Applied Materials (NASDAQ: AMAT) is one of the largest providers of semiconductor manufacturing equipment. While demand for its products can be volatile, ebbing and flowing with the state of the economy and the semiconductor market, Applied Materials has seen its profits soar over the past decade. These profits provide the fuel for the company's expansive share-buyback program.

Spending billions on buybacks

Applied Materials announced a $10 billion share-buyback program in March of 2023. This added to the $4.7 billion the company already had authorized for share buybacks.

Here's how much stock Applied Materials bought back in each of the past four quarters.

Applied Materials generates more-than-enough cash to fund its share-buyback program. In the first quarter of fiscal 2024, which ended on Jan. 28, the company produced free cash flow of $2.1 billion.

Buybacks aren't always a good thing

While share buybacks reduce the share count and boost earnings per share, Applied Materials has been paying a hefty price to execute its multibillion-dollar share-buyback program.

Analysts expect the company to produce earnings per share of $7.78 in fiscal 2024, which puts the forward price-to-earnings ratio at about 26. While that may not look overly expensive, it's no bargain, either.

Share buybacks are a useful tool to boost earnings per share, but when companies pay too much for their own shares, all that spending may fail to propel the stock higher.

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Timothy Green has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Applied Materials. The Motley Fool has a disclosure policy.

Here's How Much Stock Applied Materials Repurchased in the Past Year was originally published by The Motley Fool