According to a recent MarketWatch article, analysts have labeled Apple’s $100 billion announcement “disappointing” — not because it was small, but because it failed to set a new record.

Is it really in companies’ best interests to play this game? Buybacks are a capital allocation tool, not a performance metric — and, when used poorly, they can quietly erode the foundations of long-term value creation.

A Record High, But a Troubling Signal

In 2024, companies in the MSCI ACWI spent a record $1.5 trillion buying back their own shares — a 26 percent increase from 2023 and nearly four times the level of 15 years ago. The surge isn’t limited to one market: while U.S. firms still account for roughly two-thirds of global repurchases, buybacks in Europe and APAC have grown even faster over the past year. Of note, Apple alone devoted over half of its total capital uses — roughly $100 billion — to repurchases.

The renewed enthusiasm for buybacks comes amid record market valuations and over $500 billion total spent on investment in AI, data centers, and new infrastructure by the “Magnificent 7” alone. Yet even as some firms ramp up capital expenditures and R&D, the share of corporate cash devoted to buybacks has risen from 6.6 percent in 2009 to 9.9 percent in 2024.

That trend matters. Buybacks can make sense in specific circumstances — to offer flexibility relative to dividends, to signal confidence when shares are undervalued, to manage leverage, or to efficiently return surplus cash. But persistent over-distribution is a hallmark of short-termism. Every dollar spent on repurchases is a dollar not invested in the future.

The Pitfalls of Buybacks

Companies relying heavily on buybacks and dividends tend to shorten their investment horizons over time. Misused, buybacks can:

• Reflect poor timing — repurchasing at market peaks rather than when valuations are low.
• Create excess leverage, weakening resilience in downturns.
• Encourage executive compensation gaming, when programs are timed to boost short-term stock prices.

In other words, buybacks can support long-term goals — or sabotage them — depending on the motives and discipline behind them. Our Buybacks Playbook recommends companies approach repurchases only after meeting other long-term priorities: investing adequately in innovation and people, maintaining a healthy balance sheet, and clearly communicating how buybacks fit into the broader capital-allocation roadmap.

Apple’s buyback strategy may be an outlier, enabled by its enormous cash reserves, minimal debt, and limited acquisition opportunities. Its scale allows it to pursue repurchases as a flexible alternative to dividends, avoiding the long-term signaling commitments that dividends require. Most companies lack this level of financial insulation. When those firms prioritize buybacks over dividends, the decision deserves scrutiny: is it strategic capital discipline, or an attempt to manufacture short-term signals at the expense of long-term resilience?

Before approving a repurchase, boards and executives should ask:

• Have we fully funded our growth, innovation, and sustainability strategies?
• Would reinvestment or debt reduction deliver greater long-term returns?
• How does this buyback advance our purpose five years from now — not just our stock price five days from now?

For investors, buybacks are often seen as a signal that management believes their shares are undervalued. Investors, then, need to do their own due diligence. Signaling can work, but context matters. A company buying back shares simply because it lacks other ideas is waving a quiet red flag.

Long-term investors should:

• Evaluate buybacks within the total-use-of-capital framework, alongside CapEx, R&D, and workforce investment.
• Engage directly with management about the rationale, timing, and scale of repurchase programs.
• Use their voting power to support capital-allocation strategies that reinforce rather than erode long-term value.

When engagement reveals a mismatch between rhetoric and reality, investors should act accordingly.

The Bottom Line

Buybacks can be an effective way to return excess capital — but only after a company has secured its long-term obligations. Treating them as a badge of success mistakes optics for discipline. Buybacks are a test of stewardship. The companies that pass that test are rarely the ones chasing headlines.