Tim Cook, chief executive officer of Apple Inc., center, arrives at U.S. district court in Oakland, California, on Friday, May 21, 2021.
Nina Riggio | Bloomberg | Getty Images
Apple prevailed on nine of 10 counts in its trial against Epic Games on Friday, but federal Judge Yvonne Gonzalez Rogers issued an injunction that prohibits Apple from preventing developers from linking out in their apps to collect payments directly and cut out Apple and its 30% take of in-app purchases.
Apple’s stock slid more than 3% on the news Friday. But Wall Street analysts and longtime Apple followers believe that the financial impact on the company will be limited.
Developers will only be able to link, and will not be permitted to build their own alternative payments mechanism into their apps, a person familiar with Apple’s thinking said. That limits the effect as Apple’s in-app payments will still be easier for a consumer than putting their credit card into a website.
JPMorgan analyst Samik Chatterjee said the ruling did not change the bank’s outlook for Apple’s services or app store businesses, noting that the decision did not recommend changes to Apple’s 30% take, and that it merely kicks off the first stage of a multistep process.
“Our view continues to be that consumers will leverage payment alternatives in the case of expensive subscriptions and in-app purchases, limiting headwinds for App Store revenues and earnings from what is an otherwise very broad base of applications,” Chatterjee wrote.
Loup Ventures founder and longtime Apple analyst Gene Munster told CNBC’s Josh Lipton that the worst-case scenario for Apple could decrease Apple’s earnings by 4% over the next year, but more likely, the effect would be closer to a 1% decrease.
“The two silver linings for investors: First, 12-18 months after the changes are implemented growth rates will return to normal,” Munster tweeted. “Second, Apple’s long-term potential is not impacted by the change.”
Apple sees the verdict as a win because it did not challenge Apple’s right to determine which software is permitted on its store, and because it did not find Apple is a monopoly under federal or state law.
“We are very pleased with the court’s ruling and we consider this a huge win for Apple,” Apple General Counsel Kate Adams said in a statement.
But investors closely watch Apple’s services business, which has grown strongly for the past few years, and includes revenue from Apple’s App Store sales in addition to online subscriptions, search licensing revenue from Google and AppleCare warranties.
Services accounts for about 20% of Apple’s revenue, but it is a profit engine for Apple, with significantly higher margins than its hardware business. Apple reported $53.77 billion in services sales in its fiscal 2020 at a 66% gross margin, much higher than the 31.5% margin for Apple’s hardware business.
Apple doesn’t break down how much of its services sales come from the App Store, but it’s a big component. Apple’s App Store grossed more than $64 billion in 2020, according to a CNBC analysis. Sensor Tower, an app analytics firm, places the number slightly higher, at $72 billion.
Worldwide, Apple grossed $47.6 billion from mobile games, collecting fees of about $14.3 billion, according to Sensor Tower statistics provided to CNBC.
The judge’s ruling on Friday highlighted how much of Apple’s App Store revenue comes from games and in particular, big spenders. Rogers said in Friday’s ruling she believed Apple’s fully burdened margin on the App Store was over 72%, based on Apple documents.
Gaming app stocks soared on Friday’s news. Shares of AppLovin, Zynga, Playtika and Roblox climbed on hopes that those gaming companies can reduce costs by directing users to their own payments, bypassing Apple’s cut.
Epic Games is a private company and its CEO Tim Sweeney said in a statement that Friday’s ruling wasn’t a win. Epic wants to be permitted to offer its own app store on iPhones.
Amazon on Friday announced it would invest an additional $4 billion in Anthropic, the artificial intelligence startup founded by ex-OpenAI research executives.
The new funding brings the tech giant’s total investment to $8 billion, though Amazon will retain its position as a minority investor, according to Anthropic, the San Francisco-based company behind the Claude chatbot and AI model.
Amazon Web Services will also become Anthropic’s “primary cloud and training partner,” according to a blog post. From now on, Anthropic will use AWS Trainium and Inferentia chips to train and deploy its largest AI models.
Anthropic is the company behind Claude — one of the chatbots that, like OpenAI’s ChatGPT and Google’s Gemini, has exploded in popularity. Startups like Anthropic and OpenAI, alongside tech giants such as Google, Amazon, Microsoft and Meta, are all part of a generative AI arms race to ensure they don’t fall behind in a market predicted to top $1 trillion in revenue within a decade. Some, like Microsoft and Amazon, are backing generative AI startups with hefty investments as well as working on in-house generative AI.
The partnership announced Friday will also allow AWS customers “early access” to an Anthropic feature: the ability for an AWS customer to do fine-tuning with their own data on Anthropic’s Claude. It’s a unique benefit for AWS customers, according to a company blog post.
In March, Amazon’s $2.75 billion investment in Anthropic was the company’s largest outside investment in its three-decade history. The companies announced an initial $1.25 billion investment in September 2023.
Amazon does not have a seat on Anthropic’s board.
News of Amazon’s additional investment comes one month after Anthropic announced a significant milestone for the company: AI agents that can use a computer to complete complex tasks like a human would.
Anthropic’s new Computer Use capability, part of its two newest AI models, allows its tech to interpret what’s on a computer screen, select buttons, enter text, navigate websites and execute tasks through any software and real-time internet browsing.
The tool can “use computers in basically the same way that we do,” Jared Kaplan, Anthropic’s chief science officer, told CNBC in an interview last month, adding it can do tasks with “tens or even hundreds of steps.”
Amazon had early access to the tool, Anthropic told CNBC at the time, and early customers and beta testers included Asana, Canva and Notion. The company had been working on the tool since early this year, according to Kaplan.
In September, Anthropic rolled out Claude Enterprise, its biggest new product since its chatbot’s debut, designed for businesses looking to integrate Anthropic’s AI. In June, the company debuted its more powerful AI model, Claude 3.5 Sonnet, and in May, it rolled out its “Team” plan for smaller businesses.
Last year, Google committed to invest $2 billion in Anthropic, after previously confirming it had taken a 10% stake in the startup alongside a large cloud contract between the two companies.
LONDON — Apple and Google could face a competition investigation into their dominance of mobile web browsers and apps in the U.K.
The U.K.’s Competition and Markets Authority issued a report Friday with a provisional decision from an independent inquiry group tasked by the regulator with carrying out an in-depth review of the mobile browser markets.
In the report, the group recommended that the CMA investigates Apple and Google’s activities in mobile ecosystems under the new Digital Markets, Competition and Consumers Act (DMCC), a new U.K. law coming into force next year which seeks to prevent anti-competitive behavior in digital markets.
The DMCC is akin to the Digital Markets Act in the European Union. It gives the CMA the ability to designate firms as having “Strategic Market Status” (SMS) — which means they have a significant amount of market power in a certain digital business.
Under the rules, the CMA can impose major behavioral changes on firms that have SMS status, including ending “self-preferencing” of their own services, requiring interoperability — essentially allowing one piece of software to work with another smoothly — and banning anti-competitive behavior.
The CMA is required to undertake a formal investigation to give a firm SMS status.
For Apple specifically, the CMA inquiry group said it was concerned the tech giant’s App Store rules “restrict other competitors from being able to deliver new, innovative features that could benefit consumers” — for example, faster webpage loading on iPhone apps.
It added many smaller U.K. developers said they would like to use “progressive” web apps — which allow firms to offer apps outside of an app store — but that this technology “is not able to fully take off on iOS devices.”
The group also said it found a revenue-sharing agreement between Google and Apple to make Google the default search engine on iPhone “significantly reduces their financial incentives to compete in mobile browsers on iOS.”
“Markets work best when rival businesses are able to develop and bring innovative options to consumers,” Margot Daly, chair of the CMA’s independent inquiry group, said in a statement, adding that “competition between different mobile browsers is not working well and this is holding back innovation in the U.K.”
Apple said in a statement that it disagreed with the findings of the report and that it was concerned market interventions imposed under the DMCC “would undermine user privacy and hinder our ability to make the kind of technology that sets Apple apart.”
“Apple believes in thriving and dynamic markets where innovation can flourish. We face competition in every segment and jurisdiction where we operate, and our focus is always the trust of our users” an Apple spokesperson told CNBC via email.
Google was not immediately available for comment when contacted by CNBC.
The CMA group had also looked into restrictions on the distribution of gaming services on Apple’s mobile app distribution platform. However, it’s now decided to drop this element of the investigation following a decision by the U.S. tech giant to allow cloud gaming services on App Store.
The regulator said interested parties have until Dec. 13 to share comments on its provisional findings. It expects to make a final decision in March 2025.
An iPhone 16 signage is seen on the window at the Fifth Avenue Apple Store on new products launch day on September 20, 2024 in New York City.
Michael M. Santiago | Getty Images News | Getty Images
The Indonesian government expects Apple to increase its proposed $100 million investment into the country, according to state media, as the iPhone maker seeks clearance from Jakarta to sell its latest phones.
The American tech giant’s latest smartphone model doesn’t meet Indonesia’s 40% domestic content requirements for smartphones and tablets and hasn’t been granted clearance to be sold in the country.
The purpose of the ban is to protect local industry and jobs, with officials asking Apple to increase its investments and commitments to the economy in order to gain greater access.
According to a report from Indonesian state media, the country’s Ministry of Industry met with representatives from Apple on Thursday regarding its proposal to invest $100 million over two years.
The funds would go toward a research and development center program and professional development academy in the country, as per the report.
The company also plans to produce accessory product components, specifically mesh for Apple’s AirPods Max, starting in July 2025, it added.
Apple didn’t immediately respond to a request for comment from CNBC.
While the new offer is 10 times larger than a proposal that was reported earlier, the government is still striving to sweeten the deal to get a “fair” commitment.
“From the government’s perspective, of course, we want this investment to be larger,” industry ministry spokesperson Febri Hendri Antoni Arif told state media on Thursday.
He said that a larger investment would help the development of Indonesia’s manufacturing sector, adding that its domestic industry was capable of supporting production of Apple devices such as chargers and accessories.
While Indonesia represents a small market for Apple, it also offers growth opportunities as it has the world’s fourth-largest population, according to Le Xuan Chiew, a Canalys analyst focusing on Apple strategy research.
“Its young, tech-savvy population with growing digital literacy aligns with Apple’s strategy to expand [global sales],” he said, noting that it also offers potential for manufacturing and assembly that supports Apple’s efforts to diversify its supply chain.
Success in this market requires a long-term approach, and Apple’s investment offer demonstrates a commitment to complying with local regulations and paving the way for future growth, he added.
