The arrival of Apple’s Vision Pro, a highly anticipated “spatial computing” device, has not quite been the catalyst investors were hoping for. Instead, Apple finds itself navigating regulatory challenges reminiscent of its megatech counterparts. In the wake of a hefty $2 billion fine from the European Commission, further scrutiny over anticompetitive practices looms over the iPhone giant.

These regulatory entanglements, combined with a slowdown in revenue growth, have led Apple’s stock to trail market benchmarks in the past year.

Data by YCharts.

Facing these headwinds, Apple has embarked on trimming secretive expenditures that Meta Platforms, a tech behemoth, has surprisingly been open about: research and development (R&D).

Inspired by Meta, Apple Shifts Gears

Leaked internal communications suggest that Apple is discontinuing two major R&D initiatives that have long fueled speculation among Apple aficionados. Project Titan, envisioned as Apple’s foray into self-driving electric cars, is being shelved. Similarly, the extensive work on microLED technology for products like the Apple Watch is being scrapped.

While the fate of Apple’s 5G modem project remains unknown, recent multiyear agreements with Broadcom and Qualcomm suggest a possible wind-down of this endeavor as well.

After two decades of increasing R&D spending since the debut of the iPhone in 2007, Apple appears to be entering a phase of financial prudence. Interestingly, R&D expenses actually decreased in the past year. Meanwhile, Meta continues to benefit from CEO Mark Zuckerberg’s efficiency drive, though its R&D outlay is still on the rise.

Data by YCharts.

While Apple’s specific project allocations remain a matter of speculation, Meta’s transparency stands out. Renamed from Facebook in 2021, Meta rebranded to underscore the heavy investment in Reality Labs (RL), responsible for VR headsets like Apple’s Vision Pro. RL incurred a substantial operating loss of $16.1 billion in 2023, with the bulk of Meta’s R&D spending likely dedicated to data centers and AI, heavily relying on Nvidia hardware and related projects.

Apple seems poised to follow suit, trimming expenses to bolster profit margins. Insights on future projects may surface from CEO Tim Cook and team.

Apple’s Resilience and Return Potential

Despite the cost-cutting signals, Apple’s return on invested capital (ROIC) portrays a different narrative – showcasing stellar profitability from past investments.

Data by YCharts.

With ROIC exceeding 50%, Apple’s track record in innovation and product commercialization has been exceptional. While past performance doesn’t guarantee future success, Apple’s expansive customer base provides ample opportunities to introduce new products and services, potentially boosting earnings.

As 2024 progresses and news of Apple’s cost-cutting measures circulates, investors may pin their hopes for a stock resurgence on traditional earnings growth – a strategy that fueled Meta’s recent revival.

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Randi Zuckerberg, former market development director and spokesperson for Facebook, and sister to Meta Platforms CEO Mark Zuckerberg, sits on The Motley Fool’s board of directors. Nicholas Rossolillo and his clients hold positions in Apple, Broadcom, Meta Platforms, Nvidia, and Qualcomm. The Motley Fool has positions in and recommends Apple, Meta Platforms, Nvidia, and Qualcomm, and also recommends Broadcom. The Motley Fool maintains a disclosure policy.

The views expressed herein are those of the author and do not necessarily reflect the opinions of Nasdaq, Inc.