The Hidden Truth Behind Buybacks & Cash Flow

🔥 The Hidden Truth Behind Buybacks & Cash Flow: What Investors Miss in NVIDIA’s Numbers

Why RSUs and Working Capital can distort the real story

Most investors see two big numbers and get excited:

✔ huge buybacks
✔ huge operating cash flow

But rarely do they understand what’s actually happening behind the scenes.
Let’s break down NVIDIA’s latest filings in simple, real numbers.

🔹 1. RSUs Inflate Share Count — Buybacks Don’t Always Reduce It

Everyone loves to hear “the company is buying back shares.”
But here’s what most investors don’t realize:

RSUs (employee stock awards) create new shares → dilution.

Buybacks must first neutralize that dilution before reducing total shares.

Let’s look at NVIDIA’s own numbers (Q1 FY2026 – Apr 2025):

▶ Shares Issued from Stock Plans: +50M
▶ Shares Withheld for Taxes (RSU taxes): –13M
▶ Shares Repurchased: –126M

📌 Net share reduction = 126 – 50 + 13 = 89M

This means:

Although NVIDIA spent $14.5B on buybacks, the true reduction was only 89M shares.

And the cost?

▶ “Issuance (Retirement) of Stock, Net” = –$13.725B (Q1)
▶ Q2: –$23.445B
▶ FY: –$33.216B

This is not real reduction — it’s a treadmill:

RSUs add shares

the company buys back shares

RSUs add more

the company buys back again

If NVIDIA ever stopped buybacks for even one quarter,
shares outstanding would jump instantly.

🔥 Simple Example (for investors):

Start of quarter: 1,000M shares
RSUs issued: +40M → 1,040M
Buybacks: –50M → 990M

The investor thinks they bought back 50M shares.
In reality?

➡ True reduction = only 10M.
➡ 80% of buybacks were just neutralizing dilution.

This happens every quarter.

🔹 2. Working Capital Boosted Cash Flow — Not Operations

Look at NVIDIA’s operating cash flow (OCF):

Q1 FY2026 OCF: +$27.414B

But the key line is this:

Changes in Working Capital: +$8.654B

This means:

$8.6B of the operating cash flow came from timing of receivables, payables, and inventory — NOT from actual operations.

This is crucial because:

✔ It’s cyclical
✔ It’s temporary
✔ It reverses next quarter

Example from the next periods:

Q2 FY2026 “Changes in WC”: –$2.368B

FY2025: –$9.383B

Q4 FY2025: –$3.520B

Working capital swings can boost or crash cash flow without any change in real profitability.

🔥 Why This Matters

Investors often misinterpret:

🚫 A jump in Operating Cash Flow

= “Strong business performance”

But many times:

✔ It’s just Working Capital cycling
✔ Not improved EBITDA
✔ Not improved margins
✔ Not better demand
✔ Not better efficiency

It’s accounting timing, not operational strength.

🔹 3. The Combination Can Mislead Investors

In a single quarter, NVIDIA showed:

✔ +8.6B boost from WC
✔ $14.5B spent on buybacks
✔ Net true share reduction only 89M

This creates the illusion of:

higher OCF

higher EPS

fewer shares

But much of this stems from:

accounting timing (WC)

neutralizing dilution (RSUs)

Not from:

organic profitability

sustainable improvements

🔥 Conclusion: What Every Investor Should Watch

If you want to understand the real strength of a company, focus on:

✔ Net Shares Change (after RSUs)

Not just “buybacks.”

✔ OCF minus Changes in Working Capital

Not the headline OCF.

✔ True organic cash generation

Not timing effects.

✔ SBC (Stock-Based Compensation)

Because SBC = dilution = more future buybacks.

📌 Final Wake-Up Call

RSUs inflate share count.
Buybacks only offset them.
Working capital inflates cash flow.
Neither guarantees stronger fundamentals.

If you want to see the real story,
you must look beneath the headline numbers.