Alphabet's TPU Sales Surge but Strain Cash Flow as AI Chip Push Intensifies

Alphabet said sales of its in-house Tensor Processing Units, originally built for internal use, have generated billions of dollars in revenue, but the effort is weighing on cash flow as the company pre-buys hardware ahead of customer payments. CFO Anat Ashkenazi said on a Wednesday earnings call that unsold TPU systems are now counted as inventory, pulling cash forward. Unlike traditional capital expenditure, this creates a separate cash-recovery cycle. Shares fell nearly 11% Thursday after Alphabet reported continued net cash outflow and reiterated sharply higher AI infrastructure spending for next year. The company did not disclose chip revenue or margins but said TPU sales contributed "significantly" to Google Cloud revenue, which more than doubled year over year in the third quarter. Google Cloud CEO Thomas Kurian said TPU system sales are expected to rise further this quarter and expand substantially in 2027. Alphabet previously announced a multibillion-dollar TPU supply deal with Anthropic and is reportedly in talks with OpenAI for a similar arrangement.