Alphabet (GOOGL) (GOOG) recently unveiled a range of new AI services at its I/O developer conference. The company stated that if enterprise customers migrate 80% of their workloads from existing frontier AI models—namely Anthropic’s Claude and OpenAI’s ChatGPT—to Google Gemini, they could save $1 billion annually.
As enterprises gradually transition their employees and internal systems toward AI-driven workloads, the challenge of affording expensive AI services has become increasingly prominent. Alphabet CEO Sundar Pichai noted that the new Gemini 3.5 Flash model “provides frontier-level capabilities at less than half the price.” This advantage could give the company a competitive edge in the AI sector.
Not long ago, ChatGPT was the go-to choice for enterprises seeking AI services or developing new applications. According to Similarweb data, about a year ago, ChatGPT held approximately 77% of AI web traffic. However, that dominance is declining. The latest data shows that ChatGPT now has about 54% of the market, while over the same period, Google Gemini’s market share has nearly quadrupled to around 27%. Notably, Google has a structural advantage in this space because it has integrated Gemini into its Google Search service.
Currently, Gemini has over 900 million monthly active application users, double the number from a year ago. Google is looking to further enhance Gemini’s market appeal through price reductions. The company said it has cut the monthly fee for its unlimited Ultra AI plan by 20%, bringing it down to $200.
At the same time, Google is offering even more attractive options for enterprise customers. The latest version of Gemini has added more agentic AI features, including Gemini Spark, which can run 24/7 in the cloud even when a computer is turned off. In short, at a time when Gemini adoption is already accelerating, Google is offering some of its most powerful agentic models to enterprise customers at lower prices. With millions of businesses already trusting and using Google’s Workspace and other services, bundling these with a cheaper AI plan lowers the barrier for enterprises to adopt Gemini.
Alphabet’s AI strategy is not only reflected in price wars and market share gains but is also beginning to translate into tangible financial results. Enterprise adoption of Gemini has grown 40% quarter-over-quarter, and combined with the aforementioned 900 million monthly active users, these metrics are impressive. Google’s cloud business saw first-quarter sales grow 63% to $20 billion, partly driven by “enterprise AI solutions and AI infrastructure.” Meanwhile, Alphabet’s latest quarterly earnings jumped 82% to $5.11 per share, with free cash flow of $10 billion and cash and cash equivalents of $38 billion. Alphabet currently trades at a price-to-earnings ratio of just 30x, below the tech sector average of about 36x. Taken together, Alphabet’s cost advantages in AI, user growth, and financial health present multiple reasons why its stock is attractive at this point.
