The long-standing, multi-billion-dollar relationship between Apple Inc. (AAPL) and Alphabet Inc. (GOOG) is under fresh scrutiny.
In 2022, Alphabet paid Apple roughly $20 billion to maintain Google’s place as the default search engine on Safari. That agreement is now a centerpiece of the U.S. Department of Justice's landmark antitrust case against Google—and it's becoming increasingly clear that Apple is not afraid to distance itself from its lucrative partner if needed.
Judge Amit Mehta's ruling in August that Google maintained an illegal monopoly in the search market has opened the door to remedies that could upend the status quo. As the court deliberates next steps, Apple filed an amicus brief signaling its growing willingness to explore alternatives, including artificial intelligence-powered search tools from OpenAI, Perplexity, and Anthropic.
Apple Services chief Eddy Cue added fuel to the fire during his testimony, revealing that searches on Safari had declined for the first time, a shift he attributes to users embracing AI-driven chatbots. He also hinted that iPhones themselves could eventually be replaced by AI-integrated wearables. The implications were not lost on Wall Street—Alphabet shares plunged 8% in the wake of Cue’s remarks.
Search Isn’t Dying—It’s Evolving, and Google Is Still Leading
While the headlines may suggest existential danger for Google’s core business, the reality is more nuanced. Despite Safari’s importance, its global browser share sits at just 17%, well behind Google Chrome’s 66%. Even on Apple devices, around 97% of users still rely on Google for their web searches, many using Safari as the portal.
Moreover, not all search queries are equally valuable. Alphabet monetizes roughly 20% of its searches—primarily commercial ones like product and local business queries. These high-value searches are less likely to shift to AI chatbots, which are currently more suited to handling complex, non-commercial inquiries.
Alphabet also disputes Cue's narrative. In a blog post, the company said it continues to see growth in overall search queries, including on Apple platforms. Even if AI tools gain traction, the shift may prove complementary rather than cannibalistic. AI queries are costly and hard to monetize with ads, meaning they could follow a subscription-based model that doesn’t directly compete with Google's ad-dominated search engine.
Strategic Posturing or the Start of Real Competition?
Apple’s comments and court filings appear calculated, possibly aimed at strengthening its negotiating position rather than signaling a definitive break. With $20 billion in annual revenue at stake—more than 15% of Apple’s operating income—the company has every incentive to maintain the current arrangement, even as it flirts with AI rivals.
Still, industry voices are treating this moment as a tipping point. Ritholtz Wealth Management CEO Josh Brown called Apple's testimony “a watershed moment,” noting that for the first time, Google is facing real competition in core search. Joe Terranova of Virtus Investment Partners echoed that sentiment, pointing to years of unaddressed concerns about Google's vulnerability to new search technologies.
Yet Alphabet is far from a one-trick pony. Its Google Cloud division is growing rapidly, YouTube remains the world’s most-visited streaming platform, and its AI model Gemini is gaining ground. The company is also pushing into quantum computing and autonomous vehicles through Waymo, underscoring a diversification strategy that cushions any near-term search disruptions.
With a forward P/E of around 16, Alphabet remains attractively priced relative to its earnings potential. Even as AI redefines how people interact with information, Google’s deep integration into daily digital life—and its dominant infrastructure for search advertising—makes any immediate threat less dire than the market reaction might suggest.
Conclusion
Apple and Google’s high-stakes dance over default search is emblematic of a broader shift in tech. AI is reshaping the landscape, and even industry giants are recalibrating alliances. Whether Apple truly pivots away from Google or simply sharpens its leverage, investors should prepare for more volatility—and more opportunity—as the next chapter of search unfolds.
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