TPU Chip Sales Boost Google Cloud but Inventory Build Drains Cash Flow
GOOG is trading near its 52-week low of $268.43 (4.2% above the low).
Summary
Alphabet's custom TPU chip business is now a real revenue driver — sales made a 'meaningful' contribution as Google Cloud revenue more than doubled in the September quarter — but the model requires building inventory well before customers pay. CFO Anat Ashkenazi said on Wednesday's post-earnings call that unsold TPU systems now sit in inventory, pulling cash out in a different cycle than traditional capex. That cash drag landed alongside another quarter of cash burn and guidance for sharply higher AI infrastructure spending next year, and shares fell nearly 11% on Thursday. Cloud chief Thomas Kurian said TPU system sales should rise further this quarter and ramp significantly in 2027, with Anthropic already committed to tens of billions of dollars of TPUs and reports of similar talks with OpenAI. The bull case rests on TPU margins resembling Nvidia's GPU margins, which Check Capital's Jeremy Saltzberg called 'incredible' — but the market is currently pricing the cash-flow cost, not the margin upside.
At the time of this announcement, GOOG was trading at $279.81 on NASDAQ in the Technology sector, with a market capitalization of approximately $3.4T. The 52-week trading range was $268.43 to $404.47. This news item was assessed with negative market sentiment and an importance score of 7 out of 10. Source: Reuters.