Jeffries analysts say it’s “highly likely” the US Department of Justice (DOJ) will ban Google’s long-standing iPhone search deal, which Jeffries predicts will send Apple shares down 11%.
google has been in the center the biggest anti-competitive lawsuit in decadesBecause the DOJ is questioning practices that have put the search engine at the center of mobile phones and web browsers. Google has paid Apple and others billions annually for prominent space on devices until now, but Jeffries analysts predicted on Wednesday that the DOJ would ban those deals in the future in an effort to break any search monopoly. Jeffries estimates that the $25 billion deal represents 20% of Apple’s taxable profits, or about 6.3% of revenue, implying an 8-11% impact on share prices.
These agreements have been in place since 2002, when Google first paid Apple a portion of search ad revenue to make Google the default search platform. according to The Financial TimesIt gave Google access to Apple’s user base, with more than half of US search queries now coming through Apple devices.
During the trial, DOJ lawyers argued that Google’s practice of paying billions to secure its position on platforms like Apple locks out competitors and stifles innovation. Google has repeatedly responded that its dominance comes from consumer preferences and users can be changed easily to other search engines if desired. However, DOJ prosecutors say the sheer scale of these payments reveals just how determined Google is to maintain its monopoly.
Even if the DOJ finalizes these agreements, the effects may take time to materialize. Jefferies estimates it could take three to eight years to reach a final outcome in court, with the possibility of lengthy appeals. Jeffries called his own estimates “pessimistic,” saying they’re part of a pattern that simply offsets Apple’s revenue. If the case is tied up for years, Jeffries predicts, Apple has plenty of time to correct course and fix potential revenue. Jeffries added that the impact could only be in the US, depending on Europe’s reaction to any DOJ decision.
Representatives for Jeffries, Apple and Google did not immediately respond luck’s request for comment.
Meanwhile, Apple’s share price has remained relatively resilient, fueled by investor optimism about its upcoming products. iPhone 17 as well as new AI-based technologies.
However, if the DOJ were to block the Google-Apple deal, it would be a significant change for both companies and could force Apple to explore deeper integrations of its search engine or AI, a path with its own risks. For Google, the stakes are the same, if not higher. This case could essentially disrupt the company’s ability to use financial deals to dominate the search engine market.
The outcome of the case would also have ripple effects across the wider technology landscape, opening the door for competitors. Microsoft. With regulators around the world closely watching this case, it’s clear that both Google and Apple are at the crossroads of a legal decision that could reshape their futures.
