowed down. Also, Microsoft offered weak guidance for the ongoing quarter (see: all the Technology ETFs here).
The stock lost about 3% in after-market hours, paring earlier losses of as much as 9.1%. ETFs having double-digit exposure to this software leader also plummeted in extended trading. Select Sector SPDR Technology ETF (XLK - Free Report) , MSCI Information Technology Index ETF (FTEC - Free Report) , Vanguard Information Technology ETF (VGT - Free Report) and iShares Dow Jones US Technology ETF (IYW - Free Report) dipped at least 1% each. iShares Global Tech ETF (IXN - Free Report) was up 0.2%.
Earnings in Focus
Earnings per share came in at $2.95, beating the Zacks Consensus Estimate of $2.90 and were higher than $2.69 reported a year ago quarter. Revenues grew 15% year over year to $64.7 billion, edging past the consensus estimate of $64.73 billion.
Intelligent Cloud revenues jumped 19% year over year to $28.5 billion. Sales of Office 365 Commercial and Dynamic 365 climbed 13% and 19%, respectively. Sales of the flagship Azure computing platform grew 29% year over year, down from 31% in the previous quarter.
The software maker has been infusing its product line with AI technology from partner OpenAI, including digital assistants called Copilots that can summarize documents and generate computer code, emails and other content. The company also is selling Azure cloud subscriptions featuring OpenAI products. Further, Microsoft is spending billions to construct new data centers to meet demand for cloud computing and power-hungry AI services.
Though Azure growth will continue to slow down in the current quarter, Chief Financial Officer Amy Hood said that investments in data centers and servers will let the company capitalize on demand and accelerate Azure growth in the second half of fiscal 2025.
Microsoft expects revenues of $63.8-$64.8 billion for the fiscal first quarter of 2025, implying 13.8% growth at the middle of the range. The Zacks Consensus Estimate is pegged at $65.16 billion.
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 $67.2 billion and an average daily volume of 5 million shares. It offers broad exposure to the technology sector and follows the Technology Select Sector Index. Select Sector SPDR Technology ETF holds about 67 securities in its basket, with Microsoft occupying the top position at 22.3% (read: Should You Buy the Dip in "Mag 7" and Big Tech ETFs?).
Select Sector SPDR Technology ETF charges 9 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 297 technology stocks with AUM of $11.3 billion. It follows the MSCI USA IMI Information Technology Index. Microsoft is the top firm with a 16.6% allocation.
MSCI Information Technology Index ETF has a 0.08% expense ratio, while volume is solid at 334,000 shares a day. It carries a Zacks ETF Rank #1 with a Medium risk outlook.
Vanguard Information Technology ETF (VGT - Free Report)
Vanguard Information Technology ETF manages about $72.6 billion in its asset base and provides exposure to 320 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the top position with a 16.6% share.
Vanguard Information Technology ETF has an expense ratio of 0.10%, while volume is solid at nearly 476,000 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 140 securities in its basket. Of these, Microsoft occupies the second position in the basket, with 15.7% of the assets.
iShares Dow Jones US Technology ETF has AUM of $18.4 billion and charges 40 bps in fees and expenses. Volume is good as it exchanges nearly 810,000 shares a day. IYW has a Zacks ETF Rank #1 with a Medium risk outlook (read: Worried About Tech Selloff? ETF Strategies to Play).
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 118 stocks in its basket, Microsoft occupies the top spot with an 18.4% share.
iShares Global Tech ETF has amassed $5 billion in its asset base and trades in a good volume of 196,000 shares a day, on average. The expense ratio is 0.41%.