Thinking Deeper, Not Longer: Memory-Efficient Test-Time Reasoning with Depth-Recurrent Transformers for Compositional Generalization

Standard Transformers have a fixed computational depth, limiting their ability to generalize to tasks that require variable-depth reasoning. The usual remedy, Chain-of-Thought (CoT), spends tokens to reason, inflating the key--value cache and making latency grow with the step count, so memory becomes the limiting cost when reasoning is served over large query batches. We study a depth-recurrent Transformer that decouples computational depth from parameter count by iterating a shared-weight block, so that each added reasoning step costs flat memory and linear latency, with no token generation. Three ingredients keep the recurrence stable for 20+ thinking steps: a silent thinking objective that supervises only the final output, LayerScale initialization, and an identity-biased gate that opens a gradient highway across steps. We characterize it on three compositional domains with decreasing structural bias: graph reachability (adjacency masking), nested boolean logic (relative positioning), and unstructured relational text (no positional cue). We find a computational frontier: accuracy climbs once the thinking-step count meets the task's complexity, reaching near-perfect performance on the two structured tasks and a lower plateau on unstructured text. How it climbs depends on the structural bias---abruptly from chance on the graph task, gradually on the other two. Depth recurrence extrapolates beyond the training range: it succeeds on the graph task where fixed-depth models barely extrapolate, and on the two sequence tasks comes within two points of fixed-depth Transformers that use 4--6.4× more parameters. On the graph task, whose adjacency mask makes propagation depth verifiable, intermediate per-step supervision---a standard recipe for deep iterative models---consistently harms this extrapolation. We release the code for reproducibility.