AAPL
🤝 Apple’s highly profitable agreement with Google, making Google the default search engine on Safari, is under threat. This deal is reportedly worth around $20 billion annually to Apple, representing a significant portion of its service revenue and net income.
🤖 An Apple executive’s testimony in an antitrust case revealed that Apple is actively considering integrating AI-powered search options into Safari, which could replace Google and has reportedly already caused a decline in Safari searches for the first time in 22 years.
⚖️ The potential change comes amid U.S. antitrust investigations into Google’s search market dominance, which could prohibit such payment-for-default deals, directly impacting Apple’s earnings by removing a substantial, high-margin revenue stream.
@bernardodegarcia:
“Apple’s plans for its Safari browser have become a central point in Google’s recent stock volatility. An Apple executive, referred to as ‘Mr. Q,’ testified in a U.S. antitrust case, stating that Apple is actively looking to add AI-driven search options to Safari. Crucially, he suggested these AI alternatives could eventually replace standard search engines. This development is a direct challenge to Google, which pays Apple approximately $20 billion a year to be the default search engine on iPhones and other Apple devices. This payment is not trivial for Apple; it represents a significant revenue stream, estimated to be around 36% of the search ad revenue Google generates via Safari. For Apple, this $20 billion is largely pure profit, as the cost to implement Google as default is minimal. Losing or seeing this revenue diminished would have severe consequences for Apple’s profits, potentially causing $20 billion to ‘disappear’ from its bottom line, which is substantial when compared to its overall net income (e.g., Apple reported $61 billion in net income over six months, annualizing to roughly $120 billion). The executive also mentioned that these AI alternatives are already causing a decline in traditional Safari searches, a phenomenon not seen in 22 years. This situation is further complicated by the broader antitrust pressure on Google, with regulators considering a ban on Google paying for default search engine status. Such a ruling would directly impact Apple’s ability to collect these fees. While the discussion primarily focuses on the impact on Google, the potential loss of this $20 billion annual high-margin revenue stream is a significant consideration for Apple investors.”
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