Apparatus and method for context-aware compression. For example, one embodiment of an apparatus comprises: ray traversal/intersection circuitry to traverse rays through a hierarchical acceleration data structure to identify intersections between rays and primitives of a graphics scene; matrix compression circuitry/logic to compress hierarchical transformation matrices to generate compressed hierarchical transformation matrices by quantizing N-bit floating point data elements associated with child transforms of the hierarchical transformation matrices to variable-bit floating point numbers or integers comprising offsets from a parent transform of the child transform; and an instance processor to generate a plurality of instances of one or more base geometric objects in accordance with the compressed hierarchical transformation matrices.