Google starts September with Gemini 3.8 Flash launch, legal win and investor confidence

On Wednesday, Google launched Gemini 3.8 Flash, its third Flash model in six weeks, and a new cybersecurity model for government and enterprise customers. Berkshire Hathaway CEO Greg Abel publicly backed Alphabet's AI position, and a federal judge rejected the Justice Department's push to force Google to sell its ad exchange. The stock rose 0.6% for the day, remaining slightly down for September after falling more than 1% on Tuesday.

Google emphasized Gemini 3.8 Flash's performance on coding and agentic tasks, two areas where AI companies are seeking to turn advances into enterprise revenue. Google said the model is its best reasoning and coding iteration, with substantial gains over Gemini 3.7 Flash. Tulsee Doshi, senior director of product management at Google DeepMind, told CNBC the Flash models have "really surprised us in positive ways in their performance" and "give us opportunities to lean into them." Smaller Flash models are cheaper and faster than flagship systems while approaching them on some tasks.

D.A. Davidson analyst Gil Luria said the model keeps Google "in the race" but probably won't alter its position as a "distant third in the enterprise market" behind Anthropic and OpenAI, recommending that investors hold the stock.

Pricing is central to Google's strategy. Gemini 3.8 Flash costs 75 cents per million input tokens and $3.75 per million output tokens, matching the introductory pricing of its previous Flash model. Gemini Enterprise is adding pay-as-you-go pricing, token discounts of up to 20%, monthly caps on agent spending and a zero-dollar base subscription. CNBC said Google has directly targeted Microsoft and Anthropic, claiming their recurring fees and separate product licenses make them more expensive and less flexible.

Google also points to scale. Nearly three-quarters of Google Cloud customers use its AI products, and Google Cloud CEO Thomas Kurian told CNBC those customers are spending about 50% more than their original commitments. DeepMind's Demis Hassabis, speaking publicly for the first time since DeepMind's reorganization last month, described Gemini as potentially a general-purpose layer coordinating cheaper, specialized models and agents. Hassabis moved from CEO to chairman of DeepMind in that reorganization.

For security, Google says Gemini 3.8 Flash Cyber can detect and patch software vulnerabilities with frontier-level performance while running faster and at lower cost. Doshi said the offering gives defenders "a fraction of the cost, much faster" with frontier-level performance. Initially, Google is restricting access to a small group of trusted government and enterprise defenders through its new Fairwind Program.

Abel told CNBC's Becky Quick that Berkshire sees Alphabet as a winner in AI, citing visibility from how its portfolio companies use the technology. He said, "We have a lot of visibility from within our companies as to how we're using AI, what type of benefits it's delivering, so that brought incremental interest, and then we saw Google as a significant player."

Advertising remains Google's cash engine, growing 14% in the latest quarter. The federal judge's rejection of the government's ad-exchange divestiture demand adds further support to that business.