Alphabet's flagship AI model is months behind schedule. With $190B in capex planned and Q2 earnings due July 22, cloud growth will be the key metric to watch.
When Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) introduced Gemini 3.5 Flash at its I/O developer conference in mid-May, the company said the more powerful Pro version would arrive in June. June came and went.
Bloomberg reported Thursday that the flagship AI model is months behind schedule as Google works to improve its coding capabilities. Some inside the company worry rivals OpenAI and Anthropic are shipping models that have passed Gemini by, the report said.
Alphabet shares closed Friday at $346.77, down about 15% from a peak of $408.61 earlier this year. That is a modest pullback by most standards. It is a wobble for a stock that has been one of the market's favorite ways to bet on AI.
The timeline is what makes the delay notable. Google launched Gemini 3 in late 2025. The 3.5 generation was supposed to continue a rapid release cadence, with Flash in May and Pro a month later. Instead, Bloomberg reported, Google updated the data used to train Gemini in an attempt to improve its coding skills, and the results were disappointing. Google has not announced a new launch date.
"We're currently testing 3.5 Pro, an upgraded Flash model, and other models with partners," the company said in a statement, adding that it is "shipping quickly across a wide range of models while keeping them highly cost-effective for customers."
Coding is the main battleground for AI labs right now, and a big part of what enterprise customers pay for. A flagship model that cannot yet clear the company's own bar there is an uncomfortable place for Google to sit while rivals keep shipping.
The stakes are bigger than one product date. Alphabet expects capital expenditures of as much as $190 billion this year, much of it going toward the infrastructure behind its AI push. Spending on that scale assumes Gemini stays competitive at the frontier. A model that slips by a month is noise. A pattern of slipping models would worry investors.
So far, there is no sign of that pattern in the results. Alphabet's revenue climbed 22% year over year to $109.9 billion in the first quarter, marking 11 consecutive quarters of double-digit growth. Google Cloud revenue jumped 63% year over year to $20.0 billion, accelerating from 48% growth in the fourth quarter of 2025 and 34% in the third quarter. The cloud segment's operating income roughly tripled year over year to $6.6 billion. Google Search & other revenue rose 19%, with management saying search queries hit an all-time high.
Demand for Gemini itself looks healthy, too. CEO Sundar Pichai said the company's cloud backlog nearly doubled from the prior quarter to over $460 billion, and that its models were processing over 16 billion tokens per minute through direct customer use, up 60% in three months.
"Our AI investments and full stack approach are lighting up every part of the business," Pichai said in the company's first-quarter earnings release.
Customers do not appear to have been waiting on Gemini 3.5 Pro before signing contracts this spring.
Alphabet trades at about 25 times forward earnings, a price that assumes growth rates remain robust. If Gemini were to fall a full generation behind OpenAI and Anthropic, the AI demand filling that cloud backlog could become harder to defend, and the AI features now driving search usage could start to lag rivals. One late model does not get Alphabet anywhere close to that point. It is the right risk to watch.
Alphabet is scheduled to report second-quarter results on Wednesday, July 22. The two numbers to track: Google Cloud's growth rate and any launch timing management offers on Gemini 3.5 Pro.
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