What is the potential impact of U.S. Android Play Store remedies
Investing.com — In a recent note, Wells Fargo analyzed the potential financial impact on app developers and Alphabet (NASDAQ:GOOGL) Inc’s Google, following the U.S. District Judge’s decision in the Epic Games v. Google case, which could lead to changes in the Play Store’s operations.
More concretely, the firm’s analysts expect that app developers like Match Group (NASDAQ:MTCH), Bumble Inc (NASDAQ:BMBL), and Roblox Corp (NYSE:RBLX). could see an increase in their adjusted EBITDA by 2026 if they are allowed to process payments directly on Android in the U.S.
Wells Fargo estimates an accretion of 3 points, 5 points, and 3 points to the fiscal year 2026 adjusted EBITDA forecasts for MTCH, BMBL, and RBLX, respectively. The analysis suggests that with incentives for higher adoption of direct billing, even with a promotional discount, the companies could see an even larger benefit.
“Even with a likely promotion offset (assume a 5% discount), a 75% US direct billing mix (vs. base case 35%) would suggest a 4pts / 7pts / 6pts accretion” to Wells Fargo’s fiscal 2026 adjusted EBITDA estimates for MTCH, BMBL, and RBLX, respectively.
In contrast, Google is projected to experience only a modest 1 point negative impact on its earnings per share (EPS) due to the loss of Play Store fee revenue. Wells Fargo’s analysis indicates that U.S. Google Play billings currently account for approximately 2% of Google’s fiscal year 2026 operating income (OI) and EPS.
The firm’s forecast assumes a shift of 35% from Google Play to direct billings in 2026, considering the likelihood of large developers opting for direct billing to benefit from direct customer relationships and cost savings.
While the near-term financial impact on Google is expected to be limited, Wells Fargo notes that there is a more significant risk if international regulators implement similar rules.
The Play Store is estimated to contribute around 6% to Google’s operating income, with non-U.S. transactions constituting about 65% of total Play billings.
“Further, we believe the 3-year remedy ban on Play Store revenue share to distribution partners and a resultant rise in the distribution of alternative app stores likely opens up the Android ecosystem,” analysts added.
The legal backdrop for these projections stems from the October 7th ruling that Google must allow for greater competition in its Play Store. This follows a December 2023 jury verdict that found Google’s Play Store to be operating as an illegal monopoly.
The judge ordered an end to Google’s Play billing mandates and revenue share payments to Android Play store distributors for three years starting on November 1.
However, with a short-term stay granted and Google’s plans to appeal, the earliest implementation of the remedy is expected to be in the first quarter of 2026, pending the outcome of the appeal process.
