Alphabet stocks falls 2%: why is Wall Street still bullish on the stock

Alphabet shares fell on Friday, extending losses from the previous session after a report suggested Google’s flagship Gemini 3.5 Pro artificial intelligence model is running behind schedule.

Alphabet GOOGL stock declined about 2% on Friday after falling roughly 4% on Thursday following the report.

The weakness came despite continued bullish views from several Wall Street firms ahead of the company's earnings report due on July 22.

According to a Bloomberg report, Google has delayed the broader release of Gemini 3.5 Pro, its most advanced AI model, as it continues working to improve the model’s capabilities, particularly in coding.

The report cited people familiar with the matter who said the delay has frustrated engineers, AI researchers and managers concerned that Google risks falling behind rivals such as Anthropic and OpenAI.

Google first unveiled Gemini 3.5 Pro during its Google I/O developer conference in May, saying the model was being used internally and would be rolled out more broadly the following month.

Gemini delay adds to AI execution concerns

The reported delay comes at a time when Alphabet is investing heavily in artificial intelligence across its products and cloud infrastructure.

According to the Bloomberg report, Google’s extensive product ecosystem and multiple layers of stakeholders involved in AI releases have contributed to slower product rollouts.

The company is integrating AI across services including Search, Maps and YouTube while balancing internal testing and government engagement.

Responding to reports of the delay, an Alphabet spokesperson told CNBC the company remains focused on rapidly releasing AI products.

"We’re currently testing 3.5 Pro, an upgraded Flash model, and other models with partners, and we’re productively engaged with the US government," the spokesperson said.

The reported delay has intensified investor scrutiny because Alphabet is expected to significantly increase AI-related spending this year.

Analysts forecast Alphabet's capital expenditure will reach approximately $187 billion in 2026, according to S&P Global Market Intelligence.

That figure would consume nearly all of the company's projected $212 billion in operating cash flow, leaving around $25 billion in positive free cash flow, compared with roughly $73 billion generated last year.

The company is under pressure to demonstrate meaningful progress in AI capabilities to justify the enormous spending bill.

Analysts remain optimistic despite reported setback

Despite concerns surrounding Gemini 3.5 Pro, several Wall Street firms maintained positive views on Alphabet.

Wedbush Securities named Alphabet a "top pick" ahead of the company's quarterly earnings.

Analyst Ygal Arounian reiterated an Outperform rating and described Alphabet as the "best-positioned full stack AI offering for the next era of internet and technology."

Arounian said, "Alphabet has the most complete ownership of the consumer distribution layer (Search, Android, Chrome, YouTube), model (Gemini), custom silicon (TPUs), and cloud infrastructure (GCP), at scale."

The analyst expects Alphabet to deliver strong quarterly results as it continues monetizing artificial intelligence across its ecosystem.

Gemini has now been integrated into 13 Google products with more than one billion users each, according to Wedbush.

Five of those products — Search, Android, YouTube, Gmail and Workspace — each serve more than three billion users.

Wedbush also noted that Gemini's monthly active users exceeded 900 million in May, up from 750 million in February, while AI monetization is beginning to surpass the company's traditional search business.

Alphabet shares have declined roughly 5% over the past month, a move Wedbush views as creating an attractive entry point for investors.

Cloud outlook remains a bright spot

BMO Capital also reiterated its bullish stance on Alphabet while increasing its price target to $455 from $435.

The firm maintained its Outperform rating after raising fourth-quarter and fiscal 2027 Google Cloud estimates by 2% and 13%, respectively.

According to BMO, stronger cloud demand, expanding capacity, and a growing backlog support improved financial expectations for Google Cloud.

The firm also said Alphabet's search business continues to demonstrate mid-to-high-teen growth.

BMO noted that "Search leadership story remains intact with mid-to-high-teens growth, but new questions are emerging around Gemini model intelligence on reports that Gemini Pro 3.5 is being delayed as it falls short on benchmarks."