During Apple's upcoming quarterly earnings report on Thursday, the results are anticipated to be relatively subdued. The company has already informed investors about a projected 5% decline in revenue, mainly due to lower sales of Mac and iPad devices.
However, Apple will take the opportunity to emphasize its substantial size and market influence. In its fiscal second-quarter report, the company will disclose the amount authorized by its board for share buybacks and dividends.
Based on a compilation of analyst reports, Wall Street predicts that the announced figure for share buybacks and dividends in Apple's upcoming report will be approximately $90 billion, matching the authorization amount from the previous year.
Over the past decade, Apple has held the title of the most prolific buyer of its own shares. According to FactSet data, between 2012 and the end of 2022, Apple allocated more than $572 billion towards share repurchases, surpassing any other company. Apple has consistently disclosed board authorization levels for buybacks in its second-quarter earnings reports since 2013.
Among its competitors, Alphabet, the parent company of Google, takes second place in terms of buyback activity. Over the same decade, Alphabet repurchased shares worth $178.5 billion. Recently, Alphabet announced a board authorization for a $70 billion buyback program for the current year.
According to a recent note from Bank of America Securities, analysts have highlighted that capital returns will be a key aspect of Apple's upcoming earnings report. They anticipate an authorization amount of $90 billion, which is also in line with the predictions made by analysts at Barclays.
There are concerns emerging about the sustainability of Apple's current trajectory. Barclays, in its report, addressed this by stating that they expect Apple to strive towards achieving a net cash neutral position at some point in the future. This suggests that there are questions about how long Apple can maintain its current pace of capital returns.
The term “net cash neutral,” as used by Apple's finance chief Luca Maestri when discussing buybacks, pertains to a scenario where a company's cash reserves roughly match its debt obligations. At that stage, the company's board may opt to reduce the speed of its capital return initiatives.
Apple presently holds a substantial cash reserve that grew to $269 billion, reaching its peak in the past decade. The company currently reports $165 billion in cash, $111 billion in debt, resulting in $54 billion in net cash. This represents Apple's lowest net cash position in several years.
Some analysts anticipate another year-over-year decrease in sales for the June quarter. Bank of America's Wamsi Mohan wrote in a recent note that “We expect F3Q guide to imply another [year-over-year] decline; but we expect that to be lower than the F2Q”
Apple's substantial sales volume and high-margin device sales could be advantageous, even in the absence of growth. For the second quarter, Refinitiv consensus estimates suggest earnings per share of $1.43 on sales of $92.97 billion. This sales figure would reflect a 4.4% annual decline. FactSet estimates a 3.8% year-over-year decrease in iPhone revenue to $48.66 billion, with declines expected across all Apple hardware product lines.
