Amid ongoing antitrust scrutiny, Google’s CEO Sundar Pichai dodged a question about the company’s contingency plans if its lucrative search partnership with Apple were to fall apart. While Pichai refused to speculate on the matter due to pending legal action, he did express concerns about the potential consequences of the Department of Justice’s (DOJ) proposed remedies.
During Alphabet’s third-quarter earnings call on Tuesday, Barclays analyst Ross Sandler directly questioned Google’s backup plan. Sandler pointed to the real risk of Google losing its contract with Apple and potentially facing a loss of pre-install agreements for Android.
Pichai stressed Google’s commitment to providing easily accessible products across all platforms, arguing that consumers and partners have chosen Google because of its high-quality offerings. However, he did not outline any specific contingency plans. Instead, he focused on the potential downsides of the DOJ’s proposals, stating they could have unintended consequences for the dynamic tech sector and US leadership in the field.
“Some of the early proposals from the DOJ, et cetera, have been far-reaching,” Pichai said, emphasizing Google’s intention to vigorously defend itself in the ongoing litigation.
The DOJ’s aggressive pursuit of Google stems from a ruling that found the tech giant guilty of maintaining an illegal monopoly in the online search market. The DOJ is currently exploring remedies that could potentially break up Google as a means to address its dominant position. This scrutiny extends to Google’s growing influence in the generative AI market, with the DOJ concerned that Google might leverage its search dominance to monopolize this space.
The situation highlights the significant power dynamics at play. In May, it was revealed that Google paid Apple a staggering $20 billion in 2022 to maintain its status as the default search engine on Safari. Analyst at Jeffries previously speculated that this deal could be banned entirely, potentially impacting Google’s revenue significantly.
Despite these legal challenges, Alphabet’s third-quarter earnings report was a positive one. Revenue surged 15% year-over-year, exceeding Wall Street’s expectations. As of this writing, Alphabet’s Class A shares have surged 5.80% in after-hours trading, reaching $179.52, while Class C shares have jumped 5.89% to $181.22.
The outcome of the ongoing legal battle remains uncertain, but the potential consequences for Google and the tech landscape are substantial. The company’s ability to maintain its market dominance, especially in the face of the DOJ’s proposals, will continue to be a major focus for investors and the industry at large.
