Shares of Apple Inc. (AAPL Quick QuoteAAPL - Free Report) jumped nearly 5.35% in after-hour trading yesterday on better-than-expected fiscal third-quarter results. After delivering weak results in the fiscal second quarter, the company succeeded to beat our estimates on both the top and the bottom lines in this time, on the back of impressive results in some segments including iPad. Favorably ranked tech ETFs that have significant exposure to Apple are expected to benefit from the tech giant’s performance.

Apple Q3 Results in Detail

The tech behemoth reported fiscal third-quarter diluted earnings per share of $1.42, outpacing the Zacks Consensus Estimate by 3 cents. Also, the company’s net sales of $42.4 billion came in above the Zacks Consensus Estimate of $41.8 billion. Though continuing decline in sales in the company’s iPhone segment weighed on third-quarter results, encouraging sales performance of the iPad segment boosted the same. iPad sales rose 10% and 7% sequentially and year over year, respectively, to nearly $4.88 billion (read: Tech ETFs in Trouble Post Rotten Q2 Apple Results).

Moreover, impressive performance by the company’s newly introduced low-cost product, iPhone SE also have a positive impact on company’s earnings results. Apple’s CEO, Tim Cook said: “We had a very successful launch of iPhone SE and we’re thrilled by customers’ and developers’ response to software and services we previewed at WWDC in June.” Moreover, the company’s CFO, Luca Maestri said: “Our Services business grew 19 percent year-over-year and App Store revenue was the highest ever, as our installed base continued to grow and transacting customers hit an all-time record.”

Additionally, Apple also saw a 23% year-on-year surge in sales of its products in Japan to $3.53 billion. The company also forecast fiscal fourth-quarter revenues between $45.5 billion and $47.5 billion. The mid-point is above our current estimate of $45.9 billion. Separately, the company declared a dividend of 57 cents per share, which will be paid on Aug 11.

Headwinds Remain  

However, both earnings and revenues witnessed a significant decline from the year-ago quarter due to weak iPhone sales. Diluted earnings per share and revenues for the quarter slumped 15% and 23.2% year over year, respectively. Meanwhile, the number of iPhone units sold during the quarter declined 15% from the year-ago period to 40,399 units. Revenues from the segment also declined 27% and 23% sequentially and year over year to $24.05 billion, respectively (read: What to Do With Apple ETFs After Icahn Has Left?).

Sluggish growth in China and decline in iPhone demand in the U.S. played key roles in dragging down the performance of the segment during the fiscal third quarter. While iPhone sales dropped 33% year over year in China, it witnessed an 11% year-over-year drop in U.S. sales. 

3 Tech ETFs to Buy

Overall, tech earnings results released till now are mostly encouraging and likely to get an additional boost from Apple’s better-than-expected fiscal third-quarter results. Among others, one of the major tech companies, IBM Corporation (IBM Quick QuoteIBM - Free Report) managed to beat our estimates on both the top and the bottom lines in the second quarter. Moreover, Microsoft’s MSFT second quarter earnings per share came in at 69 cents, surpassing the Zacks Consensus Estimate of 58 cents and the year-ago earnings of 62 cents (read: Will Microsoft Earnings Lift These ETFs?).

Against this backdrop, we have highlighted three tech ETFs that have significant exposure to Apple and are likely to gain from its impressive earnings results.

iShares U.S. Technology ETF (IYW Quick QuoteIYW - Free Report)

This ETF tracks the Dow Jones US Technology Index, giving investors exposure to 140 technology stocks. The fund has AUM of more than $2.4 billion and charges 43 bps in fees and expenses. Volume is good as it exchanges nearly 242,000 shares in hand a day. Apple occupies the top position in the basket with 14.8% of assets. More than half of the portfolio is allocated to software and services while technology hardware and equipment accounts for 26.9% share. The fund has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook. The ETF gained nearly 2% and 9.6% over the past five days and one month, respectively.

Technology Select Sector SPDR Fund (XLK Quick QuoteXLK - Free Report)

This most popular technology ETF follows the Technology Select Sector Index and has $12.4 billion in AUM. This fund trades in heavy volume of more than 10 million shares and charges 14 bps in fees per year. In total, the fund holds about 76 securities in its basket. Of these firms, AAPL takes the top spot, making up roughly 12.2% of the assets. In terms of industrial exposure, the fund is widely spread across software, Internet software & services, hardware storage & peripherals, IT services, semiconductors, and diversified telecom services that make up for a double-digit allocation each. It has a Zacks ETF Rank #1 with a Medium risk outlook. The ETF gained 1.5% and 8.5% over the past five-day and one-month periods, respectively (read: Buffett Takes a Bite of Apple: Should You Taste Its ETFs?).

Vanguard Information Technology ETF (VGT Quick QuoteVGT - Free Report)

This fund manages about $8.9 billion in its asset base and provides exposure to a large basket of 382 technology stocks by tracking the MSCI US Investable Market Information Technology 25/50 Index. The ETF has 0.10% in expense ratio while volume is good at nearly 391,000 shares. Here again, AAPL is the top firm with 11.9% allocation. The product is well spread out across a number of sectors with Internet software & services, hardware & storage, system software, semiconductors, and data processing & outsourced services accounting for a double-digit allocation each. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook. The ETF gained 1.8% and 8.9% over the past five days and one-month period, respectively.

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