Apple gets 36% of Google search revenue from Safari, Alphabet witness says
Google and Alphabet Inc. CEO Sundar Pichai arrives at the federal courthouse in Washington, Monday, Oct. 30, 2023.
Jose Luis Magana | AP
Google pays Apple more than a third of its search advertising revenue from Safari under the terms of the two companies’ search default agreement, an Alphabet witness said in open court Monday amid a protracted antitrust battle between Google and the Department of Justice.
The 36% figure, which was not previously known to the public, is one of the clearest indications of how lucrative Google’s search deal has been for both Apple and the search engine company. Both companies have fought to limit revealing the deals’ details, citing potentially anticompetitive effects.
The incidental disclosure from Alphabet’s expert witness Kevin Murphy, a professor of economics at the University of Chicago, was not expected. Murphy’s testimony came as part of the company’s efforts to fight the Justice Department’s claims that the company illegally maintains dominance over search and advertising markets.
Williams & Connolly antitrust partner John Schmidtlein visibly cringed when Murphy revealed the number, Bloomberg News reported.
The search default agreement is a major focus of the proceedings. Judge Amit Mehta has described the Apple-Google deal as the “heart” of the case. It’s a number Wall Street pays attention to as well. Bernstein analyst Toni Sacconaghi has estimated in a note to clients that Apple would see $19 billion in 2023 revenue as a result of the search engine default deal with Google.
Google declined to comment. Apple did not immediately respond to a request for comment.
Alphabet CEO Sundar Pichai defended such deals when he testified in the proceedings. But Google’s competitors have described the arrangement as damaging to their business. Microsoft CEO Satya Nadella, for example, pushed back in detail when he testified in October.
Nadella said that “every year” he had held the top job at Microsoft, he had “dialogues” with Apple over a default search engine deal for Microsoft’s Bing, even if that meant billions in short-term losses. Nothing had yet come of those talks, Nadella said.
Nadella said that the idea of an “open web” was a misnomer. “Everybody talks about the open web, but there really is the Google web,” he said on the stand.
Intel stock held a sharp hike in pretrading on Monday, after the stock surged on Friday when an analyst predicted the chip giant was nearing a deal to supply Apple in 2027.
Shares in Intel rose 10% on Friday after TF International Securities analyst Ming-Chi Kuo posted on X that he expected Intel to begin shipping its lowest-end M processor to Apple as early as second or third quarter 2027.
He said that his latest industry surveys indicate that “visibility on Intel becoming an advanced-node supplier to Apple has recently improved significantly.”
Intel stock fell 0.59% as of 6.26am ET on Monday in early pretrading.
Kuo added that the timeline of the partnership is contingent on the development process after Intel releases its process design kit — the blueprint from which Apple’s engineers can build the chips — which is expected early 2026.
Apple’s silicon chips for its iPhone, iPad and Mac products are currently supplied by TSMC.
In his post, Kuo played down the potential Intel-Apple partnership’s impact on the Taiwanese chip maker, saying that Apple is expected to remain “highly dependent” on the company’s advanced nodes for the “foreseeable future.”
“In absolute terms, order volumes for the lowest-end M processor are relatively small and virtually no material impact on TSMC’s fundamentals or its technology leadership over the next several years.”
Kuo added a deal with Intel would signal strong support from Apple for the Trump administration’s push for its homegrown companies to manufacture in the U.S.
Neither Intel nor Apple immediately responded to a request for comment from CNBC.
‘If Intel pulls it off, there is potential to win higher volume and value business from Apple’
Intel’s stock has seen a resurgence over the past 12 months after years of decline. Share price fell as low as $17.66 in April, before recovering over the past few months.
“Apple is a potential major reference customer whose presence validates Intel’s high-performance foundry offering,” Paul Markham, investment director at GAM Global Equities, told CNBC.
“If Intel pulls it off, there is potential to win higher volume and value business from Apple, for example CPU production for the iPhone, and win business from other large chip designers.”
Intel has had an up and down relationship with Apple since it first announced the chip giant’s processors would power some products in 2005. The iPhone maker transitioned away from the company’s processors at the start of the 2020s.
Last week Intel was on the subject of a lawsuit filed by TSMC, in which it alleged one of its former senior vice president had leaked “confidential information” to the company. Intel did not immediately respond to CNBC’s request for comment at the time.
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