Apple Business News

Apple continues to increase its spend on R&D despite revenue decline

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Earlier today, the Cupertino giant once again exceeded the expectations of investors in its earnings call. Yes, Apple did post a 15% decline in revenues as compared to same period last year but that has not stopped it from doing the thing it does best — innovate. And this is evident from the expenditure figures of Apple which show that the spending on R&D was on rise despite the decline in revenues.

During the third quarter, Apple spent $2.5 billion in research and development — probably working on the development of lightning headphones. This number was 25% more than the same period last year. More interestingly, this figure accounts for 5.9% of the total revenues and that is the highest share in at least the last four years.

If one looks at a broader timeline, then also Apple surprises with its extensive focus on R&D lately. The company has spent $7.475 billion on research in the past nine months. For comparison, it had spent $5.847 billion during the same period last year.

Clearly, Apple understands that the only way to break from the saturation in sales of its existing products is through innovation. Innovation to bring novel products to its customers which can surprise and wow them and bring back that unique Apple style statement.

This was something Steve Jobs once did to revive the company by bringing in iPods and iPhones to customers which actually led Apple to where it is right now. Notably, Apple has also begun to invest externally most significant being its $1 billion investment in China’s Didi Chuxing.

However, CEO Tim Cook said that the investment in Didi was mainly aimed towards a better understanding of the Chinese market and they are more focused on their internal development.

We invest a ton of capital in our business itself to support research and development. That’s the main source of our investment, 

said Cook.

On the question of the focus of this R&D, Cook admitted that the company was investing in new products and devices.

There’s quite a bit of investment in products that are not currently shipping, said Cook.

He, however, did not reveal what these products could be. Still, it is quite evident that Apple has much more in store for us than just improved versions of iPhones or iPads or other existing devices.

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