What Are Retained Earnings in Investing?

What Are Retained Earnings?

By Jason Hall – Updated Aug 15, 2025 at 2:35 AM EST

Key Points

Retained earnings are net profits not paid as dividends but held or reinvested by the company.
Apple's retained earnings decreased due to heavy stock repurchases while Texas Instruments' increased.
Investors should prioritize return on assets and invested capital over retained earnings for investment decisions.

The reason to own stock in a company is – or should be – the same as owning a stake in any business: To generate wealth from that business's earnings, either paid to owners as dividends or retained to reinvest into the company, making it more profitable and more valuable.

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a money bag on a pile of cash — Image source: Getty Images

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Profit

The amount of money a business retains from sales after subtracting expenses, taxes, and other costs involved in operation.

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Shareholder

An individual or entity that owns a portion of a company's stock, entitling them to a share of its profits and assets.

Share buybacks can also – but not always – reduce retained earnings. Two examples of how it can work: When Apple (AAPL -0.96%) filed its fiscal year 2022 annual report, it reported an accumulated deficit. That’s probably a mind-blowing fact, considering the company earned $99.8 billion last year, and it has earned at least $30 billion every year since 2012. This is because Apple has spent a lot of money to repurchase stock in recent years. In 2022, for example, it repurchased $90.2 billion while also paying out $14.8 billion in dividends. And since the shares it repurchases are being retired, this reduces Apple's retained earnings.

Texas Instruments (TXN -2.34%) has been even more aggressive than Apple at repurchasing shares over the past decade. Much of the shares it has repurchased, however, are not retired, but are held as "treasury shares" on the company's books. As a result, its retained earnings increased to $50.4 billion in 2023, even as it continued to buy back shares.

The lesson: Even something as straightforward as retained earnings can get complex and nuanced.

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About the Author

Jason Hall is a contributing Motley Fool stock market analyst with more than a decade of experience writing about dividend stocks and long-term investing. He has been with the company since 2012 and previously spent over 10 years in technical sales in the printing and information services industry. Jason also founded and operated a small food manufacturing business.

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Jason Hall has positions in Texas Instruments. The Motley Fool has positions in and recommends Apple and Texas Instruments. The Motley Fool has a disclosure policy.