The analysis that always accompanies Apple quarterly results in the days and weeks after they are revealed brings us new details about what the company is doing with their money. This year, a couple of trends are emerging that show Apple is potentially working on something new in the background.
The first detail comes courtesy of AppleInsider, in an article covering Apple’s filing with the US Securities and Exchange Commission last Tuesday. This filing went along with its quarterly results that were released the same day, and provides additional details on where Apple’s money is actually going.
This filing revealed that Apple’s R&D spending was up $760 million year over year, and is currently up to 7% of the company’s sales. This is up from the typical 4 to 5% usually dedicated to R&D. Apple did spend 6.4% during the same quarter last year in the lead up to the release of the iPhone 8, 8 Plus, and X, but it is interesting to see an increase during a year when we just expect iterations on existing iPhone, iPad, and Apple Watch designs.
While greater R&D spending is interesting, there is another expenditure increase that may be even more significant. As Philip Elmer-DeWitt points out at PED30, Wells Fargo analyst Aaron Rakers notes that Apple has also increased their Capital Expenditures budget $1 billion over this year’s previous guidance.
Photo Source: Apple 3.0
More specifically, their Machinery, Equipment, and Internal Use Software spending increased by around $4.28 billion in the third quarter. This was a 55% increase over the average of the previous five third quarters. That is a significant jump and it begs the question- what is Apple rolling out new machinery and infrastructure for? It shouldn’t take that amount of additional investment to just to prepare for what we believe will be iterative new devices that don’t have radically new designs.
There is no way to know what Apple is spending this additional money on from the outside looking in, but it is interesting to speculate. We know Apple is working on self-driving car technology, and the entire tech community feels strongly that Apple is actively developing augmented reality glasses. They are committed to expanding in the wearables space and will likely roll out new health features, and possibly even new devices toward that end. Apple could be preparing to manufacture any or all of these devices, or they may be working on something we have never heard of. Whatever Apple’s new R&D and capital expenditures spending is going toward, it is good to know that they are putting more of their record profits and market value back into making new and interesting products.