Alphabet shares drop 2% after delay in Gemini 3.5 Pro

Alphabet shares fell about 2% on Friday, extending a roughly 4% decline from the previous session and leaving the stock down about 5% over the past month. The move followed reports that the company postponed a broader release of its Gemini 3.5 Pro artificial intelligence model.

People familiar with the matter reported the model, unveiled at Google’s developer conference in May, was slated for wider rollout the following month. Work to improve the model’s coding performance has delayed the release and has frustrated some engineers, researchers and managers who worry competitors may be advancing quickly.

Alphabet confirmed it is testing 3.5 Pro and other models with partners and that it is engaging with the U.S. government on related matters. The company continues to integrate AI features across Search, Maps, YouTube, Gmail and Workspace while balancing internal testing and external review.

Analysts have highlighted the financial implications of Alphabet’s AI investments. Projections show capital expenditures could reach about $187 billion in 2026, which would use most of a projected $212 billion in operating cash flow and leave roughly $25 billion in free cash flow, versus about $73 billion in free cash flow a year earlier.

Several Wall Street firms maintained positive ratings despite the reported delay. Wedbush Securities named Alphabet a top pick and reiterated an Outperform rating. Wedbush analyst Ygal Arounian described Alphabet as “the best-positioned full stack AI offering for the next era of internet and technology,” citing the company’s distribution channels, Gemini model, custom TPUs and cloud infrastructure. Wedbush noted Gemini has been integrated into 13 Google products with more than one billion users each and that Gemini monthly active users rose to over 900 million in May from 750 million in February.

BMO Capital Markets raised its price target to $455 from $435 and maintained an Outperform rating after increasing Google Cloud revenue estimates for the fourth quarter and fiscal 2027. BMO pointed to stronger cloud demand, expanding capacity and a growing backlog, and it described search growth as mid-to-high teens. The firm added that questions are emerging about Gemini’s performance after reports that Gemini 3.5 Pro is missing some benchmarks.

Alphabet is scheduled to report quarterly results on July 22. Investors are expected to watch the company’s earnings for updates on AI spending, Google Cloud performance and any progress on Gemini 3.5 Pro.