What it is
A stock buyback, also known as a share repurchase, occurs when a company uses its cash to buy back its own shares from the open market. This reduces the number of outstanding shares, which can increase earnings per share (EPS) and make the remaining shares more valuable. Companies often execute buybacks when they believe their stock is undervalued or as a way to return capital to shareholders.
Stock buybacks are frequently announced during earnings calls, often alongside dividend declarations. They can signal management's confidence in the company's future and can support stock prices, especially during periods of market weakness. However, critics sometimes argue that buybacks prioritize short-term stock price boosts over long-term investments in growth or employee wages.
Why it matters
Buybacks can boost earnings per share and stock prices, directly benefiting shareholders. They indicate management's view on the company's valuation.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice