Flutter is in line with Google's business objectives. The more people transition to mobile apps, the more mobile searches people will make (as opposed to in-app searches.)
They don't care if you are on Android or on mobile web, so cannibalization here isn't an issue; both lead to Google searches.
I think you misunderstand how Google operates. Google is a huge company that, even though less bureaucratic than companies of the same size, has many layers of management. I'd be surprised if any top executives even know that Flutter exists. My point is, adevine is right, Flutter is probably a small internal project that a bunch of devs got behind and got approval from a middle manager to release. It indicates very little about what's on the mind of the real decision makers at Google (e.g. the VPs in charge of Android or mobile or search).
Now, it might get momentum and eventually get more attention and more resources from Google leadership; but it also might not.
They don't care if you are on Android or on mobile web, so cannibalization here isn't an issue; both lead to Google searches.