Korn Ferry's Expanded Share Repurchase Program and Its Implications for Shareholder Value

Korn Ferry's recent $250 million expansion of its share repurchase program, bringing the total available capacity to $331.4 million, underscores a strategic shift in capital allocation for professional services firms. This move, announced on September 18, 2025, reflects the company's confidence in its business fundamentals and its commitment to returning value to shareholders Korn Ferry Announces $250 Million Increase in its Common Share Repurchase Program^[1]. But beyond the immediate financial mechanics, the decision raises critical questions about how share buybacks function as signals of corporate health and their long-term implications for valuation in an industry increasingly reliant on disciplined capital management.

Strategic Signaling: Confidence or Complacency?

Share buybacks have long served as a dual-purpose tool: returning capital to shareholders while signaling management's belief that a stock is undervalued. For Korn Ferry, the expanded program sends a clear message to the market. By allocating an additional $250 million to repurchase shares, the firm is effectively stating that it views its equity as attractively priced relative to its intrinsic value. This aligns with broader academic findings that share repurchases are often interpreted as credible signals of managerial confidence, particularly in sectors like professional services, where intangible assets and market perception play a significant role in valuation Signal strength adjustment behavior: Evidence from share^[2].

The timing of Korn Ferry's announcement is also noteworthy. The company has already repurchased 456,250 shares for $32.6 million in Q2 FY'25 alone Korn Ferry Announces Second Quarter Fiscal 2025 Results of Operations^[3], suggesting a consistent, opportunistic approach to buybacks. This pattern mirrors the strategy of British American Tobacco (BAT) in the early 2000s, where disciplined repurchases during periods of undervaluation led to outsized shareholder returns Share Buyback Schemes: Case Studies of Success^[4]. However, critics caution that such signals can be misleading if buybacks are driven by short-term EPS inflation rather than genuine undervaluation. For instance, a 2024 study found that firms with low growth opportunities are more likely to use buybacks to mask stagnation, potentially eroding long-term value Stock buybacks and growth opportunities | Review of…^[5].

Long-Term Valuation: Balancing EPS Gains and Growth Trade-offs

The immediate financial benefit of Korn Ferry's program is its potential to boost earnings per share (EPS). By reducing the number of outstanding shares, the company can enhance EPS metrics, which are critical for professional services firms competing on profitability and efficiency. Data from the second quarter of 2025 shows that Korn Ferry's prior buybacks have already contributed to a 12% year-over-year increase in EPS Korn Ferry (KFY) Announces Q2 Earnings Outlook and Completes Share Repurchase Program^[6]. However, the long-term success of this strategy hinges on whether the firm can balance these short-term gains with investments in growth.

Academic research highlights a key tension here. While share repurchases can improve financial metrics, they may also divert capital from innovation, talent development, or M&A opportunities that drive sustainable growth. A 2025 analysis of global buyback programs found that firms achieving long-term outperformance typically allocate buybacks alongside strategic reinvestment, rather than substituting one for the other Are Buybacks Good for Long-Term Shareholder Value? Evidence…^[7]. For Korn Ferry, this means ensuring that its $331.4 million repurchase program does not come at the expense of its digital transformation initiatives or expansion into high-growth markets like AI-driven talent analytics.

Industry Context: Buybacks as a Capital Allocation Norm

Professional services firms are increasingly adopting share buybacks as a core component of capital allocation. According to Korn Ferry's own industry report, global repurchase programs surged by 87% in Q1 2024 compared to the same period in 2023, as firms sought to capitalize on normalized valuations and improved liquidity What Will Firms Do With All Their Cash?^[8]. This trend reflects a broader shift in the sector, where firms are prioritizing shareholder returns amid slowing revenue growth (4.6% YoY in 2025) and margin pressures The 18th Annual Professional Services Maturity™ Benchmark Report^[9].

Yet, the effectiveness of buybacks varies by firm. A 2024 study of non-U.S. markets found that companies with strong governance frameworks and disciplined valuation criteria—such as BAT's case—achieved higher long-term returns than those using buybacks to mask operational weaknesses Share Buyback Schemes: Case Studies of Success^[10]. For Korn Ferry, the challenge lies in maintaining this discipline. The company's program explicitly allows flexibility in execution, with no obligation to repurchase a specific number of shares Korn Ferry Announces $250 Million Increase in its Common Share Repurchase Program^[1]. While this flexibility is prudent in volatile markets, it also requires rigorous oversight to prevent over-leveraging or misallocation of capital.

Conclusion: A Calculated Bet on Shareholder Value

Korn Ferry's expanded buyback program is a calculated move to enhance shareholder value through strategic signaling and EPS optimization. However, its long-term success will depend on the company's ability to balance these efforts with investments in innovation and growth. As professional services firms increasingly rely on buybacks to navigate a competitive landscape, the key lesson from both academic research and industry trends is clear: share repurchases are most effective when they complement, rather than replace, a broader strategy for sustainable value creation.