Google's DoJ case has negative read across for Apple, Barclays says

Investing.com -- The Department of Justice's (DoJ) antitrust case against Google (NASDAQ:GOOGL ) could have significant implications for Appl, despite the tech giant not being directly involved, Barclays (LON:BARC ) analysts said in a recent note.

At the center of the issue is Google's Traffic Acquisition Cost (TAC), which represents payments to platforms like Apple (NASDAQ:AAPL ) for driving traffic to Google's search and advertising services.

According to Barclays, Google's TAC payments made up about 70% of Apple's advertising revenue in FY24 and may have contributed around 15% to Apple's operating income.

"The treatment of the Google TAC is at the forefront in the decision," Barclays noted, underscoring its importance to Apple's financial model.

The case is progressing, with preliminary remedies issued last week and Google set to respond in December.

A trial is expected in April 2025, with a potential decision by July 2025, according to Barclays.

However, the bank anticipates "several layers of appeals" that could prolong the process for years.

If the DoJ case results in restrictions on Google's TAC payments, Apple could face immediate revenue pressures.

Barclays highlighted that Google currently pays Apple around 36% of revenue generated through the Safari toolbar in exchange for being the default search engine.

Despite the potential setback, the bank believes Apple may have pathways to offset any revenue loss.

Barclays noted that Apple could "back fill lost revenues with its own ad stack over time" or even develop its own search engine.

While the case is still in the early stages, its resolution could materially impact Apple's lucrative advertising business, particularly its reliance on TAC payments, Barclays warned.

Source: Investing.com