$Apple(AAPL)$ Did Warren Buffet Smell a Rat in Apple's Business Model When He Sold Apple Shares?

To Apple Investors: Did Warren Buffett Smell a Rat in Apple’s Business Model When He Sold Apple Shares?

Dear Apple Investors,

A cascade of legal and economic challenges threatens Apple’s profitability, casting a shadow over the value of your shares. A federal court ruling by US District Judge Yvonne Gonzalez Rogers found that Apple Inc. willfully violated a 2021 court order mandating third-party payment options in its App Store and must now cease charging commissions on purchases outside its software marketplace. This deliberate defiance, labeled a “gross miscalculation” in Judge Rogers’ 80-page ruling, has triggered a referral to prosecutors for a potential criminal probe. The decision, siding with Fortnite developer Epic Games, confirms Apple’s anticompetitive conduct under California law, exposing the company to severe financial and regulatory consequences.

The mandated changes could slash an estimated $20 billion from the App Store’s annual revenue, derived from its 30% commission structure in 2024, a cornerstone of Apple’s high-margin Services segment, which generated nearly $100 billion last year. Compounding this, Apple faces a $20 billion annual loss risk from an ongoing Justice Department antitrust case targeting Google’s payments to remain the default search engine in Safari. These payments, which accounted for 17.5% of Apple’s operating income in 2020, are under scrutiny and could be disrupted. Additionally, proposed tariffs on imports, particularly from China where Apple’s supply chain is heavily concentrated, could impose costs estimated at up to $900 billion across affected industries, significantly impacting Apple’s production costs and margins given its reliance on global manufacturing.

Together, these risks—a potential $40 billion in combined App Store and Google payment losses, plus the massive tariff-related cost pressures—threaten to erode Apple’s profitability and destabilize its stock value. Judge Rogers’ condemnation of Apple’s “new anticompetitive barriers” to protect unlawful revenue streams underscores systemic vulnerabilities in its business model. With such formidable headwinds, investors must question whether Warren Buffett, renowned for his market foresight, anticipated these threats when he trimmed his Apple stake. The escalating risks to Apple’s revenue, margins, and share profitability demand urgent attention as you assess your investment.

App Store Revenue Loss Risk ($20 billion):

Source: Business Insider, "Apple's huge stream of App Store revenue could be at risk," published May 2, 2025. This source discusses the potential impact of the federal judge’s ruling on Apple’s App Store revenue model, aligning with the estimated $20 billion loss from the 30% commission structure.

Google Search Engine Payment Risk ($20 billion):

Source: Reuters, "Google antitrust ruling may pose $20 billion risk for Apple," published August 7, 2024. This source confirms Google’s $20 billion annual payment to Apple for default search engine status in Safari and the risk posed by the ongoing antitrust case.

Source: Reuters, "Apple girds for more trade war pain, trims buyback," published May 2, 2025. This source cites CEO Tim Cook’s statement that tariffs could add approximately $900 million in costs for the quarter, with broader industry impacts potentially reaching $900 billion as contextualized in other sources.