Deciphering ‘Big Tech’ R&D spend via the numbers

Grey Data - Big Tech

With this first article, as part of our new free to access data-based section, we have chosen to look at the top-level numbers of ‘Big Tech’ businesses, namely, Amazon, Apple, Alphabet, Microsoft and Facebook; and then compare the R&D spends each of the companies.

Firstly, lets look at the current market cap, number of employees and top-level revenue numbers for these top five players:

Current Market Cap

The numbers below are correct as of the 15th of June 2021.

 

Big Tech Revenues (2016-2020)

Revenue ($millions) 2020 2019 2018 2017 2016
Facebook 85,965 70,697 55,838 40,653 27,638
Alphabet 182,350 161,402 136,958 111,024 89,733
Microsoft 143,015 125,502 110,175 96,016 84,695
Apple 274,150 259,968 265,809 228,572 214,226
Amazon 386,064 280,522 232,887 177,866 135,987

Number of Employees

The total number of employees for each company, as reported per end of 2020.

 

Now, lets take a brief look at the Cost of Goods Sold (COGS) for each of these businesses.

As a cost of doing business, COGS is included on any corporates income statement. Knowing the cost of goods sold helps us to better estimate each players net income, or bottom line. For example, if the COGS number increases, then the net income number will reflect that, by decreasing. While this is good for income tax purposes, the business will have less profit for its shareholders. As a result, most businesses within the tech sector attempt to keep their the COGS number low so that its net profit will be optimised.

Big Tech COGS (2016-2020)

COGS ($millions) 2020 2019 2018 2017 2016
Facebook 16,692 12,770 9,355 5,454 3,789
Alphabet 84,732 71,896 59,549 45,583 35,138
Microsoft 46,078 42,910 38,970 34,620 32,780
Apple 170,143 162,264 163,826 141,702 131,506
Amazon 233,307 165,536 139,156 111,934 88,265

As you can imagine, the EBITDA numbers for these companies are astronomical. Amongst the very best in the world, with Apple and Microsoft leading the way.

Big Tech EBITDA (2016-2020)

EBITDA ($millions) 2020 2019 2018 2017 2016
Facebook 39,533 34,727 29,228 23,228 14,769
Alphabet 54,744 47,254 40,566 35,966 29,321
Microsoft 65,259 54,218 44,827 36,631 26,614
Apple 76,395 74,542 80,342 69,428 68,281
Amazon 39,572 30,457 25,330 13,517 10,406

Now lets take a look at the R&D spend numbers for each of constituent businesses. These return quite surprising results, especially when you view the percentage of the same years revenue as R&D. Whilst that is perhaps not the ideal comparison from a analysis basis, I think when trying to measure and prognosticate future performance of the business within the marketplace, it is worthy. It also explains much about the product development activities and in-turn where the businesses are with lifecycle of this fast moving sector.

Big Tech R&D Spend (2016-2020)

R&D Spend ($millions) 2020 2019 2018 2017 2016
Facebook 18,447 13,600 10,273 7,754 5,919
Alphabet 27,573 26,018 21,419 16,625 13,948
Microsoft 19,269 16,876 14,726 13,037 11,988
Apple 18,752 16,217 14,236 11,581 10,045
Amazon 42,740 35,931 28,837 22,620 16,085

Big Tech R&D Spend as a Percentage of Revenue (2016-2020)

R&D Spend (%) 2020 2019 2018 2017 2016 5 Year Avg
Facebook 21.46 19.24 18.40 19.07 21.40 19.91
Alphabet 15.12 16.12 15.64 14.97 15.54 15.48
Microsoft 13.47 13.45 13.37 13.58 14.15 13.60
Apple 6.84 6.24 5.36 5.07 4.69 5.64
Amazon 11.07 12.81 12.38 12.72 11.83 12.16

Interesting, the average percentage of revenue ‘Big Tech’ spend on R&D over the past 5 years works out at 13.36% if you include Apple with its hardware product bias, or 15.29% if you stick to primarily software vendors.

In future articles we will look at these numbers in comparison to other high revenue platform players many consider tier two, in order to see how they compare. For example Twitter, which in 2020 spent 23.5% of its same year revenue on R&D in order to better compete, or Salesforce which spent 16.93% of same year revenue on R&D activity.

Remember, you can purchase thousands of competitive intelligence reports on Platform Executive, including both corporate and dotcom SWOT’s for Amazon, Microsoft, Apple, Facebook and Alphabet. Products are produced on-demand, so as to include all the most recent developments in this fast-moving sector. Prices start from just $179.

Thanks for reading the article. The team at Platform Executive hope you have enjoyed this data-based content. Automatic translation from English to a growing list of languages via Google AI Cloud Translation. Original reporting in English by Rob Phillips.

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