Skip to Content

Analyst Says Apple Is ‘Building a New Company’

Apple is expected to spend considerably more on research and development this year and next, but why?

Above Avalon’s Neil Cybart, a longtime financial analyst, Apple-tracker, and one of the more accurate predictors on the company’s earnings, has released an in-depth investigation into the company’s research and development efforts. His findings show that Apple (AAPL) is ramping up its R&D spending at a rapid rate, suggesting that in just a few years, “we are no longer going to refer to Apple as the iPhone company.”

Cybart dug through Apple’s financials to look back at how the company has invested in research and development over the years. He found that Apple spent more than $4 billion on it in 2013 and then $6 billion in 2014. By 2015, the R&D costs had risen to $8 billion. Now, he believes that Apple is on track to spend more than $10 billion this year on research and development in 2016 and more than $12 billion next year.

“This is a remarkable feat considering that Apple was spending a little over $3 billion per year on R&D just four years ago,” he wrote.

The ramp up in research and development—an unprecedented one when compared to its expenditures dating all the way back to 1996—suggest something big might be up at Apple, Cybart argues. While he acknowledged that it’s possible the increasing spending is due to a broader product line or Apple could try to get into more product categories, he believes the most likely reason is that Apple wants to turn into a different kind of company.

Get Data Sheet, Fortune’s technology newsletter.

“Apple is ramping up R&D because they have a few big bets that require a massive increase in investment,” Cybart writes. “The two most logical areas for these bets are wearables and personal transport initiatives. In both cases, Apple is moving well beyond its comfort zone of selling pieces of glass that can be held in one’s hand. Instead, Apple is literally building a new company with additional capabilities and strengths.”

Apple did not immediately respond to a request for comment.

Cybart’s comments come as rumors continue to pile up that the company is working on a electric car. Although Apple itself has not said for sure that it’s planning to a car, the company has hinted at such plans and made strategic hires in that market. Tesla (TSLA) CEO Elon Musk says Apple’s car ambitions are an “open secret” in the industry.

Meanwhile, Apple seems committed to the idea that its wearable, Apple Watch, could be the leading device for what is expected to be a booming industry. While Apple has yet to share sales figures on its wearable, most analysts believe the company is leading the pack by a wide margin.

The idea that Apple would “pivot,” as Cybart claims, seems rather bold. However, in the company’s last-reported quarter ended March 26, its iPhone business, which takes up the largest chunk of its operation, saw revenue slide 18% year-over-year to $32.9 billion. Meanwhile, Apple’s iPad and Mac sales also fell. In total, Apple’s $50.6 billion in revenue was down 13% year-over-year.

Those issues, coupled with disappointing performance in China, has prompted worry among investors. Meanwhile, Apple CEO Tim Cook has been forced to allay fears, saying that the trouble is only temporary. He has also promised big things for the future, but won’t say exactly what they are. He has even pitched the idea of possibly spending more than Apple ever has on a major acquisition.

Simply put, major changes could be afoot.

For Cybart, however, the R&D expenditures make the prospect of those major changes seem real. He argues that the company will indeed get into the car business, and all that’s required to guarantee that prediction is looking at how it’s spending money.

“Apple is not spending $10 billion on R&D just to come up with new Watch bands, larger iPads, or a video streaming service,” he wrote on his blog. “Instead, Apple is planning on something much bigger: a pivot into the automobile industry.”

Cybart added that by pivot, he means that Apple will take what it has learned from other markets, like Macs and iPhones, and use it to its advantage in cars.

“Apple is designed to move from product to product, industry to industry,” Cybart said of the company’s organizational structure. “We see the company do just that by entering the smartphone market, followed by the wearables market and soon, the auto market.”

Given all the data and the expenditures, Cybart says that Apple’s chances of selling its own electric car are “80%.” Ultimately, he says, while the iPhone will remain important to Apple, it will eventually be less important to the company.

“Apple wants to move beyond the iPhone,” he predicts.

Correction (May 12, 2:05 pm): An earlier version of this story incorrectly calculated the rise in Apple’s research and development spending between 2013 and 2014. The language has been fixed.