Research and Development Expenses of Microsoft and Google Compared

Comparing the Research and Development Expenses of Microsoft and Google.

Both Microsoft and Google are leading players in the cloud industry. However, compared to Google, Microsoft has been able to grow the range of its cloud services faster. Alphabet (parent company of Google) is also expanding its cloud services fast. The main source of Google's revenue is advertising. It is the market leader in search and digital advertising. Meanwhile Microsoft's revenue from intelligent cloud has grown very fast.

Both the companies invest large sums in research and development to grow their service range and improve their existing services. Amazon is currently the largest spender in terms of research and development followed by Alphabet, the parent company of Google. Microsoft and Apple spend less on research and development.

The table below shows the investment by each of the two giants in research and development over the last seven years.

R&D expenses of Microsoft and Google compared 2017-2021 (in millions)
R&D expenses of Microsoft and Google compared 2017-2021 (in millions)

 

YearGoogle R&D Expenses ($Mn)Microsoft R&D Expenses ($mn)
2021$31,562$20,716
2020$27,573$19,269
2019  $ 26,018$16,876
2018 $ 21,419$14,726
2017 $ 16,625 $13,037
2016 $ 13,948 $11,988
2015 $ 12,282  $12,046

 As you can see from the above table, the research and development expenses of Google have more than doubled during 2015-19 while that of Microsoft have increased only 40%. In 2019, Google spent $26 billion on research and development which was around 21% higher than the previous year when it spent $21.42 billion on research and development. On the other hand, Microsoft spent $16.9 billion on research and development, which was around 15% higher than the previous year. In 2019, Microsoft's research and development expenses increased $2.2 billion or 15%, driven by investments in cloud and artificial intelligence (“AI”) engineering, Gaming, LinkedIn, and GitHub.

2021: In 2021, While Google's research and development expenses have continued to grow fast, that of Microsoft have grown at a slower pace. From 2018 to 2021, the R&D expenses of Microsoft increased only by $5.9 billion, whereas that of Google (Alphabet) increased by more than $10 billion. While Google spent $31.6 billion on research and development in 2021, Microsoft spent $20.7 billion on research and development or around $9.9 billion less than Google. In 2015, the R&D expenses of the two companies were nearly the same but since then Google's have increased at a lot faster rate crossed the $30 billion mark in 2021. Microsoft's research and development expenses have crossed the $20 billion mark for the first time in 2021.

About Microsoft:

Microsoft (NASDAQ: MSFT) 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 recently 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. The company 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 business over time.

About Google:

Google (Parent company Alphabet), the search engine giant relies mainly on digital advertising as its main source of revenue. The company was founded in 1998 by Larry Page and Sergey Brin who have stepped down from the leadership positions and the company (incuding the parent company) is led by Sunder Pichai. Apart from search and advertising as well as social media (YouTube), the company has also brought a large range of cloud computing products for use by individuals and enterprises. The headquarters of Google (Googleplex) are located in Mountain View, California, United States. Apart from its core business which is Google, Alphabet, the parent company also owns several smaller companies which are collectively called other bets.