A U.S. judge has ruled that Google has engaged in illegal monopolistic practices in its operations, which poses a threat to the partnership agreement between Apple and Google. Wall Street analysts noted that Google may terminate its agreement to serve as the default search engine for Apple devices in order to avoid further antitrust action.

According to estimates by Morgan Stanley analysts, Google pays Apple about $20 billion a year, or 36 percent of its search advertising revenue through the Safari browser. If the deal is canceled, Apple's profits could fall between 4 and 6 percent.

The current agreement runs through September 2026, with Apple having the right to unilaterally extend it for two years.

Evercore ISI analysts believe the most likely outcome would be a judge ruling that Google may not continue to pay for a default search engine, or a requirement that Google instead offer the option for users to actively choose a search engine instead of the default setting, allowing users to make changes in the settings.

In terms of market reaction, Apple's shares were flat on Tuesday, failing to get a significant boost from Monday's global market rally. Google's shares were also essentially flat, after falling 4.5 percent in the previous session.

Herbert Hovenkamp, a law professor at the University of Pennsylvania, said the ruling means companies with dominant market positions should refrain from using exclusionary agreements and ensure that agreements give buyers the freedom of choice. The legal dispute could last until 2026, including appeals to the Court of Appeals for the District of Columbia Circuit and the U.S. Supreme Court.

Even if the agreement is terminated, Apple still has a variety of strategies to deal with it, including offering customers an alternative search engine such as Microsoft Bing, or possibly launching a new search product powered by OpenAI.

Analysts believe the ruling could accelerate Apple's transition to an AI search service. Apple recently announced it would bring OpenAI's ChatGPT chatbot to its devices, and said it is in talks with Google to add the Gemini chatbot, as well as plans to introduce other AI models.

Additionally, Apple is utilizing AI technology to improve Siri so that it can handle tasks such as composing emails and interacting with messages that have been difficult to tackle in the past. While these improvements are expected to have limited benefits in the short term, they will help Apple capitalize on the opportunities of the new technology.Emarketer analyst Gadjo Sevilla believes that while Apple benefits significantly from the Google search deal, the ruling also presents an opportunity to move to an AI search solution.