Key Takeaways
- Apple’s September-quarter revenue rose 12% to a record $114.5 billion, but Services growth slowed to 10%, and Apple guided it to 8% to 9% for the December quarter.
- Bloomberg’s Mark Gurman says a big chunk of Apple’s Services revenue is Google’s revenue share from Safari search, and he expects AI to shrink it.
- Google’s search queries are growing at their fastest pace in five years, yet Alphabet’s search revenue missed estimates. Apple’s cut follows the ad revenue, so more queries alone won’t protect it.
- Apple needs to make money from AI search itself, through Siri AI and its cloud services, before the Google payments shrink.
Apple (AAPL) just closed out its best fiscal year ever with a record September quarter, as revenue rose 12% to $114.5 billion. The stock still fell 1.9% to $331.90 on Nov. 3, the day after Apple guided December-quarter gross margin and Services growth below what Wall Street expected.
Bloomberg’s Mark Gurman thinks part of the Services slowdown comes from a problem Apple doesn’t control: the AI squeeze on Alphabet (GOOGL), which lost about $500 billion in value on Oct. 29 after its search revenue fell short.
On Bloomberg Talks, Gurman, Bloomberg News’ managing editor for global consumer tech, laid it out:
“Google searches are down because of AI and a big chunk of the revenue Apple gets from services is a revenue share from Google search done in Safari.”
As people turn to the Gemini app, ChatGPT, Claude or even Siri AI for things they’d normally type into a search engine, he said, “that service’s revenue is going to come down.”
That’s a strange spot for a company that never built a search engine.
A Phenomenal Quarter, With a Catch
Gurman called it “a phenomenal report for Apple,” and the iPhone backs him up: revenue jumped 17% to $57.6 billion. Services hit an all-time high of $31.6 billion, but growth slowed to 10%, after 16% in the March quarter and 12% in June.
On the Q4 fiscal 2026 earnings call, CFO Kevan Parekh guided December-quarter Services growth to 8% to 9% and said the outlook “contemplates sequential headwinds, primarily driven by third-party licensing and foreign exchange.” Apple didn’t name Google, but its 10-K files third-party licensing under Services advertising, the bucket the search deal sits in.
That matters because analysts expect Apple’s earnings per share to keep rising through fiscal 2028:
Even before the report, those estimates had EPS growth slowing to 8.4% in fiscal 2027. If Gurman’s right, they have further to fall, because the Google money is about as profitable as revenue gets.
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The Easiest Money Apple Makes
Google paid Apple about $20 billion in 2022 to stay Safari’s default search engine, court records show, and testimony in the same case put Apple’s cut at 36% of the search ad revenue Google earns through Safari.
Apple’s side of that deal is keeping Google as the default. There’s almost no cost against it, so nearly all of it falls to profit.
In fiscal 2026, Services brought in 25.8% of Apple’s revenue but 40.2% of its gross profit ($93.9 billion of $233.6 billion).
Services did most of the work of lifting Apple’s gross margin through fiscal 2025. Fiscal 2026’s jump came from products, helped by tariff refunds:
Those refunds are mostly done. Memory costs are still climbing, and Apple guided December-quarter gross margin to 45% to 46%, down from 47.9% in September.
More Searches Won’t Save the Payment
Google’s problem isn’t traffic. In its third-quarter report on Oct. 28, Alphabet said search query growth hit its fastest pace in five years. But Apple’s cut comes from the ad revenue, and that’s the part Google is struggling with.
Search revenue grew 12% to $63.35 billion, about $1.5 billion short of Wall Street’s estimate. On the call, Chief Business Officer Philipp Schindler said the fast growth in AI Mode queries weighed on search revenue because AI Mode monetizes at a lower rate.
So queries can rise while Apple’s check gets smaller. And searches that move to the Gemini app, ChatGPT or Claude never touch Safari at all.
Ask Siri AI for a dinner spot or a plumber and you get an answer, not a page of sponsored links. There’s nothing for Google to sell, so there’s nothing for Apple to take a cut of.
Apple Has to Charge for the Answers
Gurman’s fix: “What Apple needs to do is figure out a way to make up for that revenue loss by monetizing search on its platforms or shall I say AI search on its platforms because they’re not doing that.”
Apple has made a start. Siri AI comes with daily usage limits, and Apple’s latest 10-K says its cloud services will provide expanded access to Siri AI features. It hasn’t said what that will cost.
I think Gurman has the mechanics right, and the stock isn’t priced for them. Apple’s forward P/E hit 36x at the end of September, its highest quarter-end level on TIKR since 2014. That multiple assumes Services keeps compounding, while the easiest Services dollars now depend on Google learning to sell ads next to AI answers.
The bull case is that Siri AI turns into a real paid business before the Google payments fade. Apple’s December-quarter results will show whether Services holds the 8% to 9% Apple guided, or slips below it.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
