3 Sector ETFs Catching Fire After Earnings Beats

Key Points

• With some sectors emerging as standouts in the latest earnings season, investors might turn to focused ETFs to gain broad exposure to a corner of the market that is heating up.
• Several names in the tech and financials space have beaten analyst predictions, and XLK and VFH are funds focused on these sectors, respectively.
• Aerospace and defense stocks continue to grow at a rapid clip, with ITA being a relatively cheap way to gain access to the industry.

In the midst of many companies' mid-2025 earnings reports, names from the financials and tech sectors have stood out, as have firms from the aerospace and defense industry. It's common for investors to respond to earnings info by buying or selling shares of individual companies, but those bullish on these broader categories may find that a targeted exchange-traded fund (ETF) is an easy way to gain exposure to a larger segment of the market that is primed for success.

Three such funds may allow investors to capitalize on future growth across these trending areas of the market. Two—the Technology Select Sector SPDR Fund NYSEARCA: XLK and the Vanguard Financials ETF NYSEARCA: VFH—are sector funds providing broad exposure. A third, the iShares U.S. Aerospace & Defense ETF BATS: ITA, is also fairly broad in scope but focused on a particular industry.

Broad and Inexpensive Tech Exposure

Investor disappointment in the performance of Amazon.com Inc. NASDAQ: AMZN aside, a number of tech firms have made a positive impression in the latest round of earnings reports. Giants of the tech sector like Alphabet Inc. NASDAQ: GOOG and Apple Inc. NASDAQ: AAPL have achieved revenue strength thanks in large part to developments in the artificial intelligence (AI) space. Earnings beats have not been limited to the biggest names, however, as some smaller companies, including InterDigital Inc. NASDAQ: IDCC and Energous Corp. NASDAQ: WATT, also topped predictions.

XLK is a fantastic way to gain broad exposure to the large-cap (and larger) portion of the tech sector. The fund holds approximately 70 stocks, with major players like Apple representing an outsized share of invested assets. Despite a handful of heavily weighted tech titans, though, XLK also provides access to a host of smaller companies that still have stability. XLK also stands out compared to some other tech-focused funds because it holds companies across multiple industries within the broader tech space. This makes XLK a good bet when investors are generally optimistic about the tech space.

XLK has a low expense ratio of 0.09% and a year-to-date return of nearly 11%, beating the S&P 500's 8% gains over the same period. While investors wait for chip giant NVIDIA Corp. NASDAQ: NVDA to report earnings later in August—an event that is likely to have repercussions for the whole sector—an investment in XLK now could make it possible to participate in any gains after that report.

Access to a Wide Swath of the Financials Sector in One Fund

Several names in the financials sector are also at the top of the list of companies that had the biggest earnings wins. Lighter regulations, relaxed liquidity requirements, and access to alternatives have buoyed performance for many financial institutions reporting so far. Among the biggest positive surprises are First Citizens BancShares Inc. NASDAQ: FCNCA, Capital One Financial Corp. NYSE: COF, and Allstate Corp. NYSE: ALL.

Like XLK above, VFH offers targeted exposure to financial companies, holding more than 400 different names in a portfolio that is fairly evenly distributed outside of a couple of standouts. While VFH focuses mostly on large-cap companies, it also holds mid- and small-cap companies as well, making it a good option when the entire financials sector gets a boost. Investors expecting that earnings will continue to favor the sector might find reason to be bullish on VFH as a result.

VFH is also an inexpensive fund, with a fee of just 0.09%. It has returned 6.9% year-to-date, slightly behind the S&P 500.

Red-Hot Aerospace and Defense Names in a Single Investment

Whether aerospace and defense names are truly riding an earnings wave—or just experiencing an all-around surge thanks to favorable regulations, legislation, and spending, among other factors—ITA is a standout ETF for exposure to the space.

Investors should expect to spend a bit more on a fund with an industry-specific focus like this one compared with the sector funds above, but the fee of 0.38% is likely worthwhile in this case. ITA is, in fact, less expensive than some alternatives in the defense arena.

For that fee, investors gain exposure to a selection of aerospace and defense companies across the market cap spectrum. ITA is not the most diversified fund, with about 39 different names and the largest two holdings accounting for well over a third of invested assets. However, its performance this year has been stellar—the fund is up more than 35% YTD.