Following a U.S. judge’s ruling on Google’s illegal monopoly, Apple’s lucrative deal with them might now face threats.
On Tuesday, Wall Street analysts suggested Google might avoid antitrust issues by ending its default search engine deal with Apple.
Morgan Stanley analysts report that Google pays Apple $20 billion annually, about 36% of its Safari search ad earnings.
Analysts estimate that if the deal falls through, the iPhone maker might face a 4-6% profit loss.
The pact extends to September 2026, with Apple able to extend it by two more years, per May media reports.
“The most likely outcome now is the judge rules Google must no longer pay for default placement or that companies like Apple must proactively prompt users to select their search engine rather than setting a default and allowing consumers to make changes in settings if they wish,” Evercore ISI analysts said.
On Tuesday, Apple’s shares were flat, lagging behind the market recovery, while Alphabet remained unchanged after a 4.5% drop.
“The message here is that if you’ve got a dominant market position with a product, you’d better avoid the use of exclusive agreements and make sure any agreement you make gives the buyer free choice to substitute away,” said Herbert Hovenkamp, a professor of law at the University of Pennsylvania.
The “remedy” phase and potential appeals to higher courts might extend legal disputes into 2026.
Apple’s Shift to AI
However, if the deal fails, Apple could offer alternatives like Microsoft Bing or a new search product from OpenAI.
Analysts agree that the ruling will accelerate Apple’s shift to AI search, especially after its recent ChatGPT announcement.
Shifting from exclusive deals, Apple is now discussing adding Google’s Gemini chatbot and other AI models.
Apple is upgrading Siri with AI, thus improving its ability to handle tasks like writing emails and managing messages.
Though these efforts may yield little profit initially, they could leverage the new technology effectively in the long run.
“Apple could see this as a temporary setback, especially since it earns a lot from the Google search deal, but it is also an opportunity for them to pivot to AI solutions for search,” said Gadjo Sevilla, analyst at Emarketer.
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