Alphabet's Gemini delay, spending worries loom over earnings

Alphabet's Gemini delay, spending worries loom over earnings Deborah Mary Sophia and Rashika Singh Tue, July 21, 2026 at 3:45 PM GMT+2 2 min read GOOG By Deborah Mary Sophia and Rashika Singh July 21 (Reuters) - 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.