For more than a decade, Apple has made good on its history-making buyback plans, spending more than $573 billion on share repurchases since 2012. And in its most recent quarter, Apple spent another $18 billion on buybacks despite a third straight quarter in a row of declining revenues.
It's clear that Apple's buybacks have benefited Berkshire's bottom line. Buffett himself has said as much, telegraphing that he very clearly believes in Apple's consistent buyback program.
"At Apple and Amex, repurchases increased Berkshire’s ownership a bit without any cost to us," Buffett wrote in Berkshire's annual shareholders letter this year. "The math isn’t complicated: When the share count goes down, your interest in our many businesses goes up. Every small bit helps if repurchases are made at value-accretive prices. Just as surely, when a company overpays for repurchases, the continuing shareholders lose."
A staggering 46% of Buffett's portfolio is concentrated in Apple stock, which Buffett's Berkshire first bought in 2016. Famously, Apple just last month became the first company in history to cross the $3 trillion-dollar mark.
Buffett has long been an advocate of stock buybacks, even as the practice faces pushback from critics in Washington, D.C., including President Biden, who proposed an increased tax on them as recently as this year.
Buffett even penned a fervent defense of buybacks in his annual letter.
"When you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive)," he wrote.
Stock buybacks 'have helped make Buffett richer'
In the three months leading up to July 1, Apple repurchased $18.14 billion in its own stock, according to SEC filings. In the past nine months overall, Apple spent a whopping $56 billion on buybacks.
Though that's an impressive number, it's still less than the $64 billion the company spent on share repurchases over the same period in 2022.
So how much have Apple's buybacks boosted the stock — and Warren Buffett's bottom line? After all, by spending on buybacks, Apple is spending less on other areas such as product development. (In the latest earnings report, Apple reported holding $28 billion in cash.)
"Investors commonly view stock buybacks as a benefit to Apple, and given Berkshire’s relatively large allocation to Apple, stock buybacks have helped make Buffett richer," VerityData senior analyst Ali Ragih told Yahoo Finance.
However, he added that "financial literature often views stock buybacks in a neutral action on a theoretical basis."
As buybacks have become an essential part of Apple's business model — and a necessary method of deploying capital — there's every reason to believe Apple's buyback train will continue full steam ahead, revenue woes or not.
"On average, with buybacks we will see the stock price go up," said Michael Roberts, a professor at the University of Pennsylvania's Wharton School. "In the tech space, the largest players have a lot of cash, and a question to answer — how do we return that money to investors? Repurchases are an artifact of their operating business. They're generating so much money and don't have enough new investments to use it on."
Furthermore, Apple's competitors are increasingly upping their buyback game too.
"Apple routinely buys back the most stock of any company every quarter with amounts that are around $20 billion per quarter," Ragih said. "Google is gradually catching up and bought back $15.0B last quarter. Buybacks market-wide are swayed by the largest companies and Apple plays an important role in that."
Still, for all of Washington, D.C.'s pushback on share repurchases, it's important to remember something even bigger than Buffett.
Huge swaths of both Berkshire and Apple aren't just owned by billionaires and large institutional investors, they're both tickers that have massive followings among retail investors.
"Berkshire's an investor in Apple just like you or me," Roberts said. "They just own a lot more stock than you and I do. When Apple buys back shares, remember, we have to consent to sell them. ... And, after all, who owns Berkshire Hathaway? A lot of retail investors."