The oil giant has given in to investors who have stuck by the oil giant through a downturn in the industry.
Shell had always said it would buy back its own stock once it has paid down its debt accumulated through the $54bn acquisition of BG Group in 2016.
It is in the process of selling assets worth $30bn in the wake of the 2014 oil price crash.
Ben van Beurden, chief executive of Shell, said: “Today we are taking another important step towards the delivery of our world-class investment case, with the launch of a $25bn share buyback programme.
“This move complements the progress we have made since the completion of the BG acquisition in 2016.”
The Anglo-Dutch company posted a 37% rise in underlying earnings on a current cost of supply basis to $10.1bn for the six months to 30 June. Much of the gain was down to rising oil prices.
Brent crude, the international benchmark for oil prices, has risen to $75 a barrel from around $50 a barrel a year ago.
However, Shell’s underlying earnings rose 30% to $4.7bn in the second quarter – missing forecasts.
Its stock slipped 2% in early trading in London.
Richard Hunter, head of markets at Interactive Investor, said it was an “impressive update” despite missing City expectations.
“The old market adage of ‘Never sell Shell’ is holding firm as the company has unveiled something of a bonanza for shareholders,” he said.
A buyback typically reduces the number of stocks in circulation pushing up a company’s share price.