The world’s largest software maker — Microsoft
MSFT
— delighted investors with better-than-expected second-quarter fiscal 2022 results. It continued a long track of beating earnings estimates and topped the revenue estimate. Microsoft also issued an optimistic growth forecast (see:
all the Technology ETFs here
).
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 five with double-digit exposure to Microsoft that could be compelling choices. These are
Select Sector SPDR Technology ETF
XLK
,
iShares Dow Jones US Technology ETF
IYW
,
Vanguard Information Technology ETF
VGT
,
MSCI Information Technology Index ETF
FTEC
and
iShares Global Tech ETF
IXN
.
Earnings in Focus
Earnings per share came in at $2.48, outpacing the Zacks Consensus Estimate of $2.29 and improving 22% 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 20% year over year to $51.7 billion, topping the consensus estimate of $50.1 billion.
Growing demand for cloud computing services and software tools that support at-home workers led to the robust performance. Microsoft Cloud generated $22.1 billion in revenues in the quarter, up 32% year over year. Growth of the flagship Azure computing platform rose 46% in the fiscal second quarter, just shy of 50% growth in the fiscal first quarter. Sales of Office 365 Commercial and Dynamic 365 climbed 19% and 45%, respectively.
Microsoft expects revenues of $48.50-$49.30 billion in the fiscal third quarter, topping the Zacks Consensus Estimate of $47.77 billion.
ETFs to Buy
Select Sector SPDR Technology ETF (XLK)
Select Sector SPDR Technology ETF is the most popular and liquid ETFs in the technology space with AUM of $45.8 billion and an average daily volume of 13.1 million shares. It offers broad exposure to the technology sector and follows the Technology Select Sector Index. Select Sector SPDR Technology ETF holds about 76 securities in its basket, with Microsoft occupying the second position at 21.5%.
Select Sector SPDR Technology ETF charges 12 bps in fees per year from investors and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read:
5 ETFs to Cash in on Microsoft-Activision Deal
).
iShares U.S. Technology ETF (IYW)
iShares Dow Jones US 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 154 securities in its basket. Of these, Microsoft occupies the second position in the basket with 16.4% of the assets.
iShares Dow Jones US Technology ETF has AUM of $8.5 billion and charges 41 bps in fees and expenses. Volume is good as it exchanges nearly 692,000 shares a day. IYW has a Zacks ETF Rank #1 with a Medium risk outlook.
Vanguard Information Technology ETF (VGT)
Vanguard Information Technology ETF manages about $49.2 billion in its asset base and provides exposure to 362 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the second position with a 17.6% share.
Vanguard Information Technology ETF has 0.10% in expense ratio, while volume is solid at nearly 362,000 shares. It has a Zacks ETF Rank #1 with a Medium risk outlook.
MSCI Information Technology Index ETF (FTEC)
MSCI Information Technology Index ETF is home to 368 technology stocks with AUM of $6.4 billion. It follows the MSCI USA IMI Information Technology Index. Microsoft is the second firm with a 17.6% allocation.
MSCI Information Technology Index ETF has 0.08% in expense ratio, while volume is solid at 350,000 shares a day. It carries a Zacks ETF Rank #1 with a Medium risk outlook (read:
5 Stocks in Nasdaq ETF That Are Still Up YTD
).
iShares Global Tech ETF (IXN)
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 131 stocks in its basket, Microsoft occupies the second spot with 16.9% share.
iShares Global Tech ETF has amassed $5.3 billion in its asset base and trades in a good volume of 339,000 shares a day, on average. The expense ratio is 0.43%.
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