Alphabet edges up after 10% slide as Gemini 3.8 debuts

Alphabet’s stock ticked higher in early September after falling more than 10% over the prior month. The company introduced Gemini 3.8 Flash and a cybersecurity AI model for government and enterprise customers while raising its 2026 capital spending plan to $195 billion–$205 billion.

Gemini 3.8 Flash is the third Flash model Google has released in about six weeks. The model emphasizes coding, reasoning and agent-like tasks that companies seek to monetize for enterprise use. Google described Flash models as faster and cheaper to operate than its largest frontier systems.

Alphabet reported second-quarter results that beat analyst revenue and profit estimates but recorded negative free cash flow of about $5.9 billion for the quarter, compared with roughly $5.3 billion of positive free cash flow a year earlier. The company reported substantial gains in its investment portfolio that boosted GAAP income; one market observer estimated about $99 billion in “other income” tied to holdings including stakes in Anthropic and SpaceX. Adjusted operating earnings exclude those gains and provide a different view of underlying performance.

Market views are split on whether the recent selloff creates a buying opportunity. Supporters point to Google’s dominant position in search, fast-growing cloud revenue and proprietary AI hardware as drivers of future revenue. Analysts at Wolfe Research project Google Cloud Platform revenue could rise about 125% year over year in the third quarter. Estimates from market research firms suggest sales of Alphabet’s tensor processing units could grow from roughly $3 billion in 2026 to as much as $25 billion in 2027.

Other investors cite three concerns: the scale of Alphabet’s current spending, signs of slowing search growth and departures of talent from AI teams. Eric Sheridan of Goldman Sachs Research commented on two debates weighing on the stock: “One is that search slowed down a little bit more than investors expected. The second concern relates to talent departures and Google’s AI strategy.” He also pointed to delays in some next-generation Gemini models.

Views on the new model vary. Gil Luria of D.A. Davidson described Gemini 3.8 Flash as a product that keeps Google competitive but said it likely will not change Google’s position in the enterprise market.

Regulatory news provided limited relief for investors. A federal judge rejected the Justice Department’s request to force the sale of Google’s AdX advertising exchange and favored behavioral remedies instead. The ruling removed a potential operational disruption to Google’s ad business.

Berkshire Hathaway increased its Alphabet stake in the second quarter by about $17 billion and now holds roughly 106 million Class A and Class C shares. Berkshire’s chief executive credited visible AI benefits within the conglomerate’s businesses as a factor behind the investment.

Valuation metrics show a mixed picture. Alphabet’s trailing price-to-earnings ratio is near 17, while forward multiples that adjust for recurring operating earnings rise closer to 25. Data tracking analysts’ ratings lists most covering Alphabet as positive, with a mean price target implying upside from current levels.