Google CEO Pichai says Gemini's next leap depends on building "much larger base models"

Alphabet has raised its 2026 investment forecast to between $195 billion and $205 billion, up from the previous range of $180 billion to $190 billion. The company says demand continues to outpace investment.

Google reported revenue of $119.8 billion for the second quarter of 2026, a 24 percent increase year over year that beat analysts' expectations of $116.9 billion. Google Cloud grew 82 percent to $24.8 billion, and the Services segment rose 15 percent to $94.5 billion. The Gemini app now has 950 million monthly active users, up from 750 million in February.

AI Mode in Google Search has crossed one billion monthly active users since its global launch in October. Google claims AI Mode, like AI Overviews before it, is driving more overall search queries. That shouldn't be confused with more traffic to websites compared to traditional search.

Google says it sends billions of clicks to websites every week through AI features in Search, but without specific data or comparisons to traditional search volume, that claim doesn't tell us much. On the ad side, AI Max has left beta and already has 500,000 advertisers using it. Alphabet says AI is unlocking billions of new search queries that were previously hard to monetize.

The cost per AI response in AI Mode has dropped to its lowest level since launch, even as Google uses more powerful models. That points to growing efficiency gains, something the recent Flash 3.6 release also showed. Over time, that efficiency could give Google an edge on margins for serving AI.

It also raises the question of how much a frontier model still matters to Google day to day. For the AGI race, it likely does. For serving daily use cases across its ecosystem, probably less so. "We're seeing tons of demand for our workhorse Gemini Flash series because it hits the sweet spot of performance and cost", Google CEO Sundar Pichai said.

Google bets on Gemini 4 to close the gap with frontier rivals

Google is still working on a new frontier model and plans to ship new models monthly. But Gemini 3.5 Pro apparently isn't part of that cadence, even though Google says it's currently being tested.

CEO Sundar Pichai acknowledged during the earnings call that Google needs a more capable base model first to catch up with the leaders. The next generation of frontier AI models requires "much larger base models," he said. Google is training Gemini 4 to meet that bar.

"We have started our most ambitious pre-training run yet for Gemini 4, and are excited by the progress we are seeing at the frontier," Pichai said.

He also pointed to specific weaknesses Google is trying to fix. "There are areas where we have acknowledged we need to improve. Coding and agentic coding is an example of that, and I think the teams are very, very focused on it."