① The testimony provided by Apple executives for the Google antitrust case has triggered significant fluctuations in the Capital Markets; ② Renowned Apple leaker Mark Gurman stated that Apple often makes exaggerated statements in court to influence the outcome of trials; ③ Even though AI is impacting product forms, the deep cooperation between Apple and Google continues, and it is very likely that both parties will continue to sign similar revenue-sharing agreements.
According to the Financial Association on May 8 (edited by Shi Zhengcheng), when Apple publicly disparages its own Business in court, there is likely a more significant interest that needs to be protected behind the scenes.
On Wednesday local time, $Apple (AAPL.US)$ Senior Vice President of Service Business Eddie Cue mentioned during the $Alphabet-A (GOOGL.US)$ antitrust case that as the default browser Safari on Apple devices will be restructured around AI, the company's massive search cooperation agreement with Google "may not be necessary in the long run." He even boldly stated that due to technological innovations, "you may not even need an iPhone in ten years"—currently, mobile phone sales contribute half of Apple's revenue.
As a result,$Alphabet-A (GOOGL.US)$On Wednesday, it fell by 7.26%, with a single-day Market Cap evaporation of over 140 billion USD. Apple also dropped by more than 1%.
However, renowned Apple leaker Mark Gurman stated that AI is indeed affecting the Internet product ecosystem, but Kuo's claims are more about Apple's time-tested courtroom strategy.
An agreement that cannot be easily given up.
As a background, by setting Google Search as the default browser Search Engine on Apple devices (in most regions), Apple can earn nearly 20 billion USD in substantial revenue from Google every year. Meanwhile, $Apple (AAPL.US)$ also provides$Baidu (BIDU.US)$、$Microsoft (MSFT.US)$Alternatives like Bing and DuckDuckGo. Apple has revenue sharing agreements with all suppliers, but the amount paid by Google is significantly higher than that of other companies.
This agreement itself is also core evidence identified by the USA Department of Justice that Google's search business is suspected of monopolistic practices, and legal proceedings are currently underway to attempt to break up Google. If the USA Department of Justice succeeds, it would pose a significant risk for Apple.
As the slow iteration of the iPhone affects sales, the services business under Cook has become one of the few stable revenue growth sources for Apple. In the first three months of this year, Apple's services business reported a record revenue of 26.6 billion dollars.
Gurman stated that Apple has a history of making surprising statements in court, even at the expense of the company's product image, to influence rulings. For instance, during the lawsuit with Epic Games in 2021, Apple's software chief openly claimed that there were malware issues on Mac computers to justify keeping the application ecosystem closed.
It is clear that Apple is unwilling to lose the current agreement with Google. By directing the judge's attention to the idea that 'AI could potentially replace Search Engines', the aim is to reduce the possibility of the judge ultimately ruling against this agreement.
During testimony on Wednesday, Cook also mentioned losing sleep over the potential termination of the revenue sharing agreement with Google, while adding that 'although other services will increase, they are unlikely to become the default option.'
Significantly, Kui deliberately downplayed Google's presence while discussing the goal of shifting browsers towards AI.
Kui stated that Apple plans to reshape its Safari web browser around AI services such as ChatGPT, Perplexity, and Claude. However, in reality, Apple and Google have already engaged in deep cooperation in the field of AI—last year's new iPhone's "visual intelligence" feature uses Google's AI to analyze photos, which also involves revenue-sharing agreements.
Interestingly, seemingly to emphasize the narrative of "AI transformation," Kui also specifically mentioned that as users turn to AI, search queries from Google on Apple devices experienced a decline for the first time this April. Google quickly issued a statement rebutting this, claiming that "search volume, including on Apple devices and platforms, continues to grow."
Continuing the "commission" business logic.
Gurman stated that Apple, mastering the hardware platform in the AI era, still has new revenue opportunities.
Developers of AI systems like OpenAI could still potentially sign revenue-sharing agreements with Apple, especially as these AI companies might venture into the advertising market. Apple may prefer not to sign exclusive agreements, but instead aim to share revenue from as many suppliers as possible—effectively replicating the business model of the App Store.
Kui indicated that Apple currently offers an option to call ChatGPT in its digital assistant Siri and will integrate Google’s Gemini later this year (note: there were previous rumors that the domestic version of the iPhone would introduce Alibaba and Baidu's AI in the iOS 18.6 update in June). Kui also mentioned that Apple had explored Anthropic, Perplexity, DeepSeek, and xAI’s Grok.
For this series of collaborations, the biggest uncertainty lies in Apple's progress in developing AI independently. Due to significant technological lag behind peers, Apple has been forced to delay the highly anticipated major upgrade to Siri. The company is set to hold its annual developers conference on June 9, and global shareholders will closely watch for insights from Apple's executives on the outlook for AI development.
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Editor/Rocky
