Alphabet's Gemini delay, spending worries loom over earnings

Alphabet faces heightened scrutiny from investors as ​a delay in the launch of ​a model key to its AI ambitions adds to worries over ​the payoff from massive data-center spending, months after raising expectations with a blockbuster quarter for cloud sales.

The Google parent - set to report second-quarter results on Wednesday - has delayed from June the launch of its next ‌flagship model, Gemini ⁠3.5 ⁠Pro, built especially to catch up with rivals in the lucrative market for AI coding tools and agentic AI tasks.

The setback has raised concerns as Chinese open-source models increasingly challenge top U.S. labs for customers ​amid growing worries about steep AI bills that have also fanned fears that Big Tech could be over-building capacity.


"While Google is missing the boat on AI coding and that's ​a very real growing concern ... Google's strategy is all about ⁠the ecosystem," ‌said Dave Wagner, portfolio manager at Aptus Capital Advisors.

Alphabet increased its ​2026 capital expenditure ​guidance to between $180 billion and $190 billion in April and has announced ⁠plans to raise about $85 billion in equity offerings, including an ​investment from Berkshire Hathaway.

Alphabet shares are down about 9% since late ​April - when it posted a 63% jump in cloud sales - lagging other so-called "Magnificent Seven" stocks during the period.

The company has also lost high-profile employees, including Gemini co-lead Noam Shazeer and Nobel laureate John Jumper, a key Google DeepMind executive, to rivals.

Analysts have said Google's advantage in the AI race lies in its ownership of a large consumer distribution ‌network, on top of its AI models, cloud infrastructure and custom silicon.

Overall, Alphabet shares remain nearly 13% higher for the year, making it the ​second-best performer among ​the Mag 7 group.

Analysts ⁠expect the company's second-quarter revenue growth to ease only slightly from the first three months of 2026, as the cloud business drives results.

Alphabet is expected to post a 21.3% rise ​in revenue for the April-June period to $116.93 billion, according to data compiled by LSEG. Cloud sales are estimated to grow at a similar 64% pace, while ad revenue is forecast to expand at a slower 13.7%.

The cloud business has benefited from growing deals for Google's custom AI chip business, including multi-billion-dollar agreements with Meta Platforms and Anthropic.