The Department of Justice sued Apple on Thursday, saying its iPhone ecosystem is a monopoly that drove its “astronomical valuation” at the expense of consumers, developers and rival phone makers.
The lawsuit claims that Apple’s anti-competitive practices extend beyond the iPhone and Apple Watch businesses, citing Apple’s advertising, browser, FaceTime and news offerings.
“Each step in Apple’s course of conduct built and reinforced the moat around its smartphone monopoly,” says the suit, filed by the DOJ and 16 attorneys general in New Jersey federal court.
Apple shares fell over 2% during trading on Thursday.
The Justice Department said in a release that to keep consumers buying iPhones, Apple moved to block cross-platform messaging apps, limited third-party wallet and smartwatch compatibility and disrupted non-App Store programs and cloud-streaming services.
The challenge represents a significant risk to Apple’s walled-garden business model. The company says that complying with regulations costs the company money, could prevent it from introducing new products or services, and could hurt customer demand.
The lawsuit could force Apple to make changes in some of its most valuable businesses: The iPhone, in which Apple reported over $200 billion in sales in 2023, the Apple Watch, part of the company’s $40 billion wearables business, and its profitable services line, which reported $85 billion in revenue.
“If left unchallenged, Apple will only continue to strengthen its smartphone monopoly,” U.S. Attorney General Merrick Garland said in the release.
Apple said in a statement that it disagreed with the premise of the lawsuit and that it would defend against it.
“This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets. If successful, it would hinder our ability to create the kind of technology people expect from Apple—where hardware, software, and services intersect,” an Apple spokesperson told CNBC. “It would also set a dangerous precedent, empowering government to take a heavy hand in designing people’s technology.”
“This anticompetitive behavior is designed to maintain Apple’s monopoly power while extracting as much revenue as possible,” the complaint said.
iMessage, Apple Watch, and cloud gaming
The complaint highlights comments from CEO Tim Cook and other executives. Some users have asked Apple to improve Android-to-iPhone messaging. Developers have gone as far as creating apps that can circumvent the platform limitations, only to be shut down by Apple.
Apple CEO Tim Cook speaks onstage during day 2 of Vox Media’s 2022 Code Conference in Beverly Hills, California.
Jerod Harris | Getty Images Entertainment | Getty Images
Prosecutors highlighted one exchange between Cook and a consumer.
“Not to make it personal but I can’t send my mom certain videos,” the complaint says one user told Cook, referring to a 2022 interview at a Vox Media event.
“Buy your mom an iPhone,” Cook responded.
The DOJ is also focusing on Apple’s smartwatch, Apple Watch, saying the company designed it to only work with iPhones, and not Android devices. The company’s decision means that “users who purchase the Apple Watch face substantial out-of-pocket costs if they do not keep buying iPhones,” according to the complaint.
The DOJ said Apple has fought cloud streaming services on its App Store platform, blocking consumer access to high-quality video games on iPhones, echoing complaints from Microsoft and Facebook parent Meta.
Apple has faced several significant antitrust challenges more recently, largely focused on its control over the iPhone App Store. It mostly won in a civil suit against Epic Games in 2021, although it made concessions during the trial and had to make some changes to its policies under California law.
“Today’s lawsuit seeks to hold Apple accountable and ensure it cannot deploy the same, unlawful playbook in other vital markets,” Assistant Attorney General for antitrust Jonathan Kanter said in the release.
The company is currently jockeying with the European Commission over whether it’s complying with a new Digital Markets Act, which forces Apple to open up the iPhone app store to rivals such as Microsoft or Epic Games. Apple plans to charge big companies that eschew its app store 50 cents per download.
Apple was fined $2 billion in the EU over a dispute with Spotify about whether the music streaming service can link to its website and account system inside of its app.
Apple had 64% of the market share for U.S. iPhones in the last quarter of 2023, versus 18% for Samsung, according to Counterpoint Research.
Apple isn’t the only big tech company facing government scrutiny. The DOJ filed an antitrust case against Google in 2020 over its dominant search position and another year over its advertising business. The DOJ also famously sued Microsoft in the 1990s, eventually forcing it to allow users to unbundle the Internet Explorer browser from the Windows operating system.
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TikTok’s grip on the short-form video market is tightening, and the world’s biggest tech platforms are racing to catch up.
Since launching globally in 2016, ByteDance-owned TikTok has amassed over 1.12 billion monthly active users worldwide, according to Backlinko. American users spend an average of 108 minutes per day on the app, according to Apptoptia.
TikTok’s success has reshaped the social media landscape, forcing competitors like Meta and Google to pivot their strategies around short-form video. But so far, experts say that none have matched TikTok’s algorithmic precision.
“It is the center of the internet for young people,” said Jasmine Enberg, vice president and principal analyst at Emarketer. “It’s where they go for entertainment, news, trends, even shopping. TikTok sets the tone for everyone else.”
Platforms like Meta‘s Instagram Reels and Google’s YouTube Shorts have expanded aggressively, launching new features, creator tools and even considering separate apps just to compete. Microsoft-owned LinkedIn, traditionally a professional networking site, is the latest to experiment with TikTok-style feeds. But with TikTok continuing to evolve, adding features like e-commerce integrations and longer videos, the question remains whether rivals can keep up.
“I’m scrolling every single day. I doom scroll all the time,” said TikTok content creator Alyssa McKay.
But there may a dark side to this growth.
As short-form content consumption soars, experts warn about shrinking attention spans and rising mental-health concerns, particularly among younger users. Researchers like Dr. Yann Poncin, associate professor at the Child Study Center at Yale University, point to disrupted sleep patterns and increased anxiety levels tied to endless scrolling habits.
“Infinite scrolling and short-form video are designed to capture your attention in short bursts,” Dr. Poncin said. “In the past, entertainment was about taking you on a journey through a show or story. Now, it’s about locking you in for just a few seconds, just enough to feed you the next thing the algorithm knows you’ll like.”
Despite sky-high engagement, monetizing short videos remains an uphill battle. Unlike long-form YouTube content, where ads can be inserted throughout, short clips offer limited space for advertisers. Creators, too, are feeling the squeeze.
“It’s never been easier to go viral,” said Enberg. “But it’s never been harder to turn that virality into a sustainable business.”
Last year, TikTok generated an estimated $23.6 billion in ad revenues, according to Oberlo, but even with this growth, many creators still make just a few dollars per million views. YouTube Shorts pays roughly four cents per 1,000 views, which is less than its long-form counterpart. Meanwhile, Instagram has leaned into brand partnerships and emerging tools like “Trial Reels,” which allow creators to experiment with content by initially sharing videos only with non-followers, giving them a low-risk way to test new formats or ideas before deciding whether to share with their full audience. But Meta told CNBC that monetizing Reels remains a work in progress.
While lawmakers scrutinize TikTok’s Chinese ownership and explore potential bans, competitors see a window of opportunity. Meta and YouTube are poised to capture up to 50% of reallocated ad dollars if TikTok faces restrictions in the U.S., according to eMarketer.
Watch the video to understand how TikTok’s rise sparked a short form video race.
The X logo appears on a phone, and the xAI logo is displayed on a laptop in Krakow, Poland, on April 1, 2025. (Photo by Klaudia Radecka/NurPhoto via Getty Images)
Nurphoto | Nurphoto | Getty Images
Elon Musk‘s xAI Holdings is in discussions with investors to raise about $20 billion, Bloomberg News reported Friday, citing people familiar with the matter.
The funding would value the company at over $120 billion, according to the report.
Musk was looking to assign “proper value” to xAI, sources told CNBC’s David Faber earlier this month. The remarks were made during a call with xAI investors, sources familiar with the matter told Faber. The Tesla CEO at that time didn’t explicitly mention any upcoming funding round, but the sources suggested xAI was preparing for a substantial capital raise in the near future.
The funding amount could be more than $20 billion as the exact figure had not been decided, the Bloomberg report added.
Artificial intelligence startup xAI didn’t immediately respond to a CNBC request for comment outside of U.S. business hours.
The AI firm last month acquired X in an all-stock deal that valued xAI at $80 billion and the social media platform at $33 billion.
“xAI and X’s futures are intertwined. Today, we officially take the step to combine the data, models, compute, distribution and talent,” Musk said on X, announcing the deal. “This combination will unlock immense potential by blending xAI’s advanced AI capability and expertise with X’s massive reach.”
Alphabet CEO Sundar Pichai during the Google I/O developers conference in Mountain View, California, on May 10, 2023.
David Paul Morris | Bloomberg | Getty Images
Alphabet‘s stock gained 3% Friday after signaling strong growth in its search and advertising businesses amid a competitive artificial intelligence environment and uncertain macro backdrop.
“GOOGL‘s pace of GenAI product roll-out is accelerating with multiple encouraging signals,” wrote Morgan Stanley‘s Brian Nowak. “Macro uncertainty still exists but we remain [overweight] given GOOGL’s still strong relative position and improving pace of GenAI enabled product roll-out.”
The search giant posted earnings of $2.81 per share on $90.23 billion in revenues. That topped the $89.12 billion in sales and $2.01 in EPS expected by LSEG analysts. Revenues grew 12% year-over-year and ahead of the 10% anticipated by Wall Street.
Net income rose 46% to $34.54 billion, or $2.81 per share. That’s up from $23.66 billion, or $1.89 per share, in the year-ago period. Alphabet said the figure included $8 billion in unrealized gains on its nonmarketable equity securities connected to its investment in a private company.
Adjusted earnings, excluding that gain, were $2.27 per share, according to LSEG, and topped analyst expectations.
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Alphabet shares have pulled back about 16% this year as it battles volatility spurred by mounting trade war fears and worries that President Donald Trump‘s tariffs could crush the global economy. That would make it more difficult for Alphabet to potentially acquire infrastructure for data centers powering AI models as it faces off against competitors such as OpenAI and Anthropic to develop largely language models.
During Thursday’s call with investors, Alphabet suggested that it’s too soon to tally the total impact of tariffs. However, Google’s business chief Philipp Schindler said that ending the de minimis trade exemption in May, which created a loophole benefitting many Chinese e-commerce retailers, could create a “slight headwind” for the company’s ads business, specifically in the Asia-Pacific region. The loophole allows shipments under $800 to come into the U.S. duty-free.
Despite this backdrop, Alphabet showed steady growth in its advertising and search business, reporting $66.89 billion in revenues for its advertising unit. That reflected 8.5% growth from the year-ago period. The company reported $8.93 billion in advertising revenue for its YouTube business, shy of an $8.97 billion estimate from StreetAccount.
Alphabet’s “Search and other” unit rose 9.8% to $50.7 billion, up from $46.16 billion last year. The company said that its AI Overviews tool used in its Google search results page has accumulated 1.5 billion monthly users from a billion in October.
Bank of America analyst Justin Post said that Wall Street is underestimating the upside potential and “monetization ramp” from this tool and cloud demand fueled by AI.
“The strong 1Q search performance, along with constructive comments on Gemini [large language model] performance and [AI Overviews] adoption could help alleviate some investor concerns on AI competition,” Post wrote in a note.