Tech giants dig into their $500bn cash holdings to fund programme of share buybacks
Move allows firms give support to their own stock
©Bloomberg
While many investors have been scared away from tech giants at the centre of this year's equity rout, the companies are likely to continue plowing money into buybacks that will offer at least one source of continuing support for the stocks.
The big tech firms could be tempted to hold onto their cash to guard against the economic turmoil created by US president Donald Trump's tariff policies.
However, buybacks remain attractive because companies like Microsoft, Amazon.com and Apple are sitting on piles of cash worth north of $500bn (€440bn).
'My sense is we're going to see probably little to no slowdown in buybacks, said Robert Schiffman, a senior credit analyst at Bloomberg Intelligence. 'You don't need to hoard cash if you have $30, $50, $100bn in cash on your books.'
The first signals of the trajectory should come from Alphabet's earnings announcement today.
Apple, which is the biggest buyer of its own shares, reports on May 1. Both companies typically use the first quarter earnings season to report new buyback authorisations and other capital return plans.
Sitting on cash doesn't make a lot of sense
A year ago, Alphabet authorised the repurchase of $70bn in shares and initiated a dividend, while Apple earmarked $110bn for buybacks.
The threats from tariffs – to economic growth and profits – have driven investors out of the technology stocks that led US markets higher for most of the past two years.
The tech-heavy Nasdaq 100 index is down about 18pc from a record high just two months ago, and the biggest names have fallen even more. Apple has dropped 23pc from a December peak while Alphabet is off 27pc from a February record high.
In the face of such uncertainty, buybacks can be a show of financial strength. Two weeks ago, Broadcom reported a $10bn buyback plan – the first since 2022. CEO Hock Tan said it reflected board confidence in the strength of the chipmaker's businesses.
'As an investor, it's always about risk-reward – and if you have a business trying to help you see where relative value is, it maybe gives them confidence that there's a natural buyer at those levels or lower,' said Keith Lerner, chief market strategist at Truist Advisory Services. 'That by itself can be positive.'
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The capital returns of tech giants have long been a source of attraction for investors and a display of their immense profitability.
Buybacks in particular are seen as an efficient way to return cash to shareholders, by reducing the number of shares outstanding, which boosts earnings per share.
Despite many of the big tech companies spending heavily to beef up their artificial intelligence computing capacity, the sector is still generating plenty of cash.
Combined free cash flow for the six biggest technology companies – Apple, Microsoft, Nvidia, Alphabet, Amazon.com and Meta Platforms – is expected to be nearly $100bn in the first three months of 2025, according to analyst estimates compiled by Bloomberg.
'The Big Tech balance sheets have never been stronger,' said Mr Schiffman.
'If you don't have anything else to spend it on, sitting on cash doesn't make a lot of sense.'
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