Apple R&D spending jumps to $2.5B in Q2, accounted for 5% of total revenue

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Apple's research and development spending spiked at an all time high of more than $2.5 billion during the second quarter of 2016, with the unusually large $600 million year-over-year jump owing primarily to new hires and related expenses, Apple said in a Securities and Exchange Commission filing.

According to Apple's most recent regulatory filing, a total of $2.51 billion was spent on R&D operations during the three-month period ending in March, a figure up 31 percent from the same time last year. The outlay comes out to 5 percent of Apple's net sales for the quarter, a significant increase for a company that normally commits around 3 percent to R&D activities.

On a six-month basis, R&D costs hit $4.9 billion, or 3.9 percent of net sales for the period, up 29 percent from $3.8 billion and 2.9 percent of net sales in the year ago quarter. As in years past Apple said the spending escalation was fueled by an increase in hires and "related expenses," including compensation and material costs.

CEO Tim Cook during an investor conference call on Tuesday reconfirmed Apple's commitment to research and development, noting the acquisition of 15 companies over the past year whose assets will be rolled into future products and services.

In addition to R&D, Apple listed capital expenditures at $2.8 billion for the first six months of 2016, up $500 million on a sequential basis. Some $2 billion in cash went toward property, plant and equipment costs, down from $3.6 billion spent in the first quarter of fiscal 2016. Of particular interest is a substantial increase in land and building expenses, which now stands at $8.4 billion, up $1.4 billion from the September 2015 quarter.

Last quarter, Apple announced it plans to spend $15 billion over the course of 2016, with moneys going to "product tooling and manufacturing process equipment; data centers; corporate facilities and infrastructure, including information systems hardware, software and enhancements; and retail store facilities."

While the SEC filing did not offer clues as to specific R&D projects, Apple is thought to be pushing hard get its secret automotive offering off the ground. Referred to internally as "Project Titan," the initiative is said to involve over 1,000 employees including a small car lab operating out of in Berlin. Apple was rumored to be courting potential manufacturing partners in Germany, but the company reportedly hit a roadblock recently as talks with BMW and Daimler fell through.

The project is also facing trouble internally. AppleInsider exclusively reported that Apple executives instituted a hiring freeze in January following a sub-par team performance review, just after rumored project lead Steve Zadesky left the company. Titan could be back on track, however, as recent reports note the hires of a former Tesla engineer and prototyping specialists.

 

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