Alphabet stock fell 4% Thursday after reports emerged that its flagship Gemini 3.5 Pro AI model is running months behind its planned release schedule.

The search giant's most advanced AI system is struggling with coding performance that falls short of internal benchmarks, according to Bloomberg sources familiar with the matter. The delays come as competitors like OpenAI and Meta have launched new models that outperform Google's current offerings in software code generation.

Alphabet first unveiled Gemini 3.5 Pro at its Google I/O developer conference in May, stating the model was being tested internally with a broader rollout planned for the following month. That timeline has now stretched significantly as engineers work to improve the system's capabilities.

The coding shortfall is particularly problematic given the growing importance of AI-powered software development. Code generation has become a primary battleground for AI labs, with companies pitching their models' efficiency and performance to developer audiences.

Meta recently debuted its Muse Spark 1.1 model, which the company's AI chief described as its "strongest model for agentic and coding work yet." Meanwhile, OpenAI launched GPT-5.6 Sol, with CEO Sam Altman claiming it delivers 54% better token efficiency on coding tasks.

Competition intensifies in AI coding

The delay puts Google at a disadvantage as the AI coding market heats up. Anthropic and Chinese labs offering open-weight models have gained traction with developers seeking free alternatives through open-source ecosystems.

An Alphabet spokesperson told CNBC the company remains focused on "shipping quickly across a wide range of models while keeping them highly cost-effective for customers." The spokesperson added that Google is currently testing 3.5 Pro and other upgraded models with partners.

The setback highlights the technical challenges facing even the most resourced AI labs as they race to deliver increasingly capable systems. Google's delay suggests the company is prioritizing quality over speed, though investors clearly prefer faster iteration cycles.

Alphabet has not provided a revised timeline for Gemini 3.5 Pro's public release.