Apple (NASDAQ:AAPL) is one of the most innovative companies on the planet, and its ballooning research and development budget reflects the cost of that innovation. The company has more than tripled its R&D spending since 2010.
But while Apple has invested $7.1 billion in R&D over the past 12 months, several tech companies are shelling out even more cash. Let's look at what these big spenders are working on.
Samsung: $12.6 billion
As Samsung (NASDAQOTH: SSNLF) fights off growing competition to its huge smartphone and tablet business, the company is spending heavily to develop the hottest new technology and products. Over the past 12 months, R&D expenses amounted to $12.6 billion.
Most of that spending goes toward new products like smartphones, tablets, TVs, and just about anything with an "on" button. The company runs a chip foundry, so it needs to invest in new processes to remain competitive in that space. It also makes displays and cameras for its own products, as well as those of its competitors.
As hardware sales struggle, Samsung has no choice but to open its wallet if the company wants to maintain its lofty revenue totals.
Microsoft: $12.1 billion
Microsoft (NASDAQ:MSFT) racked up a total of $12.1 billion in R&D expenses over the past 12 months. The company continues to invest in its Windows operating system, but it has actually reduced investments in that area relative to previous years.
Instead, Microsoft is focusing on its transition to the mobile-first and cloud-first world. To that end, the company is investing in mobile hardware, including handsets and tablets, apps, and cloud services. With a growing portion of its revenue coming from hardware and commercial cloud and enterprise services, this new focus looks to be paying off for the company.
Intel: $11.7 billion
By its nature, Intel (NASDAQ:INTC) is an R&D company. It spent $11.7 billion over the past 12 months developing the next generation of computer processors, and its work is never finished. There is always room for improvement -- faster, smaller, more efficient technology.
The decline in the PC market has hit Intel hard, as it still generates 60% of its revenue from PCs. As a result, Intel has shifted some of its attention to the server business, while competing intensely for every piece of the PC market.
The upcoming Skylake release should help the company maintain its lead in PC chips. Its new Xeon server processors may feature 24 cores on 14 nanometer architecture, and leaks of its Purley server platform indicate that it is making big advances in its server business.
Google: $10.5 billion
Google (NASDAQ:GOOG) (NASDAQ:GOOGL) is hard at work on all sorts of different projects, from self-driving cars to Internet-carrying weather balloons. It is no surprise that its R&D expense has also ballooned to $10.5 billion for the past year.
Most of the R&D budget goes toward improvements in its search algorithm, artificial-intelligence capabilities, and content delivery -- basically, anything that makes it easier to understand the content on the Web and the people viewing that content. The company is also developing its mobile operating system and expanding the feature set to better compete with Apple.
With its hand in just about everything related to technology, Google has an R&D budget that is sure to continue expanding.
Amazon: $10 billion
While technically a retailer, Amazon.com (NASDAQ:AMZN) is spending some serious money on technology research and development. Over the past 12 months, that line item has reached $10 billion.
This spending goes mostly toward its cloud infrastructure, which Amazon uses for its own services, such as the online store and Prime Instant Video. However, it also rents out space to other businesses. On top of that, Amazon continues to develop its Kindle line of e-readers and tablets, as well as other hardware endeavors such as the Fire smartphone, Fire TV, and the Echo.
This massive R&D budget makes it more of a competitor with Google and Microsoft than with other retailers, and the continued growth in its Amazon Web Services business requires spending in line with those competitors.
The sweet spot
High R&D spend is often a good indicator that a company is dedicated to innovation and willing to pay to keep an edge over the competition. That leads to increases in revenue and earnings, which generally results in a rising stock price.
However, not all R&D spend is created equal. Too much, and it can deteriorate shareholder value with weaker returns on their investments. Interestingly enough, a study from Bernstein Research found that tech companies spending more than 18% of revenue on R&D tend to underperform the market, while those that spend less outperform. Despite the high R&D budgets of all the companies we have discussed, just one spent more than 18% of revenue: Intel.