Although Nvidia has been getting all the glory in recent years as Wall Street's artificial intelligence (AI) pioneer, it was Apple (AAPL 1.93%) that paved the way for today's "Magnificent Seven." Apple was the first public company to reach the $1 trillion, $2 trillion, and $3 trillion market cap plateaus.
Although Apple's supercharged growth heyday, spurred by the advent of the iPhone, appears to be long gone, CEO Tim Cook and his team aren't done making sizable investments in the company's future. One such investment, totaling north of $841 billion, would, in theory, have been enough to acquire 488 of the current 500 companies in the benchmark S&P 500 (^GSPC 1.52%).
Image source: Getty Images.
Unearthing Apple's under-the-radar $841 billion investment
Here's what's truly interesting about Apple's biggest investment: it has absolutely nothing to do with artificial intelligence, data centers, software, or any of its physical devices. Rather, it's an investment entirely designed to reward the company's long-term shareholders.
In fiscal 2013, with Apple's physical devices, led by iPhone, generating overwhelming cash flow, the company's board initiated a share repurchase program. At times, Apple even leaned into historically cheap debt to fuel share buybacks. Here's how these buybacks have progressed over 13 fiscal years (Apple's fiscal year ends in late September):
- 2013: $22.95 billion in buybacks
- 2014: $45 billion
- 2015: $35.253 billion
- 2016: $29.722 billion
- 2017: $32.9 billion
- 2018: $72.738 billion
- 2019: $66.897 billion
- 2020: $72.358 billion
- 2021: $85.971 billion
- 2022: $89.402 billion
- 2023: $77.55 billion
- 2024: $94.949 billion
- 2025: $90.711 billion
- 2026 (through fiscal Q1): $24.701 billion
Collectively, Apple has repurchased $841.1 billion of its common stock and reduced its outstanding share count by nearly 44.3%. Companies with steady or growing net income and a declining share count should see their earnings per share (EPS) positively impacted through buybacks.
Image source: Apple.
Is Apple's aggressive buyback program masking operating deficiencies?
While there's little question that Apple's EPS growth and its share price outperformance, relative to the S&P 500, have been aided by aggressive share repurchases, the argument can be made that Apple's big investment is attempting to mask its operational shortcomings.
For example, physical device sales growth ground to a halt from fiscal 2022 through fiscal 2024. Although higher-margin subscription services revenue growth consistently hovered around 10%, demand for Apple's iPhone, iPad, Mac, and Watch had tapered off.
While sales growth has picked back up following the launch of the AI-driven Apple Intelligence and the release of iPhone 17, Apple's innovation-led growth engine has struggled to match its former glory and stand out in a highly competitive space.
NASDAQ: AAPL
Key Data Points
What's more, Apple stock isn't particularly cheap. History shows that Apple regularly traded at trailing 12-month (TTM) EPS multiples of 10 to 15 roughly a decade ago, when its annual growth rate was notably higher. Today, Apple commands a TTM price-to-earnings ratio of 33, and its growth rate has been far less consistent.
Though Apple's board made a wise decision to repurchase its stock to enhance shareholder value -- and clearly that decision has worked, as evidenced by Apple shares skyrocketing 1,270% since the start of 2013 -- no amount of share repurchases can mask the historical priciness of its stock or its uneven growth prospects in recent years.
