Apple is thinking long-term: R&D spending keeps rising even as revenue dips

Apple’s R&D spending jumped again in the face of another quarterly revenue decline, according to the company’s earnings on Tuesday.

Apple spent $2.5 billion in the third quarter, up 25% from the year-ago period.

source
BI Intelligence

That accounts for roughly 5.9% of the total revenue, the highest percentage in at least the past 4 years:

source
BI Intelligence

The R&D increase comes at a time when Apple continues to face revenue declines across the board. In the third quarter, Apple reported $42.3 billion in revenue, down 15% year-over-year. The drop was seen in all regions except for Japan, while all of its hardware products saw unit sales decrease compared to the same quarter of last year.

This chart shows how R&D has kept growing even as revenue has started to decline.

source
BI Intelligence

Here’s a chart of Apple’s quarterly revenue change since 2008:

source
BI Intelligence

So where exactly is Apple spending its money?

According to Motley Fool, Apple’s investing in a number of areas in hopes of finding its next growth engine. Some of the likely areas include chips, services and software, and the self-driving car that Apple’s reported to be working on.

It seems like the investments in services and software is already paying off. Apple’s services business, which includes Apple Music, the App Store, and iCloud, was the only business segment that saw year-over-year growth in the third quarter, recording $5.9 billion in revenue, up 19%. That makes it the second largest unit at Apple now, and “the size of a Fortune 100 company by next year,” according to CEO Tim Cook.