Apple (AAPL) dodged a major gut punch on Tuesday after a federal district judge ruled that Google (GOOG, GOOGL) can continue to make revenue-sharing payments to distribution partners for the placement or preloading of Google’s Search, Chrome, and generative AI offerings.
The ruling, by District of Columbia Judge Amit Mehta, means Google will still pay Apple an estimated $20 billion per year for making Google the default search option in its Safari browser and across its Siri and other services.
Apple’s stock price rose more than 2.5% in early trading Wednesday to around $236 a share.
As part of the ruling, Google will be limited to one-year agreements, allowing Apple to potentially renegotiate the terms of its revenue-sharing deals. Google also can’t force companies to keep competing apps and services off their devices, though Apple already provides access to Google Gemini rival ChatGPT via its Apple Intelligence platform.
Google previously stated it would appeal Mehta’s initial ruling that found the company operated as an illegal monopolist. Either way, though, Apple is back on solid footing after years of uncertainty surrounding its Google deal.
Cash from the agreement is accounted for as part of Apple’s Services business. In 2024, Apple’s Services segment brought in $96.2 billion. At $20 billion per year, Google’s revenue-sharing agreement made up some 20.8% of Services revenue.
It’s important to note that the $20 billion figure is an estimate for 2022 found in the antitrust court documents and could be higher for subsequent years.
BofA Global Research analyst Wamsi Mohan wrote in an investor note Tuesday that the ruling is a win for Apple and raised the firm’s price target on the iPhone maker’s stock from $250 to $260.
“While details and nuances of the ruling and their implication on Apple are still to be determined, and Google has the option of appealing this decision, in our opinion, we do not see an immediate material change to the current Apple-Google relationship and payment structure,” Mohan added.
Morgan Stanley’s Erik Woodring noted in his own research note that Mehta’s ruling could even benefit Apple in the long run and should end prior industry suggestions that the company needed to buy a generative AI search engine.
“Google’s payments to Apple can continue (with conditions), Apple can now renegotiate default payment rates annually to try and better monetize search across all traditional, and new AI-powered, search partners, and Apple has the choice — but not the requirement — to introduce a choice screen and collect new fees from search partners, if they so choose,” Woodring wrote.
