Apple’s AI Search Ambitions Threaten Google’s $20 Billion Safari Deal

Key Points:

• Apple is exploring AI-powered search alternatives, including ChatGPT, Perplexity, and others — putting Google’s longtime dominance at risk.
• Google paid Apple $20 billion in 2022 to remain the default search engine on Safari.
• Alphabet stock dropped 7.3% after Apple revealed it’s considering AI competitors — a $150 billion market cap loss in a single day.
• The shift to AI search is bigger than a tech upgrade — it could fundamentally change how we find and interact with information online.
• Antitrust pressures and consumer behaviour are aligning to end Google’s “default” era — and Apple may be quietly setting the stage.

Apple Safari Browser Logo, Photo by Mariia Shalabaieva on Unsplash

Apple Inc.’s quiet reconsideration of its default search engine strategy — disclosed during a federal antitrust trial this week — may mark a pivotal turning point for Alphabet Inc., whose business model has long relied on default status on Apple devices to maintain search dominance.

The revelation came during the testimony of Eddy Cue, Apple’s Senior Vice President of Services, in the U.S. Department of Justice’s ongoing case against Google. Cue acknowledged that Apple is “actively looking at” integrating AI-powered search engines into its Safari browser, a potential end to the $20 billion annual agreement that currently ensures Google’s default position.

The disclosure sent Alphabet shares tumbling 7.3% on Wednesday — their steepest drop since February — wiping out more than $150 billion in market cap in a single session. Apple also dipped, but far more modestly, closing down 1.1%.

$20 Billion for Default Search Engine Status

Court documents unsealed this week for the first time confirm that Google paid Apple $20 billion in 2022 to remain the default search engine in Safari. This significant payment constitutes a major portion of Apple’s operating income, highlighting the deal’s critical strategic and financial value for both companies.

Since 2002, Google has been the default search engine on Apple products — a partnership that began at no cost, but gradually evolved into a multibillion-dollar revenue-sharing arrangement. At last year’s trial, a Google witness inadvertently revealed that 36% of the revenue Google earns from search advertising is paid to Apple.

Those terms, while favorable to Apple, are now under scrutiny — not only from regulators but from Apple’s own leadership, who appear increasingly interested in shifting toward AI-powered alternatives.

According to Google's Q1 2025 earnings report, search remains the company’s largest source of revenue. Google reported $90.23 billion in revenue for the quarter, with more than half of that total generated from search, source: alphabet's investor relations.

AI Disruption and Strategic Realignment

Cue’s testimony provided insight into Apple’s evolving approach to search. Notably, he indicated that search volumes in Safari declined last month for the first time — a drop he attributed to rising usage of generative AI platforms such as OpenAI’s ChatGPT and Perplexity AI. Following Cue's remarks, Google later issued a statement addressing matters related to search traffic:

We continue to see overall query growth in Search. That includes an increase in total queries coming from Apple’s devices and platforms. More generally, as we enhance Search with new features, people are seeing that Google Search is more useful for more of their queries — and they’re accessing it for new things and in new ways, whether from browsers or the Google app, using their voice or Google Lens. We’re excited to continue this innovation and look forward to sharing more at Google I/O.

While Cue maintained that Google should remain the default, he acknowledged that the technology shift driven by large language models may soon present superior user experiences. “There’s enough money now, enough large players, that I don’t see how it doesn’t happen,” he said.

Competitive Pressures and Microsoft’s Missed Opportunity

The newly unsealed filings also revealed that Microsoft Corp. made an aggressive pitch to replace Google as the default search engine on Apple devices. According to internal correspondence, Microsoft offered Apple 90% of ad revenue from Safari queries, and was even willing to white-label Bing to obscure its branding.

Despite those concessions, Apple declined. At the time, Bing’s technology was not considered competitive with Google’s. But with generative AI leveling the playing field, Apple’s calculus appears to be shifting.

Antitrust and the End of Defaults

The DOJ case itself is another major variable. Regulators argue that Google’s default search engine arrangements — particularly with Apple — constitute illegal monopolization of the online search market. Should the court rule against Google, the company may be compelled to unwind its most valuable partnership.

Google, for its part, insists that it continues to see strong search query volumes from Apple devices and has invested heavily in next-gen AI capabilities like Gemini. But the financial and competitive risks are significant.

A break with Apple would leave Google with a massive traffic shortfall on the most-used smartphone platform in the U.S. Moreover, consumer behavior is evolving quickly: as AI-powered assistants become more capable and integrated, traditional keyword search models may lose relevance.

CNBC: Apple's service chief Eddy Cue: Searches in browser fell for first time in April

Outlook: The Default Era Nears Its End

For over a decade, Google’s grip on mobile search has been anchored by its privileged position within iOS. That dominance, and the $20 billion price tag attached to it, now faces simultaneous disruption from three fronts: technological change, regulatory intervention, and shifting platform incentives.

Even if Apple maintains Google as its default engine in the near term, the long-term trajectory appears clear: the future of search may not be a single box with ten blue links — but a distributed ecosystem of AI agents and assistants, many of which Apple is already vetting.

Investors are reacting accordingly. The sharp selloff in Alphabet underscores just how central the Safari default deal is to its ad-driven business model. While Apple also has exposure, it appears better positioned to adapt, particularly as it accelerates the rollout of its Apple Intelligence platform.

The question is no longer if Google’s status quo will change — but when, and how rapidly.