Market participants have rapidly become concerned about the state of affairs with growth stocks. That includes some of the previously sturdy megacap names. Those jitters are reflected by a slew of ETFs, including the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM), which have traded lower over the past month.
However, some market observers argue now isn’t the time for tech investors, particularly those focusing on the quality names that dominate the QQQ/QQQM lineups, to lose the forest through the trees.
There’s credibility in that argument because data confirms profit margins in the tech sector — by far the largest sector exposure in the Invesco ETFs — remains stout. Investors should remember that because profit margin gauges the extent to which a company makes money.
Tech Profit Margins Look Good
Profit margin measures the percentage of a company’s sales that are retained as profits after all costs are accounted for. During the third quarter, S&P 500 profit margin trends were encouraging. That’s good news for QQQ and QQQM investors because many of the ETFs’ holdings are also S&P 500 members.
“The blended net profit margin for the S&P 500 for Q3 2025 is 13.1%, which is above the previous quarter’s net profit margin, above the year-ago net profit margin, and above the 5-year average,” noted John Butters of FactSet. “In fact, this quarter marks the highest net profit margin reported by the S&P 500 going back to at least 2009 (which is the extent of FactSet’s historical data for this metric). The previous high for the net profit margin was 13.0%, recorded in Q2 2021. This quarter also marks the 7th consecutive quarter that the net profit margin has increased.”
Of note to investors considering QQQ or QQQM, the tech sector was the YoY profit margin increase leader in Q3 among the 11 sectors represented in the S&P 500. That’s a clear benefit to ETFs that are de facto tech funds, as is the case with QQQ and QQQM.
The ETFs are also profit margin winners by way of addition by subtraction. For example, energy and healthcare were two of the sectors that reported Q3 profit margins well below five-year averages. Fortunately, those two sectors combine for less than 5% of the QQQ/QQQM portfolios.
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