Google’s TPU bet lifts Cloud growth while inventory weighs on cash

Alphabet is increasingly selling the artificial-intelligence chips it once mainly used inside Google, creating a new source of Google Cloud growth but also a less familiar cash-flow burden. The company has to build chip systems and related infrastructure before customers pay for them, unlike the simpler timing of many software and advertising sales.

A growing chip business inside Cloud

The chips, known as Tensor Processing Units, or TPUs, are bundled into systems with networking, storage and software. Alphabet does not report TPU revenue or margins separately, but said TPU sales made a “meaningful” contribution as Google Cloud revenue more than doubled in the September quarter, according to Reuters.

Google Cloud Chief Executive Thomas Kurian said TPU-system sales should increase in the current quarter and ramp up significantly in 2027. Alphabet’s official third-quarter release reported total revenue of $127.6 billion and Google Cloud revenue of $30.7 billion, up 103% from a year earlier.

Inventory changes the cash-flow pattern

Chief Financial Officer Anat Ashkenazi said on Alphabet’s post-earnings call that unsold TPU systems are now appearing in inventory balances. That means cash can leave the business before the related customer payment arrives. She described the pattern as different from traditional capital expenditure and as a different cycle of cash-flow generation.

Alphabet’s official release reported $42.3 billion in operating cash flow for the third quarter. Reuters said the company reported another quarter of cash burn and reiterated that spending on AI infrastructure would rise sharply next year. Alphabet shares fell nearly 11% on Thursday after the results, Reuters reported; that market move reflects investor reaction, not proof that the TPU business is unprofitable.

Demand outlook remains partly disclosed

Alphabet said last year that it would supply Anthropic with TPUs worth tens of billions of dollars. Reuters said media reports have also described talks over a similar arrangement with OpenAI, but those discussions were not presented as a completed deal.

The company’s TPU push therefore carries two linked outcomes: it gives Google Cloud another way to compete for AI workloads alongside Nvidia-based infrastructure, while making inventory and data-center spending more important to the timing of cash generation. Alphabet does not yet disclose enough chip-specific revenue or margin detail to measure the business independently.

Sources

• Reuters report — TPU inventory, executive comments, Cloud growth, demand outlook and market reaction.
• Alphabet Q3 2026 earnings release — reported total revenue, Google Cloud revenue and operating cash flow.
• Alphabet Q3 2026 earnings call — official investor-call source for management commentary.
• Google Cloud and NVIDIA expand AI innovation across industries at GTC 2026 — Google’s description of its co-engineered AI infrastructure and NVIDIA partnerships.