Apple's stock buyback plan worth $110 bn largest in US history, shares grow 7.9% despite dip in sales

With its recent announcement of a $110 billion share buyback program, Apple has once again topped its own record for the largest buyback value ever announced in the United States.

This move surpasses Apple’s previous authorization of $100 billion for share buybacks in 2018, according to data compiled by market research firm Birinyi Associates dating back to 1999.

In fact, Apple now claims the top six spots on the list of the 10 largest share buyback announcements ever made in the US. Other notable companies included in this list are Chevron Corp. and Alphabet Inc., highlighting Apple’s dominance in this aspect of corporate finance.

Following the announcement, Apple’s shares surged by as much as 7.9 per cent in post-market trading, indicating a strong investor response to the buyback program. If these gains hold on Friday, the move could potentially add over $190 billion in market value to the company.

This significant increase in market value comes as a welcome reversal for Apple investors, who have seen the technology giant lag behind its Magnificent 7 peers throughout the year leading up to Thursday’s close. While Apple shares have experienced a decline of 10 per cent, the broader S&P 500 Index has registered a growth of more than 6 per cent.

With a 4 per cent increase in its cash dividend and authorization for an additional $110 billion stock buyback program, Apple demonstrated its commitment to shareholder value, making it the largest buyback initiative in the company’s history.

Despite a slight decline in quarterly revenue, Apple’s performance surpassed analyst estimates, suggesting a potential resurgence in the smartphone market despite stiff competition and regulatory challenges.

Apple’s fiscal second-quarter revenue fell by 4 per cent to $90.8 billion, surpassing the average analyst estimate of $90.01 billion. Analysts and experts hailed this achievement as remarkable, with Steve Sosnick, chief strategist at Interactive Brokers LLC, describing it as “an astonishing number.”

CEO Tim Cook expressed confidence in revenue growth returning in the current quarter, indicating positive prospects for the company’s trajectory.

The surge in Apple’s shares following its report elevated its stock market value by over $160 billion, signalling investor confidence in the company’s resilience and future prospects.

While Apple faces challenges across its business, including intensified competition and regulatory scrutiny, the company remains focused on its long-term growth strategy.

Apple’s CFO Luca Maestri provided insights into the company’s outlook, expecting double-digit growth in services and iPad revenue for the current quarter. Additionally, Apple anticipates gross margins of between 45.5 per cent and 46.5 per cent for the fiscal third quarter.

Despite a 10.5 per cent decline in iPhone sales to $45.96 billion, Apple experienced growth in some markets, particularly in China. The company’s revenue decline in China was not as steep as analysts expected, indicating resilience in a crucial market.

Apple’s ongoing investments in research and development, particularly in artificial intelligence (AI), underscore its commitment to innovation. CEO Tim Cook expressed optimism about the company’s prospects in generative AI, highlighting significant investments in this burgeoning field.

As Apple races to integrate AI into its products, the announcement of a massive buyback program may reassure investors concerned about the company’s stock performance.

With earnings per share exceeding Wall Street estimates and sales in the services segment surpassing expectations, Apple’s solid performance reflects its ability to navigate challenges and capitalize on opportunities in the evolving tech landscape.

While sales in the iPad and wearables segments fell below analyst expectations, Mac sales exceeded projections, driven by the success of new MacBook Air models.

As Apple continues to innovate and adapt to changing market dynamics, its recent financial results underscore its resilience and long-term vision for sustainable growth.

(With inputs from agencies)