Apple’s R&D spending exceeds 10% of revenue

In Short:
– Apple is investing over 10% of sales in R&D, particularly in AI, reflecting a strong commitment.
– R&D spending grew to 10.3% of revenue, driven by rising demand for iPhones and Macs.

Apple is investing over 10% of its sales into research and development (R&D), marking a significant commitment to artificial intelligence (AI).In the March quarter, R&D spending reached 10.3% of revenue, a significant increase from 7.6% in the previous quarter and 9% a year earlier. Revenue grew by 17%, the fastest quarterly growth since 2021, while R&D rose nearly 34% year-on-year.

AI investments

CEO Tim Cook is increasing AI efforts before his upcoming departure, aligning with investor expectations ignited by the generative AI surge since late 2022.

Analyst Gene Munster stated that Apple is now competitive with major tech firms, as their average R&D increase for this quarter was 29%.

“Apple is catching up to other mega-tech companies for AI,” Munster noted, attributing this increase to a growing urgency for new AI products.

Apple’s earnings report exceeded expectations, highlighting rising demand for iPhones and Macs and concerns about global AI infrastructure needs.

Cook acknowledged the R&D growth, emphasizing that investments in products and services are essential for future development.

Analysts from Bernstein recognized the R&D increase as a sign of Apple pursuing new AI opportunities, hinting at updates for Siri and Apple Intelligence later this year.

Bank of America analysts anticipate R&D spending to remain above 10% for the June quarter before tapering off later in the fiscal year.

Morgan Stanley projects a significant rise in R&D investments going into fiscal 2026.

Historically, R&D spending hovered in the low- to mid-single digits over the past two decades but began rising recently.

The increase echoes trends from the early 2000s when Apple recovered from economic downturns, eventually releasing successful products like the iPod.

Gil Luria from D.A. Davidson compared this period to the early iPod launch, highlighting Apple’s innovative hardware.