Apple made an unusual pitch in its bid to save a lucrative search partnership with Google, saying that the deal might not be necessary in the long run and that even the iPhone may fall out of use.
Eddy Cue, the company’s senior vice president of services, laid out the argument during testimony on Wednesday at the US justice department’s antitrust trial against Google. Though Apple receives roughly US$20-billion/year from the company — in return for making Google’s search engine the default option on devices — Cue warned that the whole landscape is shifting.
Already, Apple plans to reshape its Safari web browser around artificial intelligence services such as OpenAI’s ChatGPT, Perplexity and Anthropic’s Claude, he said.
Moreover, customers are ditching the old way of searching. The number of Google search queries on Apple devices declined for the first time in April, the result of users switching to AI, he said.
“Technology shifts create these opportunities,” Cue said, adding that he believes the AI providers will ultimately become options in Safari as search engine alternatives.
But it was also clear that Apple doesn’t want to lose the current Google arrangement, which is under threat if the justice department wins the case. And investors see that possibility as a danger for both companies.
Shares of Alphabet fell 7.3% in New York trading on Wednesday, while Apple slipped 1.1%. Google generates billions of dollars a year from search queries conducted on Apple’s more than two billion active devices.
Clear goal
Today, the Safari web browser offers Google as the preferred search engine — alongside alternatives such as Yahoo Search, Microsoft Corp.’s Bing and DuckDuckGo. Apple has revenue-sharing agreements with all of the providers, though Google pays the most. And that pact is central to the government’s lawsuit against the Mountain View, California-based search giant.
Cue’s disclosure of Apple’s plan to shift its browser to AI systems had a clear goal: downplaying the importance of the existing Google deal. If the industry has changed and there are now clear alternatives to Google, the judge may decide there’s no reason to upend the long-running agreement. Cue spent time praising these rival options, including Perplexity’s service in particular.
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“It is logical that Apple might highlight data points supporting the narrative that Google is not anticompetitive in search,” Jefferies LLC analyst Brent Thill said in a note.
But Apple and Google have the opportunity to deepen their partnership around AI — something Cue didn’t focus on. Google has already pivoted to its own Gemini AI system for search. When users make a query via Google, they are often first presented with an AI result. That’s true even on iPhones, iPads and Macs today.
Apple’s sharing of future plans was a rarity for the company. And Cue’s remarks about the iPhone, which generates more than half of Apple’s revenue, were especially striking. “You may not need an iPhone 10 years from now, as crazy as it sounds,” he said.
But the general approach was part of Apple’s tried-and-true courtroom playbook. The company has a history of making surprising statements, even if they undermine its marketing message, in order to sway decisions. During a 2021 Epic Games trial, Apple’s software chief said Mac computers have a problem with malware — as part of an argument for why its app ecosystem should remain closed.
Cue, one of CEO Tim Cook’s closest lieutenants and a former confidant to co-founder Steve Jobs, has a lot on the line. Revenue from the Google arrangement has been a driver of services revenue in recent years. That group — one of Apple’s only reliable sources of growth — generated a record $26.6-billion in the March quarter.
During his testimony, Cue said he has lost sleep over the possibility of ending the revenue-sharing deal with Google. He added that Google should remain the preferred option. While new services will get added, “they probably won’t be the default”, Cue said.
Though Cue doesn’t oversee the App Store, revenue from the platform is recorded within his group. That business also makes Apple about $20-billion/year, and it, too, is under threat. A judge ruled last month that Apple must stop taking a commission from purchases made outside of its payment system.
But even with those two revenue streams in jeopardy, Apple has new moneymaking opportunities. ChatGPT, Perplexity, Claude and other AI systems could ultimately share revenue with Apple, especially as they potentially push into the advertising market.
Getting closer
Apple may eventually be better off with no exclusive deals and the ability to take a slice of revenue from as many providers as possible — essentially recreating the App Store business model but for AI search.
Apple currently uses OpenAI’s ChatGPT in a separate product for fulfilling queries in the Siri digital assistant. And it plans to add Google Gemini as an alternative later this year.
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Google and Apple are getting closer in other ways. Last year, the iPhone maker integrated Google into its new Visual Intelligence feature, allowing users to snap a photo and get AI analysis. Cue said the two companies have a revenue-sharing arrangement for that feature as well. — (c) 2025 Bloomberg LP
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