$90 billion in buybacks expected

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

But Apple will still remind investors of its mammoth size and market power, as the company uses its fiscal second-quarter report to tell investors how much the board has authorized it to spend on share buybacks and dividends. It’s another way of telling the world how profitable its business is and how much cash it throws off every quarter.

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

“We think they keep that intact,” said Angelo Zino, analyst at research firm CFRA, in an interview.

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

Second to Apple is rival Alphabet, with $178.5 billion in share repurchases over the decade. The internet company just said its board authorized a $70 billion buyback for the year.

Analysts at Bank of America Securities said in a note earlier this month that capital returns are a “focus” of Thursday’s report. They expect $90 billion in authorization. Barclays analysts anticipate 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 toward being net cash neutral sometime in the future.”

Net cash neutral, a phrase that Apple finance chief Luca Maestri uses when asked about buybacks, refers to a point at which the company’s cash pile is about equal to its debt. At that time, the board could decide to slow the pace of its capital return.

Apple is currently working off a pile of cash that ballooned to $269 billion, its high point over the past 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.

While investors are prepared for a down quarter, guidance is a big question mark.

Apple hasn’t given formal guidance since the start of the pandemic in 2020, citing uncertainty. But management has consistently given 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 F3Q guide to imply another [year-over-year] decline; but we expect that to be lower than the F2Q,” Bank of America’s Wamsi Mohan wrote in a note this week.

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

Samik Chatterjee, an analyst at JPMorgan, said even if the outlook is soft, Apple might benefit from “flight to safety” positioning.

“The eventual outcome might be simply driven by F3Q guidance, where investors might be looking for assurance and visibility into limited downside despite a tough macro,” Chatterjee wrote in a note this week. If its outlook suggests a year-over-year decline that’s less than 5%, Apple could still “triumph” on fundamentals, Chatterjee wrote.

Apple, after all, sells a huge 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. That sales number would be a 4.4% annual decline.

IPhone revenue is projected to fall 3.8% on an annual basis to $48.66 billion, according to a FactSet estimate. Declines are expected in every Apple hardware product line.

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

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