Many top market capitalization companies are information technology (IT) firms, including Apple, Google, Microsoft, and Facebook, each of which is valued at more than $300 billion. Facebook is less than 10 years old and is one of the top 10 companies in the world in terms of market capitalization. However, technologies change rapidly; website revenue—which once grew at a brisk rate—has slowed down, while mobile technology growth is increasing and technology trends are shifting toward cloud hosting and big data analytics. IT companies that have increased their R&D spending remain leaders throughout periods of technology change. Companies such as Facebook and Google have doubled and tripled their profits, respectively over` the past decade. In this dynamic environment, analysts play a critical role in evaluating IT company financial statements and estimating company sales and earnings per share (EPS). This study examines how changes in R&D spending are related to analysts’ sales and earnings estimate revisions. An analysis of data over a 20-year period shows that analysts typically revise their sales estimates based on changes in a company’s R&D expenditures. The correlation between analyst earnings estimates and R&D expenditures, however, varies based on company size and industry within the IT sector. Analysts play a particularly important role in small companies, where the correlation between R&D and sales changes is not as high as in large companies. Analysts are thus critical to the functioning of capital markets in the IT sector.