Silence is often louder than noise on Wall Street. During Alphabet’s recent earnings call, an analyst asked a simple question about the company’s massive AI partnership with Apple. Instead of a standard corporate answer, the executives completely ignored it. This refusal to speak suggests the dynamic between two of the world’s biggest tech companies is shifting in ways neither is ready to admit.
Key Takeaways
- Alphabet declined to answer investor questions regarding its AI partnership with Apple.
- Google previously paid Apple $20 billion to be the default search engine on its devices.
- Google is the preferred cloud provider for Apple’s Gemini-based foundation models.
For years, the arrangement between Google and Apple was clear. Google paid Apple roughly $20 billion annually to be the default search engine on iPhones. That deal gave Google access to 2.5 billion active Apple devices. Now, the relationship is evolving. Apple is using Google’s Gemini technology to power parts of Siri and its new AI features. But when investors asked how this new deal works financially, Alphabet executives refused to answer.
The big deal
This silence matters because the money is moving in a different direction. The old deal was simple: Google paid for access to users, and users saw Google ads. The new AI deal is rumored to cost Apple about $1 billion a year. That is a massive shift from the $20 billion Google used to pay out.
It also highlights a problem with the business model. Google makes its real money when you click on search ads. In this new partnership, Google is providing the “brains” for Apple’s features, but it is not immediately clear how Google displays ads to those users. If Google becomes just a backend utility provider for Apple, it loses the direct line to the consumer that made its search business so profitable.
How it works
Think of this relationship like a restaurant kitchen. In the old search deal, Google paid the restaurant (Apple) a huge fee just to be the only brand of ketchup on every table. If you wanted ketchup, you had to use Google’s bottle.
In this new AI deal, Google is acting more like a wholesale supplier. Apple is buying the raw ingredients (Gemini technology and cloud computing) from Google to cook its own meals (Siri) in the kitchen. Google executives confirmed they are the “preferred cloud provider” for Apple. This means Google provides the heavy computing power and the base technology, but Apple serves the final product to you.
The catch
The main problem is that Google does not yet know how to make AI as profitable as search. In standard search, you see links to advertisers at the top of the page. In AI responses, ads are still an experiment. Google is testing ads inside chatbot answers, but it is not a proven money-maker yet.
There is also competitive pressure. Rival companies like Anthropic are actively campaigning against ad-supported AI models. If users decide they prefer an AI that does not try to sell them things, Google’s plan to put ads in Gemini could backfire. The company is trying to figure out how to monetize these answers without driving users away.
What now?
Google is currently treating AI ads as a test. You might start seeing “Shop with AI Mode” features that guide you to checkout pages directly from a chat interface.
If you use an iPhone, pay attention to how Siri changes in the coming months. The article doesn’t say exactly when the financial details will be public, but watch the next few earnings calls to see if Google figures out how to turn this partnership back into an ad revenue machine.
