Can Q1 Earnings Inject Fresh Life Into Magnificent 7 ETFs?

The first-quarter earnings season is underway, and the so-called “Magnificent 7" companies are in focus. The “Mag 7” comprises Apple AAPL, Microsoft MSFT, Alphabet (GOOG, GOOGL), Amazon AMZN, NVIDIA NVDA, Tesla TSLA and Meta Platforms META.

The group had a rocky start to 2025, as the release of a lower-cost artificial intelligence (AI) model by Chinese startup DeepSeek raised concerns about escalating competition and spending in the AI space among major U.S. tech firms. Then, Trump's tariff blitz added further pressure.

The first-quarter earnings of the “Mag 7” companies are expected to be up 19.6% from the same period last year on 10.9% higher revenues. These expectations are a blend of actual results from Alphabet and Tesla and estimates for the remaining five, of which four are on deck to report this week. Microsoft and Meta Platform will report after market close on April 30, while Apple and Amazon will report on May 1. NVIDIA is likely to report later next month (read: Can the Tide Turn for 'Magnificent Seven' Stocks? ETFs in Focus).

Of the four Mag 7 members reporting this week, Microsoft and Meta performed better this year, losing 6.5% and 6.3%, respectively. Amazon and Apple are down 13.8% and 16.4%, respectively.  

Microsoft

Microsoft has an Earnings ESP of -0.51% and a Zacks Rank #3 (Hold). According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Microsoft saw no earnings estimate revision over the past 30 days for the third quarter of fiscal 2025. Its earnings track record is impressive, with the four-quarter earnings surprise being 4.34%, on average. The Zacks Consensus Estimate indicates earnings growth of 8.8% and revenue growth of 10.5% from the year-ago quarter.

The world's largest software company may be better positioned than many other tech companies, citing its "minimal risk exposure to retail, advertising spending, cyclical hardware, and physical supply chains." It has been investing billions of dollars in expanding its global network of data centers and other physical infrastructure required to develop AI technology that can compose documents, make images and serve as a lifelike personal assistant at work or home.

Though Azure growth will continue to slow down, Microsoft expects its AI business to be on track to bring in $13 billion in annual sales. Microsoft expects revenues of $67.7-$68.7 billion for the fiscal third quarter of 2025.

Meta Platforms

Meta Platforms has an Earnings ESP of +3.88% and a Zacks Rank #3. The social media giant saw a negative earnings estimate revision of a penny for the first quarter over the past seven days. The Zacks Consensus Estimate for the yet-to-be-reported quarter indicates substantial year-over-year earnings growth of 10.6%. Revenues are expected to increase 13.1% year over year. Meta Platforms delivered an earnings surprise of 13.77%, on average, in the last four quarters.

Concerns over tariffs may drag down the company’s profitability as Meta relies heavily on international advertisers, particularly from China, for a significant share of its U.S. ad revenues. However, its improving digital advertising market, coupled with ongoing investments in AI and its massive user base across platforms like Facebook, Instagram, Threads, Reels, and WhatsApp, will continue to fuel growth.

The world’s largest social media platform projected revenue growth to slow down in the first quarter to $39.5-$41.8 billion, reflecting 8%-15% year-over-year growth.

Apple

Apple has an Earnings ESP of -0.85% and a Zacks Rank #3. Apple saw a negative earnings estimate revision of a penny over the past 30 days for the fiscal second quarter of 2025. The iPhone maker has a strong track record of positive earnings surprises. It delivered an average earnings surprise of 4.39% in the trailing four quarters. The Zacks Consensus Estimate indicates a modest year-over-year increase of 4.58% for earnings and 3.09% for revenues (read: Tariff Relief Talks Lift Tech ETFs, Stocks: What's Ahead?).

On the last earnings call, Apple offered weak sales guidance for the fiscal second quarter. It expects “low to mid-single digit” sales growth. The iPhone manufacturer is more vulnerable to tariffs than other firms since most of its production is based in China. Wedbush analyst Dan Ives noted that about 90% of Apple’s iPhones are manufactured in China, which accounted for 17% of the company’s revenues in 2024. However, its strong service revenues are expected to offset iPhone softness amid ongoing trade tensions and AI development challenges.

Amazon

Amazon has an Earnings ESP of -2.57% and a Zacks Rank #3. The company saw a negative earnings estimate revision of a couple of cents over the past seven days for the first quarter. The Zacks Consensus Estimate indicates a year-over-year earnings increase of 19.47% and substantial revenue growth of 7.85% for the to-be-reported quarter. Additionally, Amazon’s earnings surprise history is impressive, with the four-quarter average surprise being 25.27%.

Amazon has continued dominance in the e-commerce business and is expanding its footprint in cloud computing, advertising and various other sectors. The world's largest online retailer projected revenues in the range of $151-155 billion for the first quarter of 2025. Like other tech companies, Amazon is ramping up investments in data centers, chips and the power needed for AI workloads.

However, as Amazon is heavily reliant on Chinese manufacturing and consumer markets, it is exposed to tariff risk. Roughly 30% of goods sold on the platform originate in China.  Chinese advertisers made up 14% of Amazon’s ad revenues in 2024, according to Raymond James. 

ETFs to Tap

Given this, investors may want to invest in these stocks through ETFs. Below, we have highlighted some ETFs with the largest exposure to Mag 7.

Roundhill Magnificent Seven ETF (MAGS): It is the first-ever ETF offering investors equal-weight exposure to the Magnificent 7 stocks.

MicroSectors FANG+ ETN (FNGS): This ETN is linked to the performance of the NYSE FANG+ Index, which is equal-dollar weighted and designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. The note accounts for a 10% share in each of the seven stocks. MicroSectors FANG+ ETN has a Zacks ETF Rank #3 (see: all the Technology ETFs here).

Vanguard Mega Cap Growth ETF (MGK): It tracks the CRSP US Mega Cap Growth Index. It holds 69 securities in its basket, with the in-focus four of the Mag 7 collectively accounting for 38.1% of the total assets. MGK has a Zacks ETF Rank #3.

Principal Focused Blue Chip ETF (BCHP): Principal Focused Blue Chip ETF is an actively managed fund offering exposure to blue-chip companies, which are well established in their industries and have the potential for capital growth and an expectation for above-average earnings. It holds 24 stocks, with the in-focus four of the Mag 7 collectively accounting for 34.3%. BCHP has a Zacks ETF Rank #3.

Invesco S&P 500 Top 50 ETF (XLG): Invesco S&P 500 Top 50 ETF measures the cap-weighted performance of the largest companies on the S&P 500 Index, reflecting the performance of U.S. mega-cap stocks. It holds 53 stocks in its basket, with the in-focus four of the Mag 7 accounting for a combined 32.8% share. XLG has a Zacks ETF Rank #2.

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This article originally published on Zacks Investment Research (zacks.com).

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