Prompt caching breakdown: How it reduces token spend (2026)

Every single API call to a large language model (LLM) reprocesses your whole prompt from scratch. That prompt usually includes system instructions, tool definitions and your full chat history. In most production apps, most of that content stays identical from one request to the next, yet without prompt caching the model works through that repeated prefix before it writes a single new word, and you pay full price for it every time.