Jefferies analysts say it’s “very likely” the U.S. Department of Justice will ban Google’s long-standing iPhone search deal, a decision that could send Apple stock down as much as 11%. Jeffries predicts that there will be some.
Google is at the center of one of the biggest antitrust trials in decades as the Justice Department questions its practices that have kept its search engine at the center of smartphones and web browsers. Google has traditionally paid Apple and others billions of dollars each year to gain prominence on its devices, but Jefferies analysts said on Wednesday that the Justice Department could potentially make such deals in the future as it seeks to break up its search monopoly. predicted to be banned. Jefferies estimates the $25 billion deal would represent 20% of Apple’s pretax profits and about 6.3% of its total revenue, and would hurt the stock price by 8% to 11%.
Such deals have been in place since 2002, when Google first paid Apple a portion of its search ad revenue to make Google its default search platform. According to financial timeswhich gives Google access to Apple’s user base, with more than half of all search queries in the US currently flowing through Apple devices.
During the trial, Justice Department lawyers argued that Google’s practice of paying billions of dollars to secure a spot on platforms such as Apple deters competitors and stifles innovation. Google has repeatedly countered that its dominance is due to consumer preference, and that users can easily switch to other search engines if they wish. But Justice Department prosecutors argue that the sheer size of these payments reveals the lengths to which Google will go to maintain its monopoly.
Even if the Justice Department ends these deals, it could take some time to take effect. Jeffries expects a final outcome in court could take three to eight years, with the possibility of a lengthy appeal. Jefferies also called its estimates “pessimistic,” noting that they are part of a model in which there is no revenue offset by Apple. If the lawsuit actually ends up being litigated for years, as Jeffries predicts, Apple will have plenty of time to correct course and make up for potential revenue losses. Jefferies added that the impact could be limited to the United States, depending on Europe’s reaction to the Justice Department’s decision.
Representatives for Jefferies, Apple and Google did not immediately respond. luck’Request for comments.
Meanwhile, Apple’s stock price has remained relatively resilient, supported by investor optimism about upcoming products such as the iPhone 17 and new AI-powered technologies.
Still, if the Justice Department blocks the Google-Apple deal, it would mark a significant shift for both companies, potentially forcing Apple to consider its own search engine and deeper AI integration. This is a path that comes with its own risks. The stakes are just as high, if not higher, for Google. The lawsuit could fundamentally disrupt the company’s ability to use financial arrangements to dominate the search engine market.
The outcome of the case will also have ripple effects on the broader technology industry, potentially opening the door for competitors such as Microsoft. As regulators around the world closely monitor the case, it’s clear that both Google and Apple are at the crossroads of legal decisions that could change their futures.
