Google Antitrust Ruling Threatens Apple’s $20 Billion Deal and Profits

Apple’s highly profitable deal with Google is at risk after a U.S. judge ruled that the search giant operated an illegal monopoly. The ruling could lead to the termination of the agreement, which makes Google’s search engine the default on Apple devices, posing a significant financial threat to Apple.

According to Wall Street analysts, Google pays Apple $20 billion annually, accounting for about 36% of Google’s search advertising revenue generated through the Safari browser. If the deal is terminated, analysts estimate that Apple could experience a 4-6% hit to its profits.

The current agreement between Apple and Google is set to last until at least September 2026, with Apple having the right to unilaterally extend it for another two years, as per documents filed by the Department of Justice in the ongoing antitrust case. Evercore ISI analysts predict that the most likely outcome is a judicial mandate that Google must cease paying for default placement, or that companies like Apple must proactively prompt users to choose their search engine, rather than setting a default and allowing changes in settings.

Despite the potential financial impact, Apple’s shares remained flat on Tuesday, underperforming the broader market recovery. Alphabet, Google’s parent company, also showed little change after a significant drop in the previous session. Legal experts, such as Herbert Hovenkamp from the University of Pennsylvania, emphasize the importance of avoiding exclusive agreements that limit consumer choice in the market.

The legal proceedings, including potential appeals, could extend into 2026. However, if the agreement is ultimately dissolved, Apple has various alternatives. These include offering Microsoft Bing or developing a new search product powered by OpenAI, as well as enhancing AI-powered services. Apple has recently announced plans to integrate OpenAI’s ChatGPT into its devices and is in discussions with Google to add the Gemini chatbot, indicating a shift towards AI solutions. Additionally, Apple is revamping Siri with advanced AI technology to handle more complex tasks.

Gadjo Sevilla, an analyst at Emarketer, suggests that while this ruling poses a temporary setback, it also presents an opportunity for Apple to pivot towards AI solutions for search, potentially capitalizing on emerging technologies in the long term.