Why Apple could be a loser in Google’s antitrust defeat

Apple CEO Tim Cook could see a major revenue source threatened by Google’s antitrust loss.

A federal judge just ruled against Google in a major antitrust case. Apple could be caught in the blowback.

That’s because a big part of the government’s case against Google — that it has an illegal monopoly in search — focuses on deals Google makes with platforms and device-makers to be their default search engine.

And the biggest one of those is the one Apple has with Google, where Google pays Apple tens of billions of dollars a year — $20 billion in 2022 alone — to have pole position on the iPhone.

Judge Amit P. Mehta’s ruling, which holds that those deals are inhibiting competition, doesn’t include his remedy. And Google says it plans to appeal his decision regardless. But if the ruling is ultimately upheld, and requires Google to stop making exclusive search deals, then it could threaten what’s become an incredibly lucrative revenue stream for Apple.

“As this process continues, we will remain focused on making products that people find helpful and easy to use,” Kent Walker, Google’s top lawyer and public policy executive, said in a statement. I’ve asked Apple for comment as well.

Apple is so giant — it generated nearly $400 billion in revenue last year — that even a $20 billion deal may not seem like that much to the company. And that number likely won’t go to zero. Whether Google gets replaced by a competitor like Bing, or if it keeps working with iPhone but under different terms, Apple will still likely be able to get very good money leasing out real estate on its phones.

Still, the existing Google deal is a key part of Apple’s “services” business. And as we’ve pointed out many times, growing its high-margin services revenue has become crucial for Apple as its core business — selling iPhones — slows down or even declines. You can see it in the company’s most recent quarter, where its hardware business increased by $1 billion — and services grew by $3 billion.

So anything that puts a dent in that story is a concern for Apple. You could see that live in real time on Monday afternoon, when Apple’s share price, which was already reeling as part of the general tech sell-off, lurched downward again once Mehta’s ruling went public. Now, the price has recovered, presumably because it’s too early to tell what, exactly, this will mean for Apple. But it’s certainly not nothing.