The chip maker on Wednesday announced plans to buy back $25 billion in stock when it posted blow-out earnings results. The goal looks achievable, too: Nvidia in the July quarter bought back almost $3.3 billion of stock, just over half of its free cash flow. Analysts now expect $34.4 billion in cash flow next year—so if the company plans to return more than half of that in buybacks, repurchases would total close to $20 billion.
Nvidia is aggressively growing its profits, enabling it to return so much money to stockholders. To be sure, most companies’ growth won’t be as spectacular as Nvidia’s—but if they can see earnings growth after what’s been a rocky 2023, buybacks should rise across the board, too. Newsletter Sign-up That’s not a surprise, with S&P 500 aggregate net income in the first two quarters of the year having fallen roughly 5%, according to Credit Suisse. Higher interest rates are starting to hit companies’ sales. Revenue for the index was almost flat year-over-year for the first half, while companies have had to contend with higher costs, like rising wages and salaries—lowering profit margins and hitting bottom lines.