The court ruling brings an "unexpected victory," and Apple's $20 billion search revenue is "secured"!

The latest ruling by a U.S. court in the Google antitrust case has brought an unexpected victory for Apple, as the judge allowed Google to continue paying Apple over $20 billion in annual default search engine fees, a decision that protects one of Apple's most important sources of service revenue.

U.S. District Judge Amit P. Mehta's latest ruling prohibits Google from signing exclusive search agreements but rejected the Department of Justice's request for severe measures such as forcing the divestiture of the Chrome browser. The judge clearly stated that Google can continue to pay for the distribution of its products, and prohibiting these agreements would harm the interests of partners like Apple.

This ruling has triggered a strong market reaction. In pre-market trading on Wednesday, shares of Google's parent company Alphabet rose more than 6%, while Apple's stock increased by about 3%. Wall Street analysts view this as a significant victory for both companies, as it protects the core business model of their $20 billion annual partnership.

The ruling also paves the way for further collaboration between the two companies in AI-related services. The judge believes that as AI technology rapidly evolves and changes the competitive landscape, the court should avoid excessive interference in the natural operation of market forces.

Court Adopts Google's Core Position, Avoids Severe Sanctions

Judge Mehta's ruling largely adopted Google's defense position. Although he previously ruled that Google illegally monopolized the search market for over a decade, he displayed a relatively mild attitude regarding specific remedial measures.

In his ruling, Mehta wrote:

There is ample reason not to disrupt the system but to let market forces play out. He emphasized that judges should maintain a humble attitude when dealing with remedial measures, especially in the context of AI technology changing competitive dynamics.

The most important limitation imposed by the court is the prohibition of Google signing agreements with browser companies and device manufacturers that require them to exclusively use Google's search engine, Chrome browser, or AI products. Additionally, Google is prohibited from bundling the licensing of its Android app store with the use of these products.

The judge rejected the Department of Justice's proposal for Google to sell the Chrome browser, stating that the plaintiffs were "overreaching" in seeking to force the divestiture of these core assets, as "Google has not used these assets to impose any illegal restrictions."

Key Protection for Apple's Service Revenue

For Apple, the significance of this ruling is particularly profound. Although the $20 billion fee paid by Google accounts for only about 5% of Apple's annual revenue, it contributes significantly to profits.

Apple's services business (including licensing fees from Google) generated a gross profit of 75 cents for every dollar earned in the 12-month period ending in June, while Apple's hardware business had a gross margin of only 37% during the same period.

Losing this high-profit revenue source would be poorly timed for Apple. The iPhone still accounts for more than half of Apple's annual revenue, but the average annual revenue growth rate over the past three years has been only 2%. Analysts expect that iPhone revenue growth will be less than 4% in Apple's fiscal year ending next September Craig Moffett of MoffettNathanson stated: "Apple not only dodged the bullet but also the missile." Apple's stock price has fallen more than 8% this year, making it the only large tech stock with a negative annual performance.

AI Competition Becomes Key Factor for Judges' Consideration

When considering relief measures, the rapid development of AI technology has become an important factor. Generative AI has posed a threat to Google's traditional search business, with users increasingly turning to chatbots for answers to questions they previously posed to Google.

The judge wrote that these companies are in a better financial and technological position to compete with Google than any traditional search company has been for decades (except for Microsoft).

AI startup Perplexity previously proposed to acquire the Chrome browser for $34.5 billion. Although this proposal was deemed unrealistic by the judge, it reflects the potential impact of AI technology on the search market landscape.

The judge required Google to share search query data with specific competitors, but analysts believe this will have limited short-term impact. By the time this measure may take effect, AI technology may have already fundamentally changed the way people search