How Does Apple Spend Its Money?
Apple’s (NASDAQ: AAPL) total expenses have trended steadily higher from around $170 billion in 2016 to about $205 billion in 2019 (FY ends September) As a percentage of revenues, expenses have remained roughly flat at about 79%. Below, we take a look at the key drivers of Apple’s expenses and net margins.
View our interactive dashboard analysis on Apple’s Expenses: How Does Apple Spend Its Money?
Total Expenses were $205 Billion, with Operating Expenses of $196 Billion, and $10 Billion in Tax Expenses
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Breakdown of Apple’s Total Expenses in 2019 :
Total = $205 Bil
- Operating Expenses = $196 Bil
- Provision for income taxes = $10 Bil
- Non-operating (income)/expense = – $2 Bil
Apple’s Net Income Margins have remained roughly flat at 21.2% between 2016 and 2019
- While Apple’s Income Margin has remained roughly flat at 21.2% between 2016 and 2019, it increased to around 22.4% in 2018, partly due to the U.S. tax reforms.
Apple’s Total Expenses Have Increased From $170 Billion in 2016 to $205 Billion in 2019
For 2020, we expect total expenses to stand at $218 billion, which comprises of
- Operating Expenses: $208 billion
- Non-Operating Expense (Income): -$1.9 billion
- Income Taxes: $12.2 billion
Below, we take a look at how the company’s key expense components have trended and the key reasons for the change.
1. Operating Expenses: Operating Expenses have increased from $156 billion in 2016 to $196 billion in 2019, driven by (A) $30 Billion Increase In Cost Of Sales (B) $ 6 Billion Increase In R&D Spending, and (C) $ 4 Billion Increase In SG&A Expenses.
(A) Cost of Sales has increased from $131 Bil in 2016 to $162 Bil in 2019, driven by higher costs of memory and other propriety components. As a % of Revenues, Cost of Sales has increased from 61% to 62% over the same period.
(B) R&D Expenses increased from $10 billion in 2016 to about $16.2 billion in 2019 as Apple is likely to be investing in more long-term projects, which may not immediately impact revenues. As a % of Revenue, R&D expenses have grown from 4.7% in 2016 to 6.2% in 2019.
(C) SG&A Expenses have increased from $14.2 billion in 2016 to $18.2 billion in 2019. As a % of Revenues, SG&A has increased from 6.6% in 2016 to 7% in 2019.
2. Non-Operating Income: Apple’s Non-Operating Income has increased from $1.3 billion in 2016 to $1.8 billion in 2019 driven by higher Interest and Dividend Income from its investments, although it has been partly offset by higher interest expenses relating to more long-term debt.
3. Income Tax Expense: Apple’s Provision for Income Taxes has declined from $15.7 billion in 2016 to about $10.5 billion in 2019, driven by U.S. Federal Income Tax Reforms, with the Effective Tax rate declining from 26% to 16% between 2016 and 2019. However, we expect the tax rate to increase to about 18% from 2020 onward.
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