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A seismic antitrust ruling against Google threatens its $20 billion annual payment to Apple, potentially cutting iPhone profits by up to 6%, experts say.
Legal Pressure on Google's Apple Deal
A U.S. judge deemed the Alphabet-owned search giant to be operating an illegal monopoly, which may put Apple's lucrative deal with Google at risk.
On Tuesday, Wall Street analysts speculated that Google could end up avoiding antitrust lawsuits by just ending the deal that makes its search engine the default on Apple devices.
Reuters shares that Morgan Stanley analysts estimate that Google pays Apple $20 billion yearly, or around 36% of its revenue from search ads displayed in the Safari browser, for the right to do so.
Reversing the transaction might reduce the iPhone maker's profit by 4-6%, according to analysts.
Media sources in May highlighted a document submitted by the Department of Justice in the antitrust case, which stated that the contract runs until at least September 2026 and that Apple has the authority to unilaterally extend it for another two years.
Analysts at Evercore ISI said: "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."
In the event that the partnership is canceled, Apple can pursue other avenues, such as introducing Microsoft Bing or possibly a new search product driven by OpenAI to its consumers.
Antitrust Ruling Spurs Apple's AI Search Pivot
The verdict, according to experts, will hasten Apple's transition to search services powered by artificial intelligence. Not long ago, it made an announcement about integrating OpenAI's ChatGPT chatbot into its products.
Per MSN, Apple is moving away from exclusive arrangements that could put it in trouble with regulators by announcing that it is in negotiations with Google to integrate their Gemini chatbot and intends to do the same with other AI models.
Siri is also getting an AI makeover from Apple, which will give it greater authority to manage activities like email composing and message interaction, which have been challenging in the past.
Although those endeavors are not anticipated to generate much revenue in the near future, they may contribute to maximizing the potential of the emerging technology.
"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," Gadjo Sevilla, an analyst at Emarketer, said.
