Editor's note: Any and all references to time frames longer than one trading day are for purposes of market context only, and not recommendations of any holding time frame. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don't have the resources, time or inclination to constantly monitor and manage your positions, leveraged and inverse ETFs are not for you.

Investing in the funds involves a high degree of risk. Unlike traditional ETFs, or even other leveraged and/or inverse ETFs, these leveraged and/or inverse single-stock ETFs track the price of a single stock rather than an index, eliminating the benefits of diversification. Leveraged and inverse ETFs pursue daily leveraged investment objectives, which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying stock’s performance over periods longer than one day. They are not suitable for all investors and should be utilized only by investors who understand leverage risk and who actively manage their investments. The Funds will lose money if the underlying stock’s performance is flat, and it is possible that the Bull Fund will lose money even if the underlying stock’s performance increases, and the Bear Fund will lose money even if the underlying stock’s performance decreases, over a period longer than a single day. Investing in the Funds is not equivalent to investing directly in MSFT.

After peaking in summer of 2024, shares of Microsoft Corporation (Ticker: MSFT) lagged the overall market as well as its Magnificent Seven peers. But its earnings report on April 30 may have signaled a major shift in the directional trend in this stock. Can bulls keep up the momentum near-term, or is this just an epic short squeeze before another leg downward?

What’s Next for this Tech Titan?

Microsoft’s business model remains a pillar of the technology sector, extending well beyond its origins in software. Known for its Windows operating system, Azure cloud platform, Office 365 suite, and AI-driven solutions like Copilot, Microsoft has cemented its leadership in cloud computing, enterprise software, and artificial intelligence. This diversified portfolio positions Microsoft for significant long-term growth in the rapidly expanding cloud and AI markets.

Microsoft’s latest earnings report showcased exceptional financial performance, with revenue reaching $70.1 billion, a 13% year-over-year increase that surpassed the $68.42 billion analyst forecast, and earnings-per-share (EPS)* of $3.46, beating estimates of $3.22.

The Intelligent Cloud segment, driven by Azure’s 33% growth (constant currency) and $26.8 billion in revenue, exceeded expectations of $26.2 billion, reinforcing Microsoft’s dominance in cloud computing. Total Microsoft Cloud revenue hit $42.4 billion, up 20% year-over-year, fueled by strong AI demand.

Traders that think a continuation of this short-term bullish momentum is in order may find a position with Direxion’s Daily MSFT Bull 2X Shares (Ticker: MSFU), which seeks daily investment results, before fees and expenses, of 200% of the performance of Microsoft Corporation common stock (Ticker: MSFT).

Below is a daily chart of MSFT as of May 1, 2025.

Source: TradingView.com

Candlestick charts display the high and low (the stick) and the open and close price (the body) of a security for a specific period. If the body is filled, it means the close was lower than the open. If the body is empty, it means the close was higher than the open.

The performance data quoted represents past performance. Past performance does not guarantee future results.

Will the Tariff Line Cost a Dime?

Despite Microsoft’s strong Q3 2025 earnings, concerns emerged around margin pressures and external risks. Operating margins of 43.35% fell slightly short of the expected 43.5%, driven by escalating costs from $80 billion in planned AI and data center investments for fiscal 2025, raising questions about profitability if AI revenue growth underperforms.

Traders may want to keep a close watch on the May Consumer Price Index (CPI)* inflation report, which will be released on June 11. If this comes in higher-than-expected, it could lead to further margin compression for MSFT.

Additionally, management brought up uncertainties from President Trump’s April 2025 tariff announcements, which could disrupt future revenue, while ongoing U.S. and EU regulatory investigations into Microsoft’s cloud and software dominance threaten potential fines or restrictions, tempering the bullish outlook.

In this situation, Direxion’s Daily MSFT Bear 1X Shares (Ticker: MSFD), which seeks daily investment results, before fees and expenses, of 100% of the inverse performance in common shares of Microsoft (Ticker: MSFT) could see another rebound.

*Definitions and Index Descriptions

An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.

The Funds have derived all disclosures contained in this document regarding Microsoft Corporation from publicly available documents. In connection with the offering of each Fund’s securities, neither the Funds, the Trust, nor the Adviser or any of its respective affiliates has participated in the preparation of such documents. Neither the Funds, the Trust nor the Adviser or any of its respective affiliates makes any representation that such publicly available documents or any other publicly available information regarding Microsoft Corporation is accurate or complete. Furthermore, the Funds cannot give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available documents described above) that would affect the trading price of Microsoft Corporation have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning Microsoft Corporation could affect the value of a Fund’s investments with respect to Microsoft Corporation and therefore the value of the Funds.

Direxion Shares Risks – An investment in a Fund involves risk, including the possible loss of principal. Each Fund is non-diversified and includes risks associated with a Fund concentrating its investments in a particular security, industry, sector, or geographic region which can result in increased volatility. A Fund’s investments in derivatives such as futures contracts and swaps may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including imperfect correlations with underlying investments or the Fund’s other portfolio holdings, higher price volatility and lack of availability. As a result, the value of an investment in a Fund may change quickly and without warning.

Leverage Risk – The Bull Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. A total loss may occur in a single day. Leverage will also have the effect of magnifying any differences in the Fund’s correlation with MSFT and may increase the volatility of the Bull Fund.

Daily Correlation Risk – A number of factors may affect the Bull Fund’s ability to achieve a high degree of correlation with MSFT and therefore achieve its daily leveraged investment objective. The Bull Fund’s exposure to MSFT is impacted by MSFT’s movement. Because of this, it is unlikely that the Bull Fund will be perfectly exposed to MSFT at the end of each day. The possibility of the Bull Fund being materially over- or under-exposed to MSFT increases on days when MSFT is volatile near the close of the trading day.

Daily Inverse Correlation Risk – A number of factors may affect the Bear Fund’s ability to achieve a high degree of inverse correlation with MSFT and therefore achieve its daily inverse investment objective. The Bear Fund’s exposure to MSFT is impacted by MSFT’s movement. Because of this, it is unlikely that the Bear Fund will be perfectly exposed to MSFT at the end of each day. The possibility of the Bear Fund being materially over- or under-exposed to MSFT increases on days when MSFT is volatile near the close of the trading day.

Microsoft Corporation Investing Risk — Microsoft Corporation faces risks associated with competition in the technology sector and among platform based ecosystems, including its cloud-based services; the evolution of its business, including the development of its new products and acquisitions, joint ventures and strategic alliances; cybersecurity, data privacy and platform abuses; significant investment may occur on products and services that do not achieve their expected results; operations, including excessive outages, data losses or disruptions of online services; quality or supply problems; legal, regulatory and litigation risks; and the ability to attract and retain talented employees.

Information Technology Sector Risk — The value of stocks of information technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, government regulation, and competition, both domestically and internationally, including competition from competitors with lower production costs.

Software Industry Risk — Companies that develop and implement computer software can face risks associated with intense competition, especially in new product development, deployment and delivery, product obsolescence or saturation, cybersecurity risks as well as changes in regulation especially with respect to consumer or customer data, and risks associated with technology.

Additional risks of each Fund include Effects of Compounding and Market Volatility Risk, Derivatives Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Industry Concentration Risk, Market Risk, Indirect Investment Risk, and Cash Transaction Risk. Additionally, for the Direxion Daily MSFT Bear 1X Shares, Shorting or Inverse Risk. Please see the summary and full prospectuses for a more complete description of these and other risks of a Fund.

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