Alphabet’s Silence on Google-Apple AI Deal Stuns Investors
▼ Summary
– Alphabet refused to answer an investor’s question about its AI partnership with Apple during its earnings call, signaling it is not ready to discuss the deal’s business impact.
– The long-standing Google-Apple search partnership involved Google paying Apple approximately $20 billion to be the default search engine on Apple devices.
– The new AI deal is rumored to cost Apple around $1 billion annually, but its direct payoff for Google is less clear than the search agreement.
– Google is experimenting with placing ads within its AI Search interface, integrating them below or into chatbot responses, and testing agentic shopping features.
– Google’s AI competitor Anthropic is challenging the ad-supported AI model, while the long-term outcome of Google’s AI strategy and partnerships remains uncertain.
The recent silence from Alphabet regarding its landmark AI partnership with Apple has left investors and analysts searching for answers. During the company’s fourth-quarter earnings call, a direct question about the strategic implications of powering AI for Apple’s Siri was met with no response. This notable omission suggests that Alphabet is not yet prepared to publicly detail how this collaboration will influence its core business operations, which are increasingly centered on artificial intelligence. The decision to avoid the topic underscores the complex and potentially transformative nature of the deal.
Historically, the relationship between Google and Apple has been a lucrative symbiosis. Regulatory filings have revealed that Google pays Apple an estimated $20 billion annually to remain the default search engine on iPhones and other devices. This arrangement grants Google unparalleled access to Apple’s vast ecosystem, which boasts over 2.5 billion active devices worldwide. The financial scale of this search partnership sets a high bar for any new collaborative ventures.
The new AI agreement, rumored to involve Apple paying Google around $1 billion per year, presents a different dynamic. While the search deal delivers clear, immediate revenue from advertising, the benefits of the AI partnership are more nuanced and long-term. In traditional search, ads are prominently displayed, driving direct consumer action. However, the future of search is evolving with AI Overviews (formerly AI Mode), where advertising integration is still in an experimental phase. Ads currently appear below or woven into the conversational AI responses, representing a significant shift in user experience and monetization strategy.
Google is actively exploring new commerce models within this AI-driven framework, such as its “Shop with AI Overviews” feature. This initiative aims to guide users from product inquiries directly to checkout, all within the AI interface. The success of these experiments is critical, as they could define the next era of Google’s search and advertising empire. The company’s cautious approach to discussing the Apple deal likely reflects the uncertainty surrounding how AI will ultimately generate profit, especially when compared to the established, high-margin search business.
This strategic reticence occurs amid growing competition in the AI space. Rivals like Anthropic are openly challenging the ad-supported AI model pursued by Google and OpenAI, with Anthropic even launching a Super Bowl advertisement to critique the approach. The competitive landscape adds another layer of complexity to Google’s calculations, making its partnership with Apple a high-stakes bet on an unproven business future.
During the earnings call, mentions of the Apple deal were minimal and carefully scripted. CEO Sundar Pichai briefly noted that Google is “pleased” to be Apple’s preferred cloud provider and to collaborate on developing foundation models with Gemini technology. Chief Business Officer Philipp Schindler echoed this exact phrasing, offering no further elaboration. The deliberate, uniform messaging, coupled with the avoidance of analyst questions, signals that while the partnership is a major technical achievement, its commercial roadmap remains a closely guarded secret. For now, investors are left to ponder the long-term payoff of this billion-dollar AI alliance.
(Source: TechCrunch)
