$90 billion in buybacks expected

When Apple reports quarterly earnings on Thursday, the results are expected to be somewhat muted — the company has already guided investors to a 5% revenue decline, largely due to lower Mac and iPad sales.

But Apple will still remind investors of its massive size and market power, as the company uses its second-quarter financial report to tell investors how much its board has authorized it to spend on share buybacks and dividends. It’s another way of telling the world how profitable the business is and how much money it’s throwing away each quarter.

Wall Street expects the figure to come in at $90 billion, similar to last year’s authorization figure, based on a compilation of analyst reports.

“We think they’re keeping it intact,” Angelo Zino, an analyst at research firm CFRA, said in an interview.

Apple has been the buyback king for the past decade. From 2012 to the end of 2022, Apple spent more than $572 billion on share buybacks, the most of any company, according to FactSet data. Since 2013, Apple has announced board authorization levels in its second quarter earnings report.

Next to Apple is rival Alphabet, with $178.5 billion in share buybacks over the decade. The Internet company just said its board approved a $70 billion buyback for the year.

Analysts at Bank of America Securities said in a note earlier this month that capital return is a “focus” in Thursday’s report. They expect $90 billion in authorization. Barclays analysts expect the same.

But some are asking how long Apple can maintain this pace. Barclays said in its report that “we expect AAPL to continue to work towards being net cash neutral sometime in the future.”

Net cash neutral, a phrase Apple chief financial officer Luca Maestri uses when asked about buybacks, refers to a point where the company’s cash pile roughly equals its debt. At that point, the board could decide to slow down the pace of capital returns.

Apple is currently working with a pile of cash that has increased to $269 billion, the highest in the last decade. The company says it now has $165 billion in cash and $111 billion in debt for $54 billion in net cash, its lowest net cash position in years.

As investors brace for a down quarter, guidance is a big question mark.

Apple has not issued formal guidance since the start of the pandemic in 2020, citing uncertainty. But management has consistently provided data points to investors about individual product lines and the company’s overall sales.

Some analysts expect another annual drop in sales for the June quarter.

“We expect the F3Q guide to suggest another [year-over-year] decline; but we expect it to be lower than F2Q,” Bank of America’s Wamsi Mohan wrote in a note this week.

Analysts on average expect Apple’s third-quarter revenue to rise about 2% to $84.7 billion, according to Refinitiv.

Samik Chatterjee, an analyst at JPMorgan, said that while the outlook is soft, Apple could benefit from “flight to safety” positioning.

“The final result may simply be driven by F3Q guidance, where investors may be looking for safety and visibility in limited downside despite a tough macro,” Chatterjee wrote in a note this week. If the outlook suggests a year-over-year decline of less than 5%, Apple could still “win” on fundamentals, Chatterjee wrote.

After all, Apple sells a large number of devices at high margins, even in the absence of growth.

For the second quarter, Apple is expected to report $1.43 in earnings per share on $92.97 billion in sales, according to Refinitiv consensus estimates. This sales figure will be an annual decrease of 4.4%.

iPhone revenue is projected to fall 3.8% year over year to $48.66 billion, according to a FactSet estimate. A decline is expected in all Apple hardware products.

— CNBC’s Gabriel Cortes and Michael Bloom contributed reporting to this story.

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