Apple’s lucrative agreement with Google, which makes Google’s search engine the default on Apple devices, is under scrutiny following a recent U.S. judge’s ruling that found Google was operating an illegal monopoly. This ruling could jeopardize the $20 billion annual payment Google makes to Apple, equivalent to about 36% of Google’s search advertising revenue from the Safari browser, according to Morgan Stanley analysts.
If the deal is terminated, Apple could face a 4-6% reduction in profit, analysts estimate. The existing contract is set to last until at least September 2026, with Apple holding an option to extend it for another two years. Analysts from Evercore ISI suggest that the most probable outcome could involve Google being prohibited from paying for default placement, or requiring companies like Apple to prompt users to select their search engine rather than having it pre-set.
Apple’s shares were flat on Tuesday, reflecting a broader market recovery after a recent global selloff. Alphabet’s stock was relatively unchanged following a 4.5% drop in the previous session. Herbert Hovenkamp, a professor of law at the University of Pennsylvania, commented, “The message here is that if you’ve got a dominant market position, you should avoid exclusive agreements and ensure any agreement allows the buyer to choose freely.”
The “remedy” phase could be lengthy, with potential appeals extending the legal process into 2026. In the meantime, Apple might explore alternative search options, such as Microsoft Bing or even a new search product powered by OpenAI. Analysts believe the ruling could accelerate Apple’s transition toward AI-driven search services, including the integration of OpenAI’s ChatGPT into Apple devices.
Apple is also revamping Siri with AI technology to enhance its capabilities, including tasks like composing emails and managing messages. While these initiatives might not generate immediate revenue, they position Apple to leverage new technology in the future.
Gadjo Sevilla of Emarketer noted, “Apple might view this as a temporary setback, but it also represents an opportunity to pivot towards AI solutions for search.”
