Apple CEO Tim Cook gestures as he departs after a reception with business leaders and the US president on the sidelines of the World Economic Forum Annual Meeting in Davos, January 21, 2026.
Fabrice Coffrini | AFP | Getty Images
For the first time in at least 30 years, apple The company spends more than 10 cents of every dollar it makes on research and development, one of the strongest signs that the iPhone maker is pouring money into its artificial intelligence ambitions.
Apple’s research and development spending reached 10.3% of sales in the March quarter, up from 7.6% in the previous quarter and 9% a year earlier. Sales also rose 17%, the highest growth rate in a quarter since 2021, while research and development grew twice as fast, rising nearly 34% year-over-year.
As CEO Tim Cook prepares to step down after 15 years at the helm, the company is finally putting the focus on AI that investors have been clamoring for since OpenAI sparked a generative AI boom in late 2022. Gene Munster, managing partner at Deepwater Asset Management, said Apple’s push moves the company closer to becoming a hyperscaler, pointing to overall gains. google, microsoft, Meta and Amazonthe average year-over-year increase in R&D this quarter was 29%
“Apple is catching up with other big tech companies in terms of AI research and development,” Munster said. “This shows that Apple is concerned about new AI products.”
The main talking points during Apple’s earnings season, which last week reported results that beat analysts’ expectations and boosted revenue estimates, centered on a global memory shortage caused by surging demand for iPhones and Macs and insatiable demand for AI infrastructure.
But the increased research and development funding has caught the attention of Cook, who is expected to hand over the top job to longtime hardware chief John Tarnas in September.
“We’re obviously investing more,” Cook said on the call. He noted that research and development is “much faster than the company,” and that Apple is “investing in products and services.”
Bernstein analysts cautioned against the rise in a note published Sunday, noting that the increase from December to March is evidence that Apple is pursuing AI opportunities, with updates to Siri and Apple Intelligence confirmed to be scheduled for later this year.
Bank of America analysts said in a note that they expect research and development as a percentage of sales to remain above 10% in the June quarter, but decline slightly in the second half of the fiscal year. morgan stanley‘s model also shows that the company’s R&D will increase sharply in FY2026.
Apple’s research and development spending as a percentage of its revenue has been in the low to mid-single digits for most of the past two decades, but has been slowly increasing in recent years. The recent increase is reminiscent of the early 2000s, when the company was recovering from the post-9/11 dot-com crash and slump in spending.
In late 2001, Apple introduced the first iPod. This product revolutionized the music industry and helped turn the company into a leading consumer device leader. Apple’s research and development share of sales jumped from 5% to 8% in 2001. This number remained until 2003, when the company rolled out iTunes Music Story and really took off.
Gil Luria, an analyst at DA Davidson, said the early iPod era was “a nice parallel because we were introducing a completely new hardware platform and reinventing the form factor.”
However, he noted that the magnitude of the opportunity today is on a completely different level. In 2003, Apple spent $471 million on research and development and generated revenue of $6.21 billion. The company is now making even more money per week.
“Spending 10% of sales is much more than it was back then, mainly because it requires execution on a much larger scale,” said Luria, who recommends owning Apple stock. “A hit with the iPod sold millions of units, but a hit with glasses or AI pins could sell hundreds of millions of units.”
Apple hasn’t mentioned any new types of devices it might introduce, but Bloomberg reported earlier this year that the company is fast-tracking development of three upcoming AI wearables built around Siri: smart glasses, a pendant, and AirPods with cameras.
Capital investment gap remains
One area where Apple lags particularly behind its tech industry peers is in capital spending. Google, Amazon, Meta, and Microsoft collectively spend hundreds of billions of dollars a year in capital investment to build massive data centers packed with AI chips and systems.
Apple spent just $4.3 billion in capital spending over the past two quarters, down from about $6 billion in the same period last year. The company relies heavily on Google, and in January announced that the search giant’s Gemini technology would enhance its AI capabilities, including upcoming Siri upgrades.
When asked during an earnings call how Apple is balancing its own AI model development and collaboration with Google, Cook said, “Our collaboration with Google is progressing well.”
“We’re happy with where we are and we’re happy with the work we’re doing on our own,” Cook said, without elaborating.
Apple CFO Kevan Parekh signaled a change in investment plans, adding that the company no longer aims to be “net cash neutral” and “will independently evaluate cash and debt.”
Nancy Tengler, CEO of Laffer Tengler Investments, said the combination of stronger guidance, increased research and development and Apple’s decision to change its approach to cash makes it feel like “something is happening.”
“Analysts tried every avenue to ask what they were working on,” Tengler said. “In typical Apple fashion, they didn’t answer. There’s a new Siri coming this year, but it looks like they have more in the works.”
Asinco founder Horace Dediou agreed that the big question is where that money goes. He said much of the increase is likely related to experimentation with talent, teams, training and modeling, rather than the large-scale data center deployments being driven by hyperscalers. But he also said Apple is focusing on overall hardware, investing in silicon, optics, batteries, materials, sensors and small form factors.
“AI is an obvious candidate, but R&D is not a capital investment,” Dediu said.
Apple has not commented on this matter.
Oppenheimer analysts focused on where R&D funding goes, pointing to Apple’s efforts in on-device AI, private cloud computing, agent AI running on custom chips, privacy, and other areas that require sustained engineering investment.
This aligns with Apple’s bet that AI is moving from the cloud to devices, and that the company is in the best position to incorporate it into the iPhone, Mac, and iPad experiences. Oppenheimer analysts said investment appears to be ramping up ahead of clear profitability.
Investors can now turn their attention to Apple’s Worldwide Developers Conference (WWDC) in June. Apple typically announces a number of upcoming services and features there. Meanwhile, in the fall, the company is expected to unveil a foldable device that will significantly change the iPhone form factor for the first time in years. This is alongside Apple’s anticipated AI-enabled Siri.
Behind the scenes, Apple has been building its own AI models, developing silicon for on-device inference, and expanding the infrastructure needed to support Apple Intelligence. Investors want to know how quickly that spend turns into product cycles.
Of course Mr. Cook didn’t say that.
“I haven’t mentioned any future roadmap,” he said in a phone conversation.
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