As Google faces a legal battle with the U.S. Department of Justice over antitrust concerns, the outcome of the battle could reshape the tech landscape and impact the company’s future.
Analysts at JMP Securities, Mizuho and Barclays have assessed the possible scenarios and their implications:
Analysts at JMP Securities expect the US Justice Department to impose measures such as requiring OEMs and browsers to provide a choice screen for default search engines.
They explain that this is likely to benefit Google, as superior search quality could help it retain a significant market share despite increasing competition.
“We assume that OEMs and browsers are required to provide a list of default options,” analysts at JMP Securities noted, suggesting this approach would be the most likely outcome.
While this could hurt Google, the company maintains an optimistic stance, citing its strong position in AI and YouTube. However, analysts warn that if regulators bar Google from bidding on default search slots, it could dramatically change the dynamics of the market, benefiting rivals like Microsoft but potentially hurting Apple and other partners that rely on revenue-sharing agreements with Google.
On the other hand, analysts at Mizuho see a Google breakup as unlikely due to the high legal threshold created by historical precedents such as the breakup of AT&T in 1982.
“The barrier to a breakup is very high,” said Mizuho analysts, who stressed that Google’s dominance in search does not match the vertical control seen in AT&T’s case.
Instead, analysts expect a solution similar to previous issues, such as the search engine selection screen, which could preserve Google’s position in the market.
Analysts at Barclays outline a range of potential impacts, from minor to major. They warn that the solutions could cut Alphabet’s (NASDAQ:) total earnings by as much as 41%, depending on the extent of the structural or behavioral changes.
Analysts suggest that the most damaging outcomes could involve ditching major assets like Chrome or Android, or severely restricting search and advertising revenue models.
While the exact decision remains uncertain, investment banks are highlighting that the DOJ’s actions could lead to significant adjustments, with potential long-term impacts on their profitability and market strategy.