Microsoft Readies for Q2 Earnings Release Amid AI Expansion
Microsoft MSFT is set to announce its second-quarter fiscal 2025 results today after the market closes. As the tech giant prepares for this financial update, it’s essential to examine its fundamentals and performance (read: DeepSeek Shakes US Tech Dominance: Impact on Stocks & ETFs).
Microsoft Stock Performance Overview
In recent months, Microsoft shares have increased by 3.3%, falling short of its sector’s overall growth of 7.1%. Exchange-Traded Funds (ETFs) with significant exposure to Microsoft are currently of interest. These include the T-Rex 2X Long Microsoft Daily Target ETF MSFX, iShares Dow Jones US Technology ETF IYW, iShares Top 20 U.S. Stocks ETF TOPT, Principal Focused Blue Chip ETF BCHP, and MSCI Information Technology Index ETF FTEC.
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Earnings Expectations
Microsoft currently holds an Earnings ESP of -2.13% and a Zacks Rank of #3 (Hold). According to our methodology, a combination of positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), #2 (Buy), or #3 is more likely to result in an earnings beat. Our Earnings ESP Filter can help identify strong buying or selling opportunities.
In the past week, Microsoft has seen a slight decrease of one cent in its earnings estimate for the second quarter of fiscal 2025. Historically, it has performed well, averaging a 4.91% positive earnings surprise over the last four quarters. Analysts anticipate a significant earnings growth of 6.5% and a revenue growth of 10.8% for the upcoming quarter (read: Mag 7 ETFs to Watch This Earnings Season).
Microsoft Corporation Price, Consensus, and EPS Surprise
Microsoft Corporation price-consensus-eps-surprise-chart | Microsoft Corporation Quote
Based on reports from 43 brokerage firms, the average recommendation on Wall Street is 1.23, ranging from 1 (Strong Buy) to 5 (Strong Sell), showing a slight decline from 1.24 last month. Of these analysts, 36 recommend a Strong Buy and four suggest a Buy, meaning about 83.72% of recommendations are positive. Price targets offered by 40 analysts average around $510.03, varying from a low of $425.00 to a high of $600.00.
Microsoft also holds a Growth Score of A, suggesting that it is positioned for future advancement. Currently, its stock trades at 33.70X forward earnings, which is above the Zacks Computer-Software industry average of 31.34X.
Key Areas of Focus
As the largest software company globally, Microsoft greatly benefits from the AI revolution through its collaboration with OpenAI, the creator of ChatGPT. Investments are also being made into expanding data centers and the development of Copilot AI applications. The company is dedicating significant resources to grow its infrastructure, essential for advancing AI capabilities that can write documents, create visuals, and act as virtual assistants in both professional and personal spaces.
Microsoft plans to invest $80 billion in fiscal 2025 to enhance data centers catering to AI workloads. More than half of this expenditure will be concentrated in the United States, according to a statement from Brad Smith, Microsoft’s vice chair and president (read: Microsoft Unveils $80B AI Data Center Plans: ETFs in Focus).
Although growth in Azure may slow down, Microsoft anticipates its AI segment will generate over $10 billion in sales in upcoming quarters. The company projects revenues between $68.1 billion and $69.1 billion for the fiscal second quarter of 2025, reflecting a growth rate of 10.6% at the midpoint.
ETFs Highlighting Microsoft Stock
T-Rex 2X Long Microsoft Daily Target ETF (MSFX)
This ETF aims to amplify (200%) the daily performance of Microsoft shares. It has an expense ratio of 1.05% and currently manages $8.3 million in assets.
iShares U.S. Technology ETF (IYW)
iShares U.S. Technology ETF provides exposure to U.S. companies in electronics, software, and IT. It tracks the Russell 1000 Technology Index, holding 140 stocks, with Microsoft representing 15.1% of its assets. The ETF, which has $20.8 billion in assets under management (AUM), carries a 0.39% fee and averages 613,000 shares traded daily. It maintains a Zacks ETF Rank of #1 with a medium risk outlook.
iShares Top 20 U.S. Stocks ETF (TOPT)
This ETF focuses on the growth potential of large-cap stocks, tracking the S&P 500 Top 20 Select Index. Microsoft comprises 13.6% of the holdings, which number 21 stocks in total. With $145.3 million AUM, it has an annual fee of 0.20% and trades about 246,000 shares each day (read: Go Beyond MAGS ETF: Tap Broadening of the Rally With TOPT ETF).
Principal Focused Blue Chip ETF (BCHP)
As an actively managed fund, this ETF invests in established blue-chip companies showing capital growth potential and above-average earnings expectations. With Microsoft at 12.6%, it holds 24 stocks. BCHP has $95.7 million in AUM, trades around 9,000 shares daily, and has an expense ratio of 0.58%, earning a Zacks ETF Rank of #3.
MSCI Information Technology Index ETF (FTEC)
This ETF includes 296 technology stocks, managing $13.8 billion. It tracks the MSCI USA IMI Information Technology Index, with Microsoft at a 13% allocation. The expense ratio is 0.08%, with solid trading volume averaging 279,000 shares per day. It also holds a Zacks ETF Rank of #1 with a medium risk outlook.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
