Communication Services Select Sector SPDR Fund ETF (NYSEARCA:XLC), which tracks S&P 500 Communication services sector, was one of the worst performers during the first quarter, showing a decline of nearly 1%.

The communication services sector, which consists of stocks including Alphabet (GOOG), Meta Platforms (META), Disney (DIS) and AT&T (T), is one of the sectors other than Information technology (XLK), consumer discretionary (XLY) and Industrials (XLI) that recorded a fall during the quarter. This is in comparison to the over 4% fall in the broader S&P500 Index.

Investors saw a volatile first quarter, with markets mostly remaining in the red due to uncertainties over tariff policies, higher inflation, geopolitical tensions and corporate earnings from companies.

Alphabet (GOOG) fell over 6% in reaction to the tech giant’s fourth quarter results. Even though the company narrowly topped profit expectations, it posted a few lackluster unit performances outside core beats in search and YouTube sales. On the other hand, Netflix’s (NFLX) shares hit record high, after investors were left impressed by the streaming giant’s much higher user growth than expected.

Industries Q1 Performance

Media & Entertainment fell about 10% in the first quarter, while Telecommunication Services gained 19%.

U.S. stock fund flow in and out of the sector was mostly average throughout the year, with noticeable dips during the month of March. The Communication Services-focused ETF had a net outflow of $399 million.

What are the top 5 movers in Q1?

• Gainers: AT&T (T) +25.7%.
• T-Mobile US (TMUS) +20.8%.
• Fox (FOX) +15.3%.
• Take-Two (TTWO) +13.9%.
• Verizon (VZ) +13.8%.
• Losers: Alphabet (GOOGL) -18.14%.
• Walt Disney (DIS) -11.8%.
• Omnicom (OMC) -7.9%.
• Interpublic Group of Companies (IPG) -6.9%
• Match Group (MTCH) -4.9%.

What Quantitative Measures say?

XLC received a Buy rating from Seeking Alpha’s Quant Rating system, with a score of 4.33 out of 5. The sector got A+ for liquidity, expenses and momentum. However, it got a B+ for dividend and risk prospect.

What analysts expect?

One analyst surveyed by Seeking Alpha in the last 90 days gave the XLC a Buy rating.

According to FactSet analyst John Butters, Communication Services is one of the sectors which is expected to see the largest price increases in the next 12 months, with earnings and revenue for XLC expected to grow nearly 15% and 8% for CY25, respectively.

A recent Seeking Alpha analysis by Komal Sarwar noted “XLC offers a balanced portfolio of growth and defensive stocks, with lower downside risk and higher risk-adjusted returns” compared to its peers. However, Sarwar added that macroeconomic trends and consumers spending power are also a key to the sector's performance.