Apple’s lucrative agreement with Google, which sees the search giant paying $20 billion annually to be the default search engine on Apple devices, is under threat following a recent antitrust ruling. A U.S. judge has determined that Google, owned by Alphabet Inc., operates an illegal monopoly, raising the possibility that the agreement could be terminated to avoid further antitrust actions.
According to analysts at Morgan Stanley, Google’s payment to Apple represents approximately 36% of its earnings from search advertising through the Safari browser. If the deal were to collapse, Apple might face a 4-6% reduction in its profit margins, impacting its financial performance significantly.
The current agreement between Google and Apple runs until at least September 2026, with Apple holding the option to extend it for an additional two years. This arrangement is outlined in a document from the Department of Justice related to the antitrust case. Analysts predict that a likely outcome of the ruling could involve Google no longer paying for default placement, or requiring companies like Apple to prompt users to select their search engine rather than setting it by default.
The ruling has already affected the stock market. Apple’s shares remained flat on Tuesday, underperforming in a broader market recovery following Monday’s global selloff. Alphabet’s stock, which had dropped 4.5% in the previous session, showed little change.
Herbert Hovenkamp, a professor of law at the University of Pennsylvania, commented on the ruling’s implications, suggesting that companies with dominant market positions must avoid exclusive agreements and ensure that any agreements provide buyers with the option to choose alternatives.
The legal process is expected to be lengthy, potentially extending into 2026 with various appeals to higher courts. During this period, Apple will need to consider alternative strategies, including potentially offering search alternatives like Microsoft Bing or developing a new search product powered by AI.
Apple has already started pivoting towards AI-driven search services, announcing plans to integrate OpenAI’s ChatGPT into its devices. The company is also in discussions with Google to incorporate the Gemini chatbot and is working on enhancing Siri with advanced AI capabilities to handle more complex tasks.
Analysts suggest that while losing the Google search deal would be a temporary setback for Apple, it also presents an opportunity for the company to accelerate its move towards AI solutions in search. Gadjo Sevilla, an analyst at Emarketer, noted that this shift could help Apple leverage new technologies and reduce its reliance on exclusive agreements that attract regulatory scrutiny.
