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Alphabet shares fall on report its most powerful AI model Gemini 3.5 Pro is delayed
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Alphabet shares dropped 4% on July 16, 2026, following a Bloomberg report that the company's flagship AI model, Gemini 3.5 Pro, is months behind schedule due to performance issues, particularly in coding capabilities. The model was announced at Google I/O in May 2026 with an expected broader rollout in June, but internal testing fell short of expectations. This delay comes as competitors OpenAI and Meta recently released new AI models (GPT-5.6 Sol and Muse Spark 1.1) that outperform Google's current offerings in code generation. An Alphabet spokesperson stated the company is testing 3.5 Pro with partners and the U.S. government, emphasizing cost-effectiveness and rapid shipping across multiple models.
Source report
Alphabet shares sank 4% on Thursday following a report that the company has delayed releasing its flagship artificial intelligence model.
The search giant's Gemini 3.5 Pro AI model is months behind schedule due to the company's efforts to improve its performance, according to Bloomberg, citing sources familiar with the matter. The model's coding capabilities, in particular, were short of internal expectations. This comes at a time when rivals like OpenAI and Meta have recently debuted new AI models that outpace Google's current offerings in generating software code, the report said.
The company previously announced the Gemini 3.5 Pro AI model in May as part of its annual Google I/O developer conference. At the time, Alphabet said the model was being used internally but would not be ready for a broader rollout until the following month.
An Alphabet spokesperson told CNBC in an emailed statement that the company is "shipping quickly across a wide range of models while keeping them highly cost-effective for customers."
"We're currently testing 3.5 Pro, an upgraded Flash model, and other models with partners, and we're productively engaged with the U.S. government," the spokesperson added.
Competitive Landscape in AI Coding
Code-generation has become one of the biggest use cases for AI model providers, including:
- Anthropic and OpenAI
- Chinese AI labs like Z.ai, which offer so-called open-weight variants that developers can access for free via the open-source ecosystem
Meta debuted last week its Muse Spark 1.1 AI model, which the company's AI chief Alexandr Wang described as the social media giant's "strongest model for agentic and coding work yet."
OpenAI last week released its GPT-5.6 Sol AI model. CEO Sam Altman said the model is 54% more token efficient on agentic coding tasks, underscoring how AI labs are pitching their respective AI coding models as being cost-effective relative to their performance.
Watch: Google is still a 'well-positioned' company, says Gabelli Funds' John Belton
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Alphabet shares drop on Gemini 3.5 Pro delay and EU regulatory order