Eddy Cue’s testimony in the ongoing DOJ antitrust case against Google was highlighted by his comment that, for the first time, Safari search volumes declined in April. That’s a negative signal for Google, given that I estimate it accounts for roughly 95% of Safari search traffic. It also raises concerns for Apple’s search placement deal, as the underlying economics of traditional search appear to be coming under pressure.

Cue added that he believes AI-native search providers will eventually replace traditional engines like Google. Apple is actively exploring the integration of AI-powered search features into Safari and could potentially partner with companies like OpenAI, Perplexity, or Anthropic. While Google is expected to remain the default search engine for Safari, largely due to Apple’s revenue-sharing agreement, it’s clear that the relationship is beginning to shift.

Even in a worst-case scenario, where the Google deal is broken up or loses its economic force, Apple has levers to pull to monetize its massive user base. For example, by either charging users directly or partnering with another AI search provider, Apple could aim to generate just $1 per month per active user. With approximately 1.5B active users (and 2.2B active devices), that alone could yield $18B in annual revenue, nearly enough to fully offset the estimated $20B per year it currently receives from the Google Search placement agreement.

That $1 per user target is conservative. As a point of comparison, if Google has around 2.3B daily Search users, and Search revenue is expected to be about $200B this year, then Google’s monthly average revenue per user (ARPU) is closer to $7. In other words, capturing 15% of that monetization potential through premium AI features, or third-party partnerships (e.g., with OpenAI, Anthropic, or Perplexity) would represent a significant revenue stream for Apple. The company already has the infrastructure, user trust, and device integration to make the change with minimal friction.

In other words, the narrative that Apple is overly dependent on Google Search is over stated. Apple could potentially come out ahead if forced to move in a new direction.

While I believe the Apple–Google Search partnership will ultimately have a favorable outcome, even if Google’s role is reduced, shares of Apple are likely to face near-term headwinds. I personally hold shares, as does Deepwater, and we haven’t made any changes to our position. However, we do recognize that the timeline for the tide to turn may be longer than we initially expected.

The challenge for AAPL now is that Eddy Cue’s comments introduce a new risk to the investment case. Previously, the primary concern around search was that the DOJ might force Apple and Google to unwind their deal, an outcome investors widely viewed as unlikely given it would represent an unusually aggressive move by the DOJ. Now, the risk feels different. The fundamentals of the search business itself appear to be changing faster than most anticipated.

This search-related overhang now joins the Apple investor concern list:

• Tariffs and trade tensions, which could impact pricing and weigh on global consumer demand.
  My take: This is the biggest unknown. I don’t have much to add, other than the simple truth that if the consumer weakens, it will weaken demand for Apple’s products. So far, we haven’t seen that happen.

• Apple’s manufacturing dependence on China, with roughly 45% of revenue tied to China-made products.
  My take: Tim Cook is doing a world-class job moving production to India and Vietnam, but shifting the supply chain at this scale takes years to move the needle.

• Softening demand in China, where local consumers are increasingly favoring domestic brands.
  My take: China revenue was down 2% in March 2025, compared to an 11% decline in December 2024. I expect the region to be roughly flat in the June quarter.

• Execution risk around Apple Intelligence, as the company works to roll out compelling personalized AI features in early 2026.
  My take: We’ll need to wait until next year to evaluate the degree that these features will drive upgrades and new Services revenue via the App Store.

• The absence of a local China-based AI model partner.
  My take: This one should be resolved soon and I expect an announcement in the next few months.

All together, these risks point to a more nuanced and evolving narrative for Apple, one that extends beyond hardware cycles and into platform strategy, geopolitical exposure, and shifting monetization models.

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