Learn · Explainer
Research and development (R&D)
What R&D expense covers, why it's charged to profit right away, and how much each company spends.
The short answer
Research and development expense is what a company spends on creating new products and improving existing ones: engineers' pay, labs, testing and clinical trials. Under US accounting rules most of it is expensed as it's spent, so it lowers profit right away even though the payoff comes later. 58 of the covered companies report an R&D line; the median is 8.2% of revenue, and Meta has the highest share at 28.5%.
Why it's expensed
A factory or a data center goes on the balance sheet and is depreciated over its life. Research usually doesn't: its future benefit is too uncertain to record as an asset, so it's charged to expense in the year it's spent. That makes heavy R&D spenders look less profitable in the short run than their spending might suggest, and it's one reason profit margins differ so much between industries. Software development costs are a partial exception: some can be capitalized once a product is technically feasible.
Where it shows up
Most technology, pharmaceutical and industrial companies show R&D as its own operating expense line. Others, such as many retailers and banks, don't report one. The MD&A section usually explains what drove the change in spending, and pharmaceutical companies describe their drug pipelines in Item 1.
In dollars, Alphabet spent the most: $61.1B in fiscal 2025.
Reading R&D figures
- Compare companies within an industry. A drug maker spending a fifth of revenue on research and a retailer spending nothing are both normal.
- Look at the trend. A rising share can mean new bets, or revenue falling faster than the budget.
- Check what's included. Stock-based pay for engineers is part of R&D expense, and it's large at many technology companies. Stock-based compensation covers it.
- Acquired research can show up differently, as acquired in-process R&D charges or intangible assets.
Every company that reports it
Latest fiscal year from each company's income statement, companies that report an R&D line, sorted by share of revenue.
Common questions
What counts as research and development expense?
Costs of developing new products or processes and improving existing ones, such as engineers' and scientists' pay, materials, testing and clinical trials.
Why is R&D expensed instead of capitalized?
Under US GAAP most research and development costs are expensed as incurred, because the future benefit is too uncertain to record as an asset. Some software development costs are an exception.
Which companies spend the most on R&D?
In dollars, Alphabet among the covered companies, with $61.1B in its latest fiscal year. Relative to revenue, Meta, at 28.5%.
Does every company report R&D?
No. Only 58 of the covered companies tag an R&D line. Many retailers, banks and service companies don't report one.
Where is R&D in the income statement?
Usually as an operating expense line between gross profit and operating income.
See it side by side
The same figures for two companies at once, each linked to its 10-K:
Disclosures
- Editor holdings
- The editor holds shares of Tesla (TSLA) and SpaceX in a long-term retirement account. The editor holds no position in any other company named on this page. As of Nov 11, 2026.
- Compensation
- Nobody paid for this page. No affiliate links on this page.
- Sources
- Each company's own SEC filings, linked next to each number.
- Last updated
- Nov 9, 2026
General education, the same for every reader. Not a recommendation to buy, sell or hold any security, and it doesn't consider your situation.
More in Learn and Tools · Methodology & Disclosures explains where every number comes from.