Google I/O primer: Alphabet's AI showcase is its chance to wow Wall Street

Alphabet's stock is up 140% over the past year, with a cloud business that is growing faster than Amazon's and Microsoft's.

But 18 months ago, the Google parent looked like it had spent a decade preparing for the artificial intelligence era, only to watch OpenAI define the market.

Now, Wall Street is valuing Alphabet like one of the few companies positioned to profit from every layer of the generative AI boom.

Google I/O, which begins Tuesday, has always been its venue for showing developers where the company is headed. This year, the stakes are higher.

Wall Street has already rewarded Alphabet for its AI comeback, but investors want to see whether that confidence is backed by a real product roadmap across key areas like search, cloud, Android, chips and enterprise software.

"Google is probably the best-positioned company to monetize AI at scale because it controls almost every layer of the stack," said Lo Toney, founding managing partner of Plexo Capital and an early investor in Anthropic. "We've never really seen a company that has that complete vertical integration from top to bottom to be able to support AI."

Gene Munster, managing partner at Deepwater Asset Management, said the advantage in having that many layers of control is not just scale, but speed.

"There is a benefit to owning the full stack in terms of the speed that you can innovate," Munster said. "When you're building on your own custom silicon, for example, that's an advantage of speed. When you have access to power, you can get data centers up more quickly. That's a speed advantage, which is important."

Here are seven key areas investors are watching for at Google I/O:

The most closely watched announcement will be whether Google unveils a next-generation Gemini model.

Reports ahead of I/O have pointed to a potential Gemini 4 debut, though analysts are not fully counting on it. Citi noted that with Gemini 3.1 Pro released in February, Google has been on a roughly three-to-four month launch cadence, making a Gemini 3.2 or 3.5 update more likely than a full generational leap.

That makes the Gemini 4 question more than a version number. A step up would give Google a cleaner answer to OpenAI and Anthropic. Mizuho wrote that a Gemini 4 announcement "would push Google back up to the bleeding edge of the frontier," while just another generation 3 update would read more like catch-up.

The broader Gemini ecosystem update will also be key.

Mizuho analysts said they'll specifically be watching for progress on Project Astra, Google's universal AI assistant, along with deeper Gemini Live capabilities, screen sharing, video understanding and native tool use across Search, Gmail, Calendar and Maps. Updates to Gemma, Google's open-source model family, and Gemini Robotics are expected, as well.

The usage numbers heading into the event are already stronger than they were a year ago. Paid Gemini Enterprise monthly active users grew 40% in the first quarter over the previous quarter. The Gemini app saw U.S. monthly active users grow 127% year-over-year in April, according to Citi data. Token consumption hit 16 billion per minute as of Google Cloud Next.

If there is one theme running through the I/O session lineup, it is agents.

Google has sessions on agentic coding workflows, multimodal tools, media generation, robotics and AI agents. The goal is to position Gemini as not just a chatbot but more of an operating layer across Google's products, capable of understanding context and taking action.

"It's who wins the office copilot market," Toney said. "If the bigger market becomes AI agents and orchestrating them — inference infrastructure, multimodal workflows, enterprise search — that's where we see a big opportunity for Google being able to drive Alphabet's future growth."

Agentic coding is part of positioning Gemini as a response to Anthropic's Claude Code and OpenAI's Codex. That category has become one of the clearest proof points for AI's commercial value, especially in enterprise software.

Commerce may be the bigger opportunity. Google already has search, shopping, autofill and payments; now it wants Gemini to connect them into an agentic checkout experience.

Google has been expanding its Universal Commerce Protocol, adding partners including Meta, Microsoft, Stripe, Klarna and Affirm in recent weeks. I/O is expected to further show how that infrastructure could enable end-to-end agentic checkout, where Gemini does not just answer a shopping query, but completes a transaction.

Sameer Samat, president of Android Ecosystem at Google, described asking Gemini to plan a barbecue, build a menu, open Instacart, add ingredients to a Safeway cart and notify him when the task was done.

"If you add that up multiple times a day across your week, that's a lot of time back," Samat said. "Those are the kinds of features that I think people are much more excited about and are much more tangible."

Toney said Google's multimodal experience gives it a structural edge as those workflows get more complex.

"Enterprise workflows increasingly include things like video, voice, images, and code," he said. "Google is uniquely strong across multimodal systems because they have this experience with some of the largest applications that handle them — YouTube, Android, Maps, Search, DeepMind — and then obviously, the TPUs."

For investors, the agentic commerce push has implications beyond Alphabet. Mizuho flagged that more agentic product development from Google could weigh on marketplaces like Booking Holdings, Expedia, DoorDash, Zillow and Instacart, noting that anticipation of that shift is likely already part of recent weakness in those stocks.

The next question is how Google gets paid for it. AI-enabled campaigns now account for more than 30% of search spend, according to Citi. AI Max, which emerged from beta in April and is set to replace Dynamic Search Ads by September, is showing early results, including stronger conversions with its full feature suite.

Citi noted that AI Mode could help Google monetize longer, more complex queries that historically were harder to turn into ad dollars. But Mizuho points to the tradeoff: AI Mode searches are producing far fewer outbound clicks, with the firm estimating that 93% end without an external click and that organic click-through rates decline 15% on AI Overview queries.

That makes monetization one of the biggest questions heading into I/O. Munster said he will be watching for new ad products inside AI Mode, how Google frames agentic commerce, and what it says about more personalized AI experiences.

For investors, though, the most consequential I/O announcements may come from cloud and infrastructure.

Cloud has become one of Alphabet's strongest pillars. It grew 63% year-over-year in the first quarter, outpacing both Azure and AWS. Cloud backlog hit $462 billion, up roughly 90% quarter-over-quarter, with half expected to be recognized over the next 24 months. Gen AI product revenue grew roughly 800% year-over-year.

CEO Sundar Pichai has pointed to several drivers behind that growth, including faster new customer wins, larger commitments and deeper relationships with existing clients.

On the company’s first-quarter earnings call, he said the number of billion-dollar-plus deals signed in 2025 surpassed the previous three years combined, while existing customers were outpacing their initial commitments by more than 30%.

The new wildcard is external TPU sales. Google disclosed in the first quarter that it will begin delivering its custom AI chips to outside customers in the second half of 2026, with broader expansion planned for 2027. It is a potentially large new revenue stream, but investors still do not know exactly how to model it.

Mizuho wrote that investors will be listening for any detail on whether external TPU sales are booked as gross sales or royalty revenue, what margins look like and how those deals are accounted for in backlog.

Toney called TPUs one of the most underappreciated parts of the Alphabet thesis, arguing that Google's in-house chips have allowed the company to build a tightly integrated AI infrastructure that supports not only Gemini and Cloud, but also YouTube, Android and the rest of its ecosystem.

Munster estimates the broader AI chip market is running at roughly a $500 billion annual pace, meaning even modest share gains could become material for Alphabet.

No relationship will draw more scrutiny heading into I/O than Google's ties to Anthropic.

Alphabet holds a significant ownership stake in the AI startup, and the recently reported $200 billion cloud commitment, if accurate, could represent a major portion of Google's contracted future cloud revenue.

Google has also committed up to $40 billion in total investment, creating a loop in which capital flows into Anthropic and back to Google through cloud and TPU spending.

That dynamic raises a concentration question that investors have already seen elsewhere in cloud. Oracle's stock soared after reporting a massive backlog jump tied largely to OpenAI, then sold off as investors grew more nervous about customer concentration. Microsoft faces a similar debate around its OpenAI relationship.

Toney said the Google-Anthropic relationship looks more like a hedge than a weakness.

Even if enterprises choose Claude over Gemini, he said, Google can still benefit from the infrastructure demand behind that usage.

"If enterprises prefer Claude, then Google still wins in infrastructure because all of that activity has to live somewhere," he said. "Google still wins because of their TPUs."

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