Apple’s profitable agreement with Google is in jeopardy following a U.S. judge’s ruling that the company, owned by Alphabet, has been maintaining an illegal monopoly.

Analysts on Wall Street indicated on Tuesday that one possible response from Google to avoid antitrust penalties could be to end the deal that makes its search engine the default on Apple devices.

According to analysts from Morgan Stanley, Google pays Apple $20 billion each year, which accounts for roughly 36% of its revenue from search advertising conducted through the Safari browser.

If this agreement is terminated, Apple could experience a profit decline of approximately 4% to 6%, as estimated by the analysts.

The current agreement is set to last until at least September 2026, with Apple able to unilaterally extend it for an additional two years, based on reports in May referencing a document from the Department of Justice regarding the antitrust case.

Evercore ISI analysts commented, “The most likely scenario now is that the judge will decide that Google can no longer pay for default placement, or that companies like Apple need to encourage users to choose their search engine rather than automatically designating it as the default, allowing users to change their settings if desired.”

On Tuesday, shares of Apple remained stable, lagging behind a market recovery following Monday’s worldwide selloff, while Alphabet’s stock showed minimal change after a previous drop of 4.5%.

Herbert Hovenkamp, a law professor at the University of Pennsylvania, said, “The takeaway is that if you hold a dominant position in the market with a product, you should steer clear of exclusive agreements and ensure that any deals allow buyers the freedom to choose alternatives.”

It’s important to note that the “remedy” phase may be prolonged, potentially followed by appeals to the U.S. Court of Appeals, the District of Columbia Circuit, and the U.S. Supreme Court, with legal processes possibly extending into 2026.

Shift Towards AI

If the partnership is dissolved, Apple could explore several alternatives, including offering options like Microsoft Bing or developing a new search solution powered by OpenAI.

Experts believe this ruling will accelerate Apple’s transition towards AI-based search services. Apple recently announced plans to integrate OpenAI’s ChatGPT chatbot into its devices.

In an effort to avoid regulatory scrutiny and move away from exclusive deals, Apple is also discussing with Google the introduction of the Gemini chatbot and other AI models.

Additionally, Apple is enhancing Siri with AI features, enabling it to manage tasks that have been challenging in the past, such as composing emails and navigating messages.

While these initiatives are unlikely to generate substantial revenue in the near future, they could position Apple to benefit from emerging technology.

Gadjo Sevilla, an analyst at eMarketer, stated, “Apple may view this as a temporary hurdle, given its significant earnings from the Google search agreement, but it also presents an opportunity for the company to pivot towards AI solutions for search.”