Engineering and R&D Pulse 2026 by Capgemini Report Summary & Insights

The Engineering and R&D Pulse 2026 report highlights a critical period of transformation for global engineering and R&D functions. Informed by a survey of 1,500 global executives, the report reveals that organizations are facing intense pressure to accelerate innovation while simultaneously reducing costs to remain competitive against emerging market players and startups. While core engineering metrics such as costs and development timelines have trended negatively over the past three years, leaders are increasingly looking toward emerging technologies, particularly Artificial Intelligence (AI) and diversified outsourcing models to regain agility and drive efficiency. Let’s check out some key insights from this report.

Key Insights:

• 44% of organizations believe they risk losing significant market share if they do not accelerate innovation within the next five years.
• 48% of executives state they must significantly reduce costs to remain competitive.
• On average, executives believe they need to reduce costs by 10% over the next two to three years.
• Design and development time must be reduced by 9% to stay competitive.
• Production ramp-up time requires an 8% reduction over the next few years.
• 78% of respondents reported that their costs have increased over the last three years.
• Over 25% of those reporting cost increases saw them rise by more than 15%.
• 48% of organizations have seen an increase in design and development timelines over the past three years.
• Less than 1/3 of executives believe their organizations are prepared for geopolitical uncertainty.
• Less than 1/3 feel prepared for supply chain disruptions.
• Less than 1/3 believe they are adequately prepared to address talent shortages.
• 63% of executives view emerging technologies and digital innovation as primary enablers of change.
• 81% of organizations in China prioritize digital innovation, compared to 73% in the US and 60% in Europe.
• Over 75% of executives expect AI to enhance outcomes (speed, productivity, cost) by 20-50% in the next two to three years.
• 84% of organizations plan to increase their investment in AI for engineering and R&D.
• China and Japan show the strongest AI momentum, with 92% of organizations in both countries planning to increase investment.
• Only 15% of executives believe AI can fully replace the problem-solving and creativity of human engineers.
• China currently holds approximately 67% of the global electric vehicle (EV) market share.
• China’s share of batteries sold globally exceeds 75%.
• China accounts for over 80% of all manufacturing stages for solar panels.
• In the aerospace industry, supply chain issues and labor shortages have created backlogs that could take over 13 years to clear.
• Some estimates suggest 1 in 3 engineering roles will remain unfilled annually through 2030.
• Global engineering and R&D spend in 2024 was estimated at $1.52–$1.53 trillion.
• Approximately 5% of the global engineering and R&D budget is currently allocated to outsourcing.
• 72% of organizations still use the traditional “Time and Materials” (T&M) outsourcing model.
• Organizations currently allocate an average of 7% of their engineering budgets to AI-related initiatives.
• 68% of organizations plan to increase sustainability-related investments in engineering and R&D over the next 12–18 months.
• 47% of European respondents cite regulatory and compliance challenges as a major barrier to efficiency, compared to 37% in the US.

Conclusion

The report concludes that traditional engineering strategies are no longer sufficient in an era defined by rapid technological shifts and global instability. To succeed, organizations must move beyond pilots to scale AI through a structured approach, transform their operations for greater flexibility, and broaden access to global talent. Future market leadership will belong to those who can effectively orchestrate a hybrid human-AI workforce and leverage a trusted ecosystem of partners to drive outcome-based innovation.

You can check out the full report here.