Alphabet starts selling its TPU chips to outside customers, opening a new front against Nvidia

For years, Google’s Tensor Processing Units were the tech equivalent of a family recipe. Everyone knew they existed, but you only got a taste if you came over for dinner, meaning you rented them through Google Cloud.

That is changing. Alphabet is now selling its TPU hardware directly to select outside customers, and the first systems have already landed in other companies’ data centers.

The shift began with an announcement in late April 2026 during Alphabet’s first-quarter earnings call. The company revealed it would start selling TPUs to a select group of external buyers.

Until then, the chips mostly powered Google’s own operations. Outsiders who wanted access had to rent capacity through Google Cloud rather than own the hardware outright.

The plan moved quickly from announcement to delivery. On the second-quarter earnings call in July, CFO Anat Ashkenazi confirmed that the first TPU systems reached external customer data centers during that quarter.

Those deliveries allowed Alphabet to recognize its first revenue from direct TPU sales.

The company expects most of the sales tied to these agreements to arrive in 2027. So the revenue line exists now, but the real volume is still a calendar flip away.

Alphabet has also signaled that this revenue won’t arrive in a smooth, predictable stream. Quarterly TPU hardware results are expected to swing around, which is typical when a business depends on large, chunky equipment orders landing in specific periods.

New customers and market impact

Demand is coming from a few corners. AI labs are the obvious customers, but capital markets firms and high-performance computing users are also in the mix.

The customer list already includes some heavyweight names. Meta began running TPUs for production workloads in its own data centers as of October 2026.

Oracle is also on board. The two companies announced a partnership that will make TPUs available on Oracle Cloud Infrastructure starting in calendar 2027.

That makes Oracle the first hyperscaler outside of Google to offer the chips.

Analyst estimates sketch a steep growth curve. Those projections put external TPU revenue at approximately $8 billion in 2026. For 2027, forecasts range from $51 billion to more than $75 billion, depending on whose model you trust.

Where the sales do show up is inside Google Cloud’s backlog. That backlog reached $514 billion by the end of the second quarter, a figure that now includes these TPU commitments.

Google Cloud revenue climbed 82% year over year to $24.8 billion in Q2 2026, and that figure doesn’t reflect the impact of TPU sales.

A new front against Nvidia

The move is a direct challenge to Nvidia, which has long dominated the market for AI accelerators. By selling its own chips to third parties, Alphabet is expanding its ecosystem beyond its own data centers.

The strategy mirrors the approach of other tech giants that have built their own hardware to reduce reliance on single vendors. For Alphabet, this is a way to monetize its internal technology and create a new revenue stream.

The company’s financials show it is well-positioned to support this expansion. Alphabet reported an annual net income of $132.17 billion for the fiscal year ended December 31, 2025, and an operating margin of 32.0%.

The success of this initiative will depend on the ability to scale production and maintain the performance advantages of its custom silicon.