Business R&D expenditure rose by an estimated 6% in 2025 (double the growth rate recorded in 2024) driven increasingly by AI and digital industries, according to new OECD data. For Canadian and U.S. companies investing in innovation, this global acceleration underscores both the competitive urgency of R&D investment and the strategic importance of capturing every dollar of government funding available to support it.
What Does the New OECD R&D Data Tell Us?
The OECD's Short-term Financial Tracker of Business R&D (SwiFTBeRD), which is a real-time tool that monitors public financial disclosures from the world's largest R&D investors, estimates that global business R&D expenditure grew by approximately 6% in 2025. That's nearly twice the 3% growth recorded in 2024, signaling a meaningful acceleration in corporate commitment to innovation.
The growth was not evenly distributed, as AI and digital industries led the charge, continuing a trend that has reshaped the global R&D landscape over the past several years. Meanwhile, a separate OECD analysis of R&D spending across the 38-member OECD area found that inflation-adjusted expenditure grew at 2.6% in 2024 in official GERD terms, with the U.S. posting 3.4% growth and the EU close behind. These are numbers that the SwiFTBeRD tracker's 2025 estimate suggests are now accelerating further.
What this signals for business leaders: The companies investing the most heavily in R&D right now are pulling ahead. For CFOs and CTOs evaluating R&D budget decisions, the data provides clear external validation that innovation investment is increasing globally, and that competitors are likely doing the same.
Which R&D Areas Are Growing Fastest?
Artificial Intelligence and Machine Learning
AI has emerged as the fastest-growing category of business R&D globally. Companies building AI capabilities (which include infrastructure, models, tools, and AI-enabled products) are driving a disproportionate share of the 2025 spending increase. This applies equally to tech companies, financial services, life sciences, and advanced manufacturers embedding AI into their processes and products.
For SR&ED and IRC Section 41 purposes, AI development work is often highly eligible. Activities like training novel models, overcoming technical uncertainty in AI system performance, or developing proprietary algorithms frequently meet the four-part test and the CRA's definition of experimental development.
Software Engineering and Digital Platforms
Software-intensive industries continue to command a large share of R&D spend. OECD data from comparable markets (including Australia's ABS, which tracks similar categories) shows software engineering as one of the largest contributors to business R&D by dollar volume, even as AI draws more attention as the fastest-growing subcategory.
For most technology companies, SaaS businesses, and digital product teams, core development activities qualify for R&D tax credits under both Canadian (SR&ED) and U.S. (IRC Section 41) programs, and often more broadly than teams realize.
Life Sciences and Advanced Manufacturing
Pharma, biotech, medtech, and advanced manufacturers continue to invest heavily in R&D, with these sectors maintaining large shares of total business R&D expenditure across OECD countries. Manufacturing companies tend to underestimate the qualifying breadth of their R&D activities, which includes process improvements, materials development, and prototyping work regularly qualify.
Defence and Deep Tech
Government R&D budget data shows a notable shift toward defence-related R&D, particularly in the EU and Japan. In Canada, the recently launched Defence Innovation Stream (DIS) and ODIS programs create new stacking opportunities for companies developing dual-use or defence-adjacent technologies alongside SR&ED.
Why This Matters for Canadian Innovators
Canada has historically been a top-10 R&D-intensive economy, but the pace of global investment is rising. The good news: the Canadian government has made significant improvements to SR&ED in 2026 that expand the program's reach and value precisely when innovation investment is accelerating globally.
The 2026 SR&ED Enhancements include:
- The expenditure limit doubled to $6M, enabling eligible CCPCs to access up to $2.1M in refundable credits annually
- Capital expenditures reinstated (effective December 16, 2024), covering equipment directly used in R&D
- Enhanced rates extended to eligible Canadian public corporations
- Raised taxable capital phase-out thresholds ($15M–$75M range), keeping more growing companies in the enhanced credit tier
- Pre-Claim Approval (PCA) process, launched April 1, 2026, cutting review timelines from ~180 to ~90 days
Quebec companies also have access to CDAE-IA, Canada's most generous AI-specific tax credit, providing up to 30% on eligible AI development expenditures. This can be a significant complement to SR&ED for teams actively building AI capabilities.
Why This Matters for U.S. Innovators
In the United States, the policy environment has shifted materially in favor of R&D investment. The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, includes Section 174A (restoring immediate domestic R&D expensing that had been disrupted since 2022) and providing retroactive relief for tax years 2022–2024. The July 6, 2026 deadline for eligible small businesses to make retroactive elections is approaching fast.
At the federal level, IRC Section 41 provides a credit of 20% on qualifying research expenses above a base amount (or a simplified alternative credit of 14%). At the state level, companies in California, Texas, Georgia, Pennsylvania, Connecticut, Minnesota, Massachusetts, New Mexico, and other states can stack additional credits on top of the federal benefit, which often recovering 10–20% of qualifying payroll, contractor, and supply costs.
For companies building AI, software, hardware, or new manufacturing processes in the U.S., the current environment represents one of the most favorable policy moments in recent memory to invest in R&D.
How Do You Make Sure You're Capturing Your Full Share?
The OECD data makes one thing clear: businesses globally are treating R&D as a strategic priority, not a discretionary line item. But investing in innovation and claiming the credits that offset the cost of that investment are two different things, and many companies are still doing the first without fully benefiting from the second.
Boast has helped more than 2,000 companies across North America secure over $900M in R&D tax credits. The companies seeing the largest returns aren't always the biggest spenders; they're the ones that understand which activities qualify, how to document them defensibly, and how to stack available programs to maximize their total credit.
The Boast platform combines AI-powered data collection and qualification with in-house R&D tax expertise to give companies a way to participate in the global R&D surge without leaving government funding on the table.
Frequently Asked Questions
The Bottom Line
Global businesses are investing in R&D at the fastest pace in years. The OECD's SwiFTBeRD tracker puts 2025 growth at 6%, led by AI, software, and digital industries. For companies in Canada and the United States, government programs exist specifically to de-risk and fund this kind of investment. The question isn't whether to invest in innovation. It's whether you're capturing the non-dilutive capital available to support it.
