Apple tries to save $20 billion Google search deal, says 'not essential'

Apple has made an unusual argument to protect its $20 billion-a-year search engine deal with Google, claiming that the agreement may not be needed in the long term — and even that the iPhone itself could become obsolete one day.

Eddy Cue, Apple’s Senior Vice President of Services, made the case while testifying at the US Justice Department’s antitrust trial against Google. The case focuses on whether Google’s dominance as the default search engine on Apple devices violates competition laws. In return for being the default, Google reportedly pays Apple around $20 billion each year.

Cue suggested that shifts in technology — especially the rise of AI — are changing how people search the web, and therefore weakening Google's grip. He revealed that Apple plans to redesign its Safari browser to include artificial intelligence services like ChatGPT, Perplexity AI, and Claude. He also said that, for the first time, Google searches on Apple devices had dropped in April, as more users turned to AI tools instead.

“Technology shifts create opportunities,” said Cue, adding that these AI platforms could soon be added as official search options in Safari. However, despite these forward-looking comments, Apple clearly doesn’t want to lose the current deal with Google, which is now at risk if the government wins its case.

The market reaction showed just how seriously investors take this deal. Alphabet’s shares fell by 7.3% and Apple’s by 1.1% following Cue’s testimony. Google benefits massively from search traffic on over 2 billion Apple devices.

Safari currently offers Google as the default search engine, but users can switch to others like Bing, Yahoo, or DuckDuckGo. Apple earns revenue from these too, but none pay as much as Google — a central point in the government’s lawsuit.

Read More: Your tragedy, their ad: Has digital advertising lost its soul? Cue’s testimony seemed aimed at showing that the market isn’t locked into Google, and that competition exists and is growing — a key defence against monopoly claims. He even went as far as to praise some of Google’s rivals, particularly Perplexity.

“It makes sense for Apple to highlight anything that supports the idea that Google isn't monopolising search,” said Brent Thill, an analyst at Jefferies.

Cue didn’t talk much about how AI might actually deepen Apple’s partnership with Google. Google has already shifted its own search system towards AI, using its Gemini model. Today, when people search using Google — even on iPhones — they often first see AI-generated answers.

Apple rarely reveals its future plans publicly, which made Cue’s comments even more striking. His remark that “you may not need an iPhone 10 years from now, as crazy as it sounds” stood out, given how central the iPhone is to Apple’s business.

Still, this isn’t the first time Apple has made surprising claims in court to support its legal arguments. During a 2021 trial with Epic Games, an Apple executive admitted that Mac computers had malware issues — a point used to justify keeping the iPhone’s app ecosystem tightly controlled.

Cue, a long-time Apple executive close to CEO Tim Cook and the late Steve Jobs, has a lot riding on the outcome. The Google deal is a major contributor to Apple’s services revenue — a part of the business that brought in a record $26.6 billion in the March quarter alone.

Cue admitted that the thought of losing the Google agreement had kept him up at night. He also stressed that Google should continue to be the default search option on Apple devices. Even as new AI tools are introduced, he said, “they probably won’t be the default.”

While Cue doesn’t run the App Store, revenue from it is included in his division. That stream, also worth about $20 billion per year, is under pressure after a recent court ruling forced Apple to stop taking commission on payments made outside its system.

Despite both revenue streams being under threat, Cue said Apple has fresh opportunities to earn from AI companies like ChatGPT, Perplexity, and Claude, especially if they move into advertising. Apple could end up with a new business model, taking a share from multiple AI providers — much like it does with apps.

Currently, Apple uses OpenAI’s ChatGPT in a feature tied to Siri. Later this year, it also plans to add Google’s Gemini AI as another option. The two companies are already collaborating more deeply: Apple recently partnered with Google for a new feature called Visual Intelligence, which lets users take a photo and receive AI-generated feedback. Cue confirmed there’s a revenue-sharing deal in place for that feature too.

Read More: Global Ads Spotlight: Apple's "Shot on iPhone - Little Garlic" shapeshifting ad that took the internet by storm