U.S. tech giant Apple (AAPL) has spent over 10% of its revenue on Research and Development (R&D) in Q1 2026 for the first time in 30 years. The sudden increase comes as Apple develops its AI capabilities to boost its chances of competing with other big tech firms in the AI space.
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Apple’s latest financial reports showed that its revenue rose by 17% compared to the previous year. However, its R&D spending increased at nearly twice the rate, reaching up to 34%. This shows the company is prioritizing the growth of its AI-related products.
Apple CEO Tim Cook confirmed the shift during the firm’s earnings call with analysts. He said that the company is “clearly investing more” in R&D, as it is growing much faster than the overall business performance.
Therefore, analysts believe that Apple may be responding to competitive pressure from other AI firms. They also claimed that the massive AI boom sparked by OpenAI, the creator of ChatGPT, in 2022 may have been responsible for the shift.
According to Gene Munster of Deepwater, Apple is now closing the gap with major tech players like Google (GOOGL), Microsoft (MSFT), Meta Platforms (META), and Amazon (AMZN). He claimed that Apple’s AI spending, which is higher than the 29% average growth in the above companies’ R&D budgets, is a sign that they are in a hurry to launch new AI products.
At the same time, other analysts, including teams from Bank of America (BAC) and Morgan Stanley (MS), also expect Apple’s R&D spending to remain above 10% in the June quarter and throughout fiscal 2026.
Apple Places Big Bets on AI, Hardware, and Future Products
Apple’s rising R&D budget has been focused on its AI tools. These include updates to its voice assistant, Siri, and Apple Intelligence features. The firm is now prioritizing the use of AI in its devices rather than building large-scale data centers.
In response, analysts said Apple is investing in on-device AI, cloud compute chips, and privacy-focused systems. Horace Dediu, the founder of Asymco, a research firm, added that much of the spending is likely tied to hiring talent, engineering teams, and training AI models. He also said it will be used to make hardware like silicon, sensors, batteries, and other materials.
Notably, Apple’s current investment cycle has been compared to the early 2000s, when it raised R&D spending before launching the iPod. Gil Luria, an analyst at D.A. Davidson, noted that Apple’s opportunity today is much bigger and has more reach than it did back then.
Reports also show that Apple is moving quickly to develop new AI-powered devices. These include smart glasses, a pendant, and AirPods with cameras, all expected to work with Siri. At the same time, the tech giant is building AI systems to support Apple Intelligence.
Even with higher R&D spending, Apple’s AI budget remains lower than that of peers such as Amazon, Meta, Google, and Microsoft, which invest heavily in AI data centers.
Is Apple a Buy, Sell, or Hold?
Wall Street analysts rate Apple (AAPL) a Strong Buy, based on TipRanks consensus data. The stock currently trades around $285 and has an average price target of $312.60 with an upside potential of 8.98%. For more information on this stock’s performance, rating, and price target, visit the TipRanks Stocks Comparison Center.
