In the last quarter, Alphabet, Apple, and Microsoft collectively generated an impressive $84 billion in cash, marking the highest earnings for a non-holiday period in Nasdaq 100 history. Alphabet alone contributed nearly $29 billion to this staggering figure after implementing cost-cutting measures, such as job reductions and minimizing losses in its ambitious projects. As a result, Alphabet now possesses a cash and short-term marketable securities reserve of approximately $118 billion, second only to Apple’s total of around $167 billion within the Nasdaq 100 Stock Index.
Industry analysts, however, perceive Alphabet’s large cash reserve as a concern. Unlike Apple, which prioritizes returning most of its cash to shareholders through stock buybacks and dividends, Alphabet does not have a clearly defined capital return strategy. This leaves investors longing for more information regarding Alphabet’s plans for its cash reserves.
Although Alphabet has increased its stock buybacks and expanded its repurchase authorization to $70 billion, the company only spent $15 billion on its own shares in the last quarter, which is less than half of its cash inflow. In contrast, Apple has returned nearly $5 billion more than the record-breaking $454 billion in cash it generated over the past five fiscal years, highlighting the substantial difference in approach.
Furthermore, Alphabet has not followed in the footsteps of Apple and Microsoft by historically paying dividends. Unlike Microsoft, which made a significant acquisition of video game maker Activision Blizzard for $69 billion last year, Alphabet has refrained from pursuing large-scale acquisitions. Currently, Google’s most notable acquisition remains its $12.5 billion deal for Motorola in 2012.
Additionally, Alphabet’s potential for major acquisitions is limited due to heightened regulatory scrutiny. Microsoft’s purchase of Activision and Amazon.com’s acquisition of iRobot, the maker of Roomba, are still subject to review by regulators.
Therefore, Alphabet faces the dual challenge of effectively utilizing its substantial cash reserves and navigating the regulatory landscape to pursue strategic acquisitions. As investors eagerly await more clarity on Alphabet’s plans, the company must carefully consider its next steps in order to optimize its financial position.
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Alex Smith is a writer and editor with over 10 years of experience. He has written extensively on a variety of topics, including technology, business, and personal finance. His work has been published in a number of magazines and newspapers, and he is also the author of two books. Alex is passionate about helping people learn and grow, and he believes that writing is a powerful tool for communication and understanding.
