Apple spent 10.3% of revenue on research and development in its March quarter, marking its highest R&D share in at least 30 years as the company intensifies AI development, according to CNBC. R&D spending rose nearly 34% year-over-year while revenue increased 17%, according to the company. The company said Siri and Apple Intelligence updates are due later in 2026.
R&D Spending and AI Competition
Analysts said the increase suggests Apple is trying to narrow the gap with bigger AI spenders such as Google and Microsoft. Apple’s capital expenditure over the past two quarters totaled US$4.3 billion, down from about US$6 billion a year earlier.
Google Gemini Partnership
Tim Cook said Apple’s work with Google on Gemini is going well. According to analysts cited in the source, the Google partnership reportedly costs about US$1 billion a year for Gemini licensing. This approach gives Apple access to a leading outside AI model without covering the full cost of building every layer itself, while Apple continues spending on its own models and infrastructure.
Apple is using Private Cloud Compute, its system for AI work on remote servers with privacy protections, for Gemini-based features. According to Apple’s statements cited in the source, the system does not store user data or make it available to Apple, and data is used only to complete requests.
AI Model Strategy
The Google partnership reflects a broader strategy that treats the underlying AI model as a component Apple can swap rather than something it must build entirely from scratch. According to the source analysis, this suggests Apple expects large language models—AI systems trained on vast amounts of text to generate human-like responses—to grow more alike over time and become commodities.
If that strategy plays out, competitive advantage would shift toward user experience, product integration, and privacy, areas where Apple has historically competed well. This flexible approach could also allow Apple to pit AI providers against one another in the future, potentially enabling AI providers to pay for access to Apple’s user base, similar to how Google is estimated to pay Apple about US$20 billion a year to remain the default search provider in Safari.
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