Apple Is Ramping Up R&D to Find Its Next Big ProductAmid stagnant growth and declining profits, Apple is pouring money into research and development.
ByRob Marvin•
This story originally appeared onPCMag
Apple'sQ3 earningscame with good news and bad news. The tech giant's services segment continues to grow steadily and helped buoy Apple's overall revenue growth, but profits dipped more than 12 percent amid declining iPhone sales.
Though Apple's services, wearables, and accessories products are still showing healthy growth, the iPhone has been its cash cow for a decade. As the smartphone marketstallsandiPhone sales stagnate, Apple needs a breakthrough technological innovation the likes of which we haven't seen much of during the Tim Cook era. And the company knows it.
So it's not surprising that Apple spent a higher percentage of its total sales revenue in Q3 on research and development than it had in any quarter since before the launch of the iPhone. The companyspent $4.26 billion on R&D in Q3, or 7.9 percent of its total sales. Overall, Apple has allotted 6.2 percent of its 2019 sales revenue to R&D, its highest percentage since 2003.
Over the past decade, Apple's yearly R&D spending has risen from $1 billion in 2009 to a projection ofmore than $13 millionin 2019. As for where all that money is going, the company has invested in AI, autonomous cars,augmented reality, biometrics, and plenty more we may never know about unless a product is unveiled.
In the meantime, Apple is quadrupling down on its services business. The growing revenue umbrella includesiCloudandApple Musicsubscriptions, App Store and iTunes sales and commissions, Apple Pay fees, and newly announced services such asApple News+and Apple TV Channels.
In Q3, Apple's services revenue accounted for 21 percent of total sales, reaching a new high of $11.5 billion, up only incrementally from last quarter but 12 percent year over year. This quarter is also the first time iPhone sales dipped below 50 percent of Apple's total revenue.
There's a reason Apple and other tech powerhouses are bolstering their cloud-based services portfolios. Theprofit margins are extremely high, and services carry recurring monthly subscription costs, providing consistent, growing revenue -- as opposed to a consumer buying a device every few years.
Apple's services revenue will only grow in the next year or more as its biggest bets enter the market. TheApple Cardlaunches this month, the company'sApple TV+streaming service will debut sometime this fall for an unspecified cost, andApple Arcade库比蒂诺的马5 g云野孩g industry, competing against Google Stadia, Microsoft xCloud, and others.
Who knows whether Apple will surprise us again with a game-changing tech product on the scale of the iPhone? But while the company continues to pour more money into R&D, its services business is slowly turning Apple into not just a device- and software-maker but also amedia and entertainment giant,菲南cial services provider, a gaming platform, and beyond.