Apple, Google $20 billion search deal at risk amid rise of AI
Apple is exploring ways to integrate artificial intelligence into its Safari browser, a move that could threaten its long-standing partnership with Google. The news came from Apple Senior Vice President of Services Eddy Cue during testimony in the Justice Department’s antitrust trial against Google, Bloomberg reported.
The court recently ruled that Google maintained an illegal monopoly in online search and the case has now moved on to figuring out what should be done about it.
Google currently pays Apple an estimated $20 billion annually to remain the default search engine on its devices. This arrangement has been a major driver of search-related advertising revenue for Google’s parent company, Alphabet. Under the deal, when users enter search queries into Safari, Google serves the results and shares ad revenue with Apple — essentially handing Apple billions without requiring any active contribution on its part.
Dynamic may be shifting
However, that relationship may be on the verge of unraveling.
Cue testified that searches through Safari declined in April and indicated that the rise of generative AI tools may be beginning to chip away at Google’s dominance. He said Apple is “actively looking” into AI-powered search alternatives, and named AI search startups Perplexity, OpenAI and Anthropic as potential partners, according to Bloomberg.
Currently, iPhones already offer access to OpenAI’s ChatGPT as a supplement to their own AI product, Apple Intelligence, introduced in iOS 18 — an arrangement that may signal deeper integration to come.
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As part of their search engine deal, Google’s $20 million payment to Apple represented approximately 5% of Apple’s overall services revenue.
Apple’s efforts to adopt AI have underwhelmed users. The Apple Intelligence rollout’s reported delays in launching an AI-enhanced version of Siri invited more criticism. Cue made clear that the growing dominance of AI in tech is pushing Apple to prioritize its integration more than ever.
Still, some analysts argued AI tools remain too inaccurate to replace traditional search engines.
“Some of the AI we get today isn’t 100% reliable,” Robert Schein, chief investment officer at Blanke Schein Wealth Management, said in an interview with Bloomberg. “If you were to do an AI search, you’d have to double-check other AI platforms just to ensure that what you’re getting is quality and truthful and real-time content.”
Schein still believes in Google’s strong position.
“A company like Google will evolve and take advantage of opportunities, even if it’s a setback,” he said.
Google has been pouring billions into its own AI search initiatives, including AI-generated summaries that appear above standard search results.
CEO Sundar Pichai announced in April that Google is pursuing a deal to bring its Gemini AI model to future iPhones.
How did markets react?
Alphabet’s stock dropped more than 7% following Cue’s testimony, wiping nearly $150 billion off its market value.
Using Alphabet’s stock ticker, longtime Apple analyst Gene Munster wrote on X that “GOOG is likely going lower because Search is in the very early stages of a seismic change that investors haven’t fully factored into current valuation.
“Among users who are engaging with generative AI daily, they’re using Google far less,” Munster added in another post.
Shares of Alphabet rebounded slightly Thursday, May 8, after Google issued a rare public statement disputing Cue’s claim that Safari search volume had declined.
“We continue to see overall query growth in Search,” Google wrote. “That includes an increase in total queries coming from Apple’s devices and platforms. More generally, as we enhance Search with new features, people are seeing that Google Search is more useful for more of their queries — and they’re accessing it for new things and in new ways, whether from browsers or the Google app, using their voice or Google Lens.”
But the risks run both ways. As generative AI reshapes how users search for information, Apple faces mounting pressure to adapt while trying to preserve its $20 billion-a-year arrangement.
“I’ve lost a lot of sleep thinking about it,” Cue said.
Ella Rae Greene, Editor In Chief
