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Apple’s stock (NASDAQ: AAPL) rose several percent this week after a federal judge’s ruling allowed Google to continue its default search engine payments on Apple devices, easing concerns over Apple’s services revenue stream. This ruling, part of the government’s search antitrust case against Alphabet (NASDAQ: GOOG), maintains a multibillion-dollar arrangement that reportedly brings Apple tens of billions annually, reinforcing the strength of its Services segment with a gross margin of 75% compared to 37% for hardware sales.
In fiscal Q3, Apple reported a 10% increase in revenue to $94 billion and a 12% rise in earnings per share to $1.57, both setting June-quarter records. The outcome of this legal case has shifted investor sentiment positively, with analysts suggesting it removes a key uncertainty around Apple’s business outlook and supports the company’s anticipated EPS growth.
The ruling is viewed as a significant win for both Apple and Google, with Wedbush labeling it a “monster win” for the iPhone maker. The company’s shares currently trade at a premium valuation of approximately 36 times earnings, highlighting the importance of sustained services growth for future returns.
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