Apple Inc. (NASDAQ: AAPL) maintains a lesser-known revenue stream that consistently yields multi-billion-dollar returns each year. Over the past three years, this source has experienced a notable increase, according to analyst Toni Sacconaghi, Jr. from Bernstein.
What Happened: Per Sacconaghi's analysis, Apple derives an estimated annual income ranging from $18 billion to $20 billion by designating Alphabet Inc.'s (NASDAQ: GOOG) (NASDAQ: GOOGL) Google as the default search engine on its iOS platform.
This updated estimate reflects a $5 billion increase compared to last year's projection and a $10 billion upswing from the calculation made in 2020.
However, if Google faces defeat in the ongoing antitrust trial, it could jeopardize its profitable agreement with Apple and raise doubts about the survival of similar deals with Samsung and Mozilla.
"We believe there is a possibility that federal courts rule against Google and force it to terminate its search deal with Apple," Bernstein stated in the published report, according to The Register.
Cupertino, not being on trial itself, could partner with another search engine to replace Google as the default option or introduce a choice screen to let users select their preferred search engine.
According to the Bernstein report, Apple has controlled access to its "installed base," which generates approximately $60 billion-plus in ad revenues. Hence, it is anticipated that Apple would still demand a fee, likely between 25-30%, for facilitating access to these search ad incomes.
"Moreover, the introduction of a choice screen could offer Apple the opportunity to potentially launch its own search engine as an option - something it could likely not do today without raising the eyebrows of regulators," the report added.
Previously, it was reported that the Tim Cook-led company reportedly plans to launch its own search engine.
According to Bloomberg columnist Mark Gurman, the tech giant has long been pondering the prospect of reducing its reliance on Google, and now the ultimate launch could be "closer than you think."
Why It's Important: Earlier this month, while testifying, Microsoft (NASDAQ: MSFT) CEO Satya Nadella said his company was open to obscuring its search engine's "Bing" brand on Apple devices to unseat Google from its default search engine status.
During the same trial, it was also revealed that Apple declined Microsoft's offer to purchase Bing around the year 2020.
Previously, Eddy Cue, Apple's services chief, cited Google's superior search results as the reason for their partnership with the search and advertising giant, resulting in approximately $8 billion in annual revenue.