- Alphabet’s (GOOGL) stock dropped nearly 8% in midday trading Wednesday after Apple’s (AAPL) Eddy Cue testified that Google searches via Safari declined in April, potentially jeopardizing the $20 billion annual revenue-sharing deal.
- Apple is exploring AI search alternatives like Perplexity and Anthropic for iOS, while the DOJ considers ending Google’s default search exclusivity, causing Cue to “lose sleep” over potential revenue loss.
- Despite ChatGPT’s integration into Siri, it lacks Safari search capabilities, and Google remains the top search engine, though competitive and regulatory pressures challenge its dominance.
Alphabet Inc.’s (GOOG, GOOGL) stock plummeted nearly 8% on Wednesday following remarks from Apple’s (AAPL) Senior Vice President of Services, Eddy Cue, during testimony in the U.S. Department of Justice’s antitrust trial against Google, as reported by CNBC’s Steve Kovach. Cue revealed that Google searches conducted via the Safari browser on iOS devices declined for the first time in April, signaling a potential erosion of Google’s dominance as the default search engine, a position secured through a $20 billion annual revenue-sharing agreement with Apple. This deal, central to the DOJ’s case, ensures Google handles queries entered into Safari’s search bar, generating substantial ad revenue, a portion of which is shared with Apple.
Cue’s testimony highlighted Apple’s exploration of AI-powered search alternatives, specifically naming Perplexity and Anthropic as potential options to integrate into the iOS ecosystem, raising concerns about Google’s long-term grip on search. While OpenAI’s ChatGPT is already embedded in Siri, it primarily supports conversational tasks rather than direct web searches, and is not yet part of Safari’s search functionality. The prospect of losing the Google deal, one of the remedies under consideration by the DOJ after ruling Google an illegal monopoly in August 2024, is causing significant unease at Apple, with Cue admitting he is “losing sleep” over the potential loss of this $20 billion revenue stream, which accounted for roughly 23% of Apple’s services revenue in 2022.
The decline in Safari-based Google searches aligns with broader industry shifts toward AI-driven search tools, which offer conversational and context-aware results, challenging traditional keyword-based models. Perplexity, for instance, has gained traction with its ability to deliver direct answers, while Anthropic’s Claude model emphasizes safety and interpretability, appealing to privacy-conscious users. Apple’s interest in these platforms reflects its strategic pivot toward AI, evidenced by recent integrations like ChatGPT and plans to incorporate Google’s Gemini model into Siri later in 2025. However, Cue emphasized that Google remains the best search engine today, a stance consistent with his 2023 testimony where he argued no viable alternative existed, citing Microsoft’s (MSFT) Bing as inadequate despite offers to provide it for free.
The DOJ’s proposed remedies, including banning exclusive default search agreements or forcing Google to divest assets like Chrome or Android, could disrupt Apple’s lucrative partnership and reshape the search market. Google’s $26.3 billion in default placement payments in 2021, with $20 billion to Apple alone in 2022, underscores the financial stakes. Meanwhile, Alphabet is under increasing pressure from competitors like Amazon (AMZN) and TikTok, which are steadily capturing search ad market share. Projections indicate that Google’s share could fall below 50% by 2026, intensifying competition in the digital advertising space. Apple’s own stock dipped 2% to $195.17 amid these developments, reflecting investor concerns about the potential revenue hit. As the trial progresses, with remedies due by December 2025, the outcome will likely redefine how search functions on iOS, balancing user choice, privacy, and the economic interests of tech giants.
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