Summary:
How much cash does the U.S. Federal Government carry on its balance sheet?
How does that cash compare to the money on Big Tech's balance sheet?
How is Big Tech spending on share repurchases?
Theoretically, how much cash could Big Tech have on its balance sheet, including the repurchase amounts?
How much cash does the U.S. Federal government carry in its Balance Sheet?
The U.S. Treasury Department owns and publishes the government's balance sheet annually. At the end of 2023, the U.S. government held $922 billion in cash (Exhibit 1). Although the Federal government, with congressional authorization, can print money to bolster its balance sheet at any time, we are using this amount as a fun exercise to compare against the cash held by the private sector, especially by the tech giants.
Exhibit 1: Assets Portion of the U.S. Government Balance Sheet
How does the federal government's cash holding compare to the private sector?
I queried the U.S. SEC filings using Snowflake to examine the cash held by various companies (Exhibit 2). I wanted to examine Big Tech but also threw in data from other companies, from Berkshire to Coca-Cola. Berkshire Hathaway had to be included in this list since its cash, bonds, and securities on its balance sheet total over $325 billion. The table below details only the cash holdings without looking at long-term bonds and securities companies may hold.
Warren Buffett believes in having a fortress balance sheet and has been selling his stock positions in Apple and Bank of America to bolster it over the past few quarters. So, what does Warren know about the markets that concern him? There's a cottage industry trying to guess Buffett's thinking and investment strategy. Buffett may be saying that U.S. stocks are overvalued, so it's time to cash in on the capital gains he has secured on Apple. My guess is as good as yours. If the market takes a beating in the coming months, Warren might be in a prime position to buy excellent businesses at a cheaper valuation.
Note: It was easy to create an AI app in Snowflake to learn from Warren Buffett's annual letters. You can learn about it here.
Amazon has the highest cash position, with $75 billion on its balance sheet, followed by Meta (Facebook), which has $43 billion. The top 10 companies on this list, from Amazon to Salesforce, held $273 billion in cash.
Note: Procter & Gamble (PG) data has a bug since the cash position is for 2019. I hypothesize that PG started using a different US GAAP tag after the 2019 fiscal year than the one I used in my query. I will look into this. You can learn more about my architecture in a series of blogs here and here.
Exhibit 2: Cash Held By U.S. Companies
This amount of cash on the balance sheet feels tiny compared to many big tech companies' annual free cash flows. Where did all the money go?
How much is Big Tech spending on share repurchases?
Share repurchase is a financial technique companies use to buy back their shares. Repurchases reduce the total outstanding shares, offering multiple benefits to the company and its shareholders.
Companies can show earnings per share growth without increasing earnings from their business operations.
Existing shareholders see their stake in the business increase. Now, they own more of the business.
Reduce the total dividend that the company has to pay out annually.
If you and your friend were partners in a business and you bought out your friend's share, you would end up owning 100% of the company and keeping all the profits. Share repurchases are similar, except on a much bigger scale.
Let's look at an example to see the benefits of share repurchases.
Exhibit 3: Share Repurchase Example
Suppose a company had a net income of $1000 and a total outstanding shares of 10 in year 1. In this case, its earnings per share (EPS) is $100. Suppose the company earns the same amount of $1000 in net income in year 2 but repurchased 2 of its shares at the end of year 1. The number of outstanding shares is now eight instead of 10. The EPS has jumped from $100 to $125, a remarkable 25% increase without the business earning a single penny more. When EPS grows, the stock price should follow, benefitting the company and its shareholders.
When paying dividends to existing shareholders, share repurchases save the company money, assuming it decides not to increase its dividend per share. In this example, the total dividend amount the company has to pay is reduced from $100 to $80.
In the partnership example, when you buy out your friend, you would consider paying a fair price for his share of the business. You would be careful not to overpay. If you overpay, the returns you generate on your investment will be less. Similarly, buying back shares at any valuation is not recommended. Warren Buffett's rule on buybacks is only to repurchase shares when the stock is trading below its intrinsic value.
How much did Apple spend on buying back its shares?
Since 2018, Apple has spent a mammoth $559 billion on buying back its shares (Exhibit 4 & 5).
Exhibit 4: Amount of Money Apple Has Spent on Share Repurchase Since 2018.
Exhibit 5: Apple's Spending on Share Buy Backs in Bar Chart Form.
How much has Apple managed to reduce its share count since 2018?
Apple has reduced its total outstanding shares from 20 billion to 15.4 billion, a 22% reduction.
Exhibit 6: Apple's Weighted Average Diluted Shares Outstanding
How much did Microsoft spend on buying back its shares?
Microsoft has spent $152 billion on share buybacks since 2018 (Exhibits 7 & 8).
Exhibit 7: Microsoft's Spending on Share Repurchases
Exhibit 8: Microsoft's Spending on Share Repurchases in Bar Chart Form
How much has Microsoft managed to reduce its share count since 2018?
Microsoft has reduced its outstanding shares from 7.79 billion to 7.46 billion, a 4.2% reduction (Exhibit 9).
Exhibit 9: Microsoft's Outstanding Shares.
In theory, Big Tech could have more money on its balance sheet than the Federal government if desired. It spends a lot on Capex, R&D, and share repurchases.
Note: All data analysis was done on Snowflake using Snowsight Worksheets and Snowflake Notebooks. If you like the analytics presented here and wish to do similar analytics with your data, Snowflake may be the easiest platform to gain insights quickly. Try Snowflake for free for 30 days here.
Disclosures: I am a Sales Engineer at Snowflake. All opinions in this blog post are solely mine and do not reflect Snowflake's views. I am not a Registered Investment Advisor, and any discussion on securities or investments is not an inducement to make a particular investment.
