As Google faces a crucial antitrust ruling from the U.S. Department of Justice (DoJ), Barclays analysts have weighed in on the potential scenarios and their impacts.
According to Barclays, the outcome of this legal battle could significantly reshape the landscape for Google and its parent company, Alphabet (NASDAQ:GOOGL), with the effects likely to be felt well into 2026.
Barclays emphasizes that the court's decision is "all that matters" in this situation, urging investors to focus on the legal ramifications rather than what they believe is "right."
The analysts outline a range of possible outcomes, with the potential remedies varying widely in their impact on Alphabet's gross profit.
One of the most severe scenarios involves structural changes such as the divestment of key assets like Chrome, Android, or AdWords.
Barclays notes that such actions could eliminate up to 41% of Alphabet's gross profit. Behavioral remedies, such as implementing choice screens with capped or uncapped revenue shares, could also lead to significant profit reductions, according to the firm.
Barclays also points out that the recent trial involving Epic Games and Google's Play Store could serve as a precursor to future changes in Google's search partnership agreements.
Furthermore, they state that the court may push for a fixed dollar revenue share rather than a percentage, which could disrupt existing incentive structures between Google and its partners.
Despite the uncertainty, Barclays suggests that some of the less favorable outcomes may already be priced into Google's shares.
However, the worst-case scenarios are said to remain difficult to quantify, and the coming months will be critical in determining the long-term impact on Alphabet.
Overall, Barclays believes the potential consequences for Google are vast, and the final ruling could lead to profound changes in the tech giant's operations and financial performance.