Apple could lose up to $12.5 billion in annual revenue if a federal judge forces Google to change the way it pays for its search engine agreements, according to a new note from JPMorgan.
The Department of Justice is demanding that corrective measures be imposed after its antitrust case against Google found the tech giant to be a monopolist in general search. The DOJ’s landmark case, which concluded in 2023, accused Google of maintaining that illegal monopoly by paying billions to device makers and browser developers, including Apple, to be their default search engine. Judge Amit Mehta found Google liable for anticompetitive conduct in general search but is still weighing appropriate remedies.
Both Apple and Google have submitted potential remedies for the case, and Judge Amit Mehta is expected to announce his judgment on them in early August. While Apple is not directly part of the DOJ’s antitrust suit against Google, the company could be deeply affected by the results due to its lucrative Traffic Acquisition Cost (TAC) agreement with Google.
Google reportedly pays Apple between $15 billion and $20 billion per year to ensure its search engine is the default on Apple devices.
The note calculates that the end of the agreement could cost Apple $12.5 billion annually, about 15% of Apple’s earnings per share, as a worst-case scenario. Analysts also suggested that a middle ground, namely that Google loses exclusivity to make deals with Apple but Apple finds alternative monetization or compensation from competitors, could be possible. The best-case scenario is that the judge only demands minor adjustments to Google’s practices, and TAC payments remain largely intact.
JPMorgan said in the note that the middle-ground scenario looked to be the most likely outcome of the case. They see a more moderate remedy as the most plausible path forward, which could include changes such as increased user choice screens (where users pick a search engine rather than defaulting to Google) or partial restrictions on Google’s default status across Apple devices.
While analysts note that the unlikely scenario of a full loss of TAC revenue would be painful, Apple has significant resources to absorb the impact or negotiate alternative deals. The company could also look to boost its own advertising and search monetization efforts if exclusivity is curtailed.
In a separate note addressing the potential impact of corrective remedies on Alphabet, analysts noted that “the ultimate impact to Google will also depend on how Apple—not technically a party to the suit—proceeds in search on Safari once the Google-DOJ case is resolved.”
While they estimated that the worst-case scenario could put Google at a potential revenue risk of $18 billion, analysts reiterated they expected the judge to impose moderate remedies rather than a full ban on default agreements, which would help Google maintain significant traffic.
Representatives for Apple did not immediately respond to a request for comment from Fortune.
