Gemini AI model delays put Alphabet under pressure ahead of Q2 earnings

Alphabet is facing increased scrutiny from investors as delays in launching a key Gemini AI model add to concerns over the returns from its massive data center investments, months after the company raised expectations with a strong quarter for cloud sales.

Google’s parent company has delayed the launch of Gemini 3.5 Pro, its next flagship AI model, from June as it seeks to catch up with rivals in the lucrative markets for AI coding tools and agentic AI applications.

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.

Gemini 3.5 Pro:

The launch of Alphabet’s flagship model was pushed back after internal training benchmarks—particularly for AI coding and complex agentic tasks—fell short of targets.

This delay comes as open-source competitors and rivals like OpenAI or Anthropic continue to aggressive release cycles.

Alphabet raised its 2026 capital expenditure guidance to $180–$190 billion to build out data centers, custom silicon, and power infrastructure.

Free cash flow dropped sharply in Q1 as a result, sparking debate over whether Big Tech is over-building capacity before monetization fully matures.

Since then, the company has been racing to improve and expand Gemini, its flagship AI model family, as competition in generative AI intensifies.

Alphabet's position in Market:

Delays in rolling out new capabilities and concerns over the cost of building AI infrastructure have raised questions about the pace of returns from Alphabet’s AI strategy .

Notably, company’s cloud business and AI-powered offerings will be important indicators of whether these investments are beginning to generate meaningful revenue.

The market is weighing Alphabet’s strong position  against concerns that higher costs and execution challenges could pressure margins in the near term ahead of quarterly earnings

Additionally, investors are also closely monitoring Alphabet’s rising capital expenditures, particularly spending on data centers, chips, and other AI infrastructure needed to support its products and services.