Apple Inc.’s (AAPL.O) highly lucrative partnership with Google LLC (GOOGL.O) is now at risk following a recent U.S. judicial ruling declaring that Google’s search dominance constitutes an illegal monopoly.
According to Wall Street analysts, a potential remedy for Google to avoid further antitrust actions might involve dissolving the agreement that designates its search engine as the default option on Apple devices. Currently, Google compensates Apple approximately $20 billion annually for this privilege, which constitutes roughly 36% of Google’s search advertising revenue generated through the Safari browser, as noted by Morgan Stanley analysts.
Should the agreement be terminated, Apple might face a 4-6% decline in its profit margins, analysts predict. The contract, which is set to run until at least September 2026, also grants Apple the option to extend it unilaterally for an additional two years, as indicated by media reports in May citing a Department of Justice filing related to the antitrust case.
Evercore ISI analysts suggest that the most likely outcome would involve the court mandating that Google cease payments for default search placement, or alternatively, requiring companies like Apple to prompt users to select their search engine rather than pre-setting it, with users then having the option to adjust their settings as desired.
On Tuesday, Apple’s stock remained relatively flat, lagging behind a broader market recovery following Monday’s global selloff. Alphabet’s shares also showed minimal movement after experiencing a 4.5% decline in the previous session.
Herbert Hovenkamp, a professor of law at the University of Pennsylvania, remarked, “The key takeaway here is that dominant market players should avoid exclusive agreements and ensure that any arrangement allows for consumer choice and substitution.”
The “remedy” phase of the case is expected to be protracted, with potential appeals to the U.S. Court of Appeals, the District of Columbia Circuit, and possibly the U.S. Supreme Court, extending the legal proceedings into 2026.
In the event that the agreement is terminated, Apple may explore alternative search options for its users, including Microsoft Bing or a new search product developed with OpenAI. Analysts predict that the ruling could accelerate Apple’s shift toward AI-powered search services. Recently, Apple announced plans to integrate OpenAI’s ChatGPT into its devices and is reportedly in discussions with Google about incorporating the Gemini chatbot, among other AI models.
Furthermore, Apple is revamping Siri with advanced AI capabilities to better handle complex tasks such as composing emails and managing messages. While these initiatives may not yield immediate financial gains, they could position Apple to leverage emerging technologies effectively.
Gadjo Sevilla, an analyst at Emarketer, stated, “Apple may view this as a temporary setback, given its significant earnings from the Google search deal, but it also represents an opportunity to pivot toward AI-driven search solutions.”
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