Google Payments Could Account for 5% of Apple’s Operating Profits This Year
Google is set to pay Apple nearly $3 billion this year to remain as the default search engine on iPhones and iPads, according to U.S. research and brokerage firm Bernstein (via CNBC).
According to the investor note, Google is paying out three times as much to Apple as it did in 2014 for the same privilege, with Google’s licensing fees making up a large bulk of Apple’s services business.
„Court documents indicate that Google paid Apple $1B in 2014, and we estimate that total Google payments to Apple in FY 17 may approach $3B,“ CNBC quoted analyst A.M. Sacconaghi Jr. as saying.
„Given that Google payments are nearly all profit for Apple, Google alone may account for five per cent of Apple’s total operating profits this year, and may account for 25 per cent of total company OP growth over the last two years,“ he added.
Apple has increasingly highlighted its services business as a core component of its continued growth. In a recent conference call, for example, CEO Tim Cook said the company’s services had become as large as a Fortune 100 company over the last 12 months.
Apple’s iOS devices contribute about 50 per cent to Google’s mobile search revenue, according to Sacconaghi, suggesting Google would be unlikely to walk away from the licensing deal even if it suspected Apple would stick with Google as the default search engine anyway, given its huge popularity.
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