“That said, the higher R&D spending isn’t exactly translating into meaningfully higher profitability for the world’s most valuable company. Apple’s Return on Research Capital – a measure of how much gross profit is generated for every dollar of R&D spent in the previous year – has been trending steadily lower,” Trefis writes. “While Apple earned about $15 in gross profits in FY’15 for each R&D dollar invested the previous year, we expect the metric to decline to just about $8 by FY’19.”
“There are likely to be multiple factors driving this decline. For one, the smartphone market, from which Apple derives a bulk of its revenues and profits, has largely plateaued,” Trefis writes. “Separately, Apple is also possibly making R&D investments that have a multi-year horizon in areas such as automotive technology, artificial intelligence and augmented reality.. [which] could pay off for the company over the long run.”
Read more, and see the charts, in the full article here.
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