Apple’s huge buyback makes as much sense to investors as iPhones and Macs

Apple Inc. One of the most important numbers in Apple’s upcoming earnings report has nothing to do with iPhones or Mac computers. This is the amount that the technology giant plans to spend to buy back its own shares.

Speculating on the size of the outlay has become a kind of annual parlor game on Wall Street as Apple’s capital return plan has emerged as one of the big draws for investors amid slowing revenue growth and economic uncertainty.

For the coming year, some analysts expect the Cupertino, California-based company to commit $90 billion to buybacks, the same as last year. Apple has historically reported its buyback plans in its fiscal second quarter results, which are scheduled for May 4.

For investors, the firm’s buyback has come to serve as a “sign of their confidence in the business,” said Gene Munster, co-founder and managing partner of Deepwater Asset Management. “If something unexpectedly changed on that, it could upset their secure position.”

Investors love buybacks because they reduce shares outstanding, increase earnings on a per-share basis and provide lift to the stock. For Apple, its capital return strategy and steady cash flow are helping fuel outperformance. The stock is up 27% in 2023, ahead of megacap peers Microsoft Corp., Alphabet Inc. and Amazon.com Inc. for the second year in a row.

Over the past decade, Apple has spent $573 billion on buybacks, the most among US companies, according to data compiled by Bloomberg. What’s more, the firm’s purchases have been relatively stable, regardless of stock market fluctuations or business cycles.

“Apple hasn’t tried to time the market when it comes to buybacks, so I don’t think they’ll slow down buybacks as shares rally,” said Ali Ragih, senior analyst at VerityData. and stock repurchase trends.

Apple’s biggest buyback authorization came in 2018 when it set aside $100 billion. In each of the last two years, it has allocated $90 billion, which Ragih hopes to repeat this year.

Even though the iPhone maker’s revenue and earnings per share are projected by analysts to fall about 2% this year, according to Anurag Rana of Bloomberg Intelligence, it shouldn’t have any impact on Apple’s buyback strategy.

Apple ended last quarter with nearly $165 billion in cash and marketable securities, and is still some way from its future goal of having zero net cash — cash minus debt outstanding.

This goal leads Bloomberg Intelligence to project that the company will reach a milestone of $1 trillion in buybacks and dividends by 2025, since the repurchase program began in 2012.