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A Look at Apple’s Research and Development Investments

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Apple spent $2.6 billion on research and development in fiscal 4Q16

According to Apple’s (AAPL) fiscal 4Q16 financial statements, the company spent $2.6 billion on research and development (or R&D) in the quarter ended September 30, 2016. In comparison, it spent $2.2 billion in fiscal 4Q15. While R&D expenditure accounted for 4.3% of sales in fiscal 4Q15, it increased to 5.3% of sales in fiscal 4Q16. Apple has doubled its R&D expenses in the last two years.

Apple CEO Tim Cook stated that “with our latest operating systems, machine learning is making our products and services smarter, more intuitive and even more personal. We’ve been using these technologies for years to create better user experiences, and we’ve also been investing heavily both through R&D and acquisitions.” R&D expenses rose 24.6% YoY (year-over-year) in fiscal 2016 to $10.0 billion.

 

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Increased focus on R&D amid falling revenues

As we’ve discussed in this series, Apple’s revenue has fallen in the last three fiscal quarters. Technology companies need to innovate continuously to ensure market leadership and penetration. Therefore, Apple is looking to focus on R&D to ensure robust product development. Due to constant disruption in the technology space, companies in this sector spend more on R&D than companies in other industries.

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