Comparing the Research and Development Expenses of Amazon and Microsoft
Amazon and Microsoft are two leading players in the technology industry. The tech industry is seeing higher competition in recent years which is driving operating expenses for the businesses higher. The research and development expenses of these companies now form a sizeable part of their overall operating expenses.
While Amazon is the largest R&D spender in the entire industry, followed by Alphabet, the parent company of Google, Microsoft’s spending on research and development has been comparatively lower. However, both Amazon and Microsoft have continued to grow their revenue from cloud based services. AWS accounted for more than 12% of the net revenue of Amazon in 2019.
The table below shows the net spending by each brand on research and development during the past seven years.
| Year | Amazon R&D Expenses ($Mn) | Microsoft R&D Expenses ($mn) |
|---|---|---|
| 2023 | $85,622 | $27,195 |
| 2022 | $73,213 | $24,512 |
| 2021 | $56,052 | $20,716 |
| 2020 | $42,740 | $19,269 |
| 2019 | $35,931 | $16,876 |
| 2018 | $28,837 | $14,726 |
| 2017 | $22,620 | $13,037 |
| 2016 | $16,085 | $11,988 |
| 2015 | $12,540 | $12,046 |
In fiscal 2023, Amazon spent more than thrice Microsoft on research and development. The ecommerce giant spent $85,622 million on research and development in 2023 compared to $73,213 million in 2022. Microsoft, on the other hand, spent only $27,195 million on research and development in 2023 compared to $24,512 million in 2022.
The research and development expenses of Amazon have grown at a very fast rate since 2015 when its R&D expenses were close to that of Microsoft. In 2019, its R&D expenses grew close to treble what it had spent in 2015. However, Microsoft’s R&D spending has grown comparatively slower and remained nearly stagnant compared to Amazon. Microsoft has seen only a 40% growth in its R&D expenses from 2015 to 2019.
In 2019, the research and development expenses of Amazon were around $36 billion compared to $16.9 billion of Microsoft. Amazon’s R&D expenses were more than double that of Microsoft in 2019.
The difference between Amazon’s R&D spending and that of the other top spenders in the industry has kept growing. In 2021, while Amazon spent $56.052 billion on research and development, Microsoft spent only $20.716 billion. Alphabet, the parent company of Google spent $31.562 billion on R&D in 2021. Amazon’s R&D spending has soared faster in recent years and so have its net sales. Its net sales in 2021 remained $ 469.822 billion compared to $386.064 billion in 2020.
About Amazon:
Amazon (NASDAQ: AMZN) is the largest ecommerce brand as well as one of the leading cloud services player and a leading competitor of Microsoft and Google in the cloud industry. The company was founded in 1994 and has seen enormous growth over the last seven years. It has greatly extended its range of cloud based services. Amazon has its headquarters in Seattle, Washington, United States. The CEO of Amazon is Jeff Bezos. Amazon Web Services (AWS) is the cloud services platform of Amazon. The ecommerce giant is also the largest R&D spender in the entire industry. The company has divided its business into three main segments that include Amazon North America, Amazon International and AWS.
About Microsoft:
Microsoft is a leading player in the computing and cloud industry which has seen enormous growth during recent years led by Satya Nadella. Microsoft Chairman Bill Gates stepped down from his position to focus on his philanthropic activities.
The company was founded in 1975. It has its headquarters in Redmund, Washington, United States. It has experienced sharp growth in its revenue from the Cloud based services. Intelligent Cloud revenue of the company in 2019 reached around $39 billion, yoy growth of 21%. Microsoft Azure experienced revenue growth of around 72% in 2019 compared to the previous year. Microsoft has acquired a very large number of businesses over time.