Google I/O Preview: AI Agents Accelerate Penetration in Search and Commercialization

Google I/O 2026 will be held on May 19th to 20th, marking Google's largest annual developer event. Amidst the escalating competition in AI large models, expectations for Google's appearance this time are high. The conference is expected to simultaneously advance the commercialization of Android XR smart glasses, the Android 17 system update, and significant iterations of AI products such as Veo video generation and Beam immersive video conferencing.

Citi Research's forward-looking report released on the eve of the conference pointed out that Google has maintained a release pace of the Gemini model at approximately 3 to 4 months since 2024. Based on this calculation, it is most likely that Gemini 3.2 or 3.5 will be released at this I/O conference.

According to Sources , Google plans to release a new Gemini model at this Tuesday's annual I/O conference. The new model's comprehensive capabilities are roughly on par with OpenAI's recently launched GPT-5.5, but it is significantly behind Anthropic's Mythos. Although Mythos has not yet been widely opened, it has redefined the industry's leading laboratories' criteria for judging "leadership".

"Agentic" strategy accelerates comprehensively

This I/O conference is seen by Citi as a key window to observe the commercialization and landing of Google AI, with core topics focusing on the comprehensive advancement of the "agentification" product matrix.

With AI Overview (AI-O), AI Mode (AI-M), and Gemini search experience accelerating integration into Chrome, Google is upgrading traditional searches from "answer return" to "intent understanding", driving search queries to evolve in a longer and more commercially intended direction. Google's first-quarter search queries in 2026 have reached a historical high, with 2B+ monthly active users, and the monthly active growth of US Gemini applications has increased by 127% year-on-year.

In the e-commerce sector, Google is accelerating the commercial deployment of the Universal Checkout Protocol (UCP) and Agentic Commerce. Citi's report indicated that major platforms such as Meta, Microsoft, Stripe, Klarna, and Affirm have recently connected to Google's business agency system, with AI-driven product discovery and one-click checkout features expected to become a reality in the fourth quarter of 2026.

Cloud business becomes the strongest growth engine

Google Cloud's revenue growth rate in the first quarter has reached 63.4% year-on-year, with the backlog of deferred orders surging by 400% year-on-year to $462.3 billion. Token consumption increased by 60% quarter-on-quarter, confirming the continuous explosion in AI inference demand.

During the conference, the market will also pay attention to the latest progress in Google's sales strategy for its self-developed TPU chips. Citi pointed out that the commercial sale of TPU was officially disclosed in the first quarter, expected to contribute to revenue starting from the second half of 2026, and to accelerate volume in 2027, directly affecting Broadcom's (AVGO) revenue. Moreover, upgrades and iterations of Google's AI programming tools such as Gemini Code Assist, as well as the commercial progress of Android XR smart glasses, are also key directions for institutional investors to track.

AI reshapes the search business model

At the Google Marketing Live (GML) conference on May 21, Google's AI monetization progress in advertising will be a focal point. Currently, more than 30% of search advertising budgets flow towards AI-driven advertising products (AI Max, P-Max, Demand Gen, etc.), AI Max has officially transitioned from beta testing to the default tool in April this year, and is set to fully replace Dynamic Search Ads (DSA) in September this year.

Early data shows that the full feature set of AI Max can achieve a 14% increase in conversion rates, while the Smart Bidding Exploration feature increases the number of search ad conversions by about 27%.