Oracle to sell Google chips worth $9.4 billion this year

Oracle will begin selling Google's tensor processing units, or TPUs, to customers outside of Google's own cloud network. Alphabet disclosed the partnership on Tuesday, one day before its third-quarter earnings release. This marks the first time the custom chips, which Google has developed since 2013, will be accessible through a third-party provider.

Analysts project substantial revenue from this shift. TD Cowen estimates Google will generate $9.4 billion in TPU sales during the second half of 2026. Wells Fargo forecasts approximately $9 billion in sales for the current quarter and $99 billion for 2027. These figures underscore the rapid expansion of a hardware segment that has historically remained internal to Google.

Thomas Kurian, who leads Google Cloud, has spent more than 20 years at Oracle prior to joining Google in late 2018. He is driving the strategy to expand the company's hardware reach. Chris Ballard, a managing director at Check Capital Management, stated that Google is a strong competitor that could eventually take market share from Nvidia. Ballard's firm held about $236 million in Alphabet stock as of June 30.

Google Cloud revenue is growing faster than its rivals. Analysts expect cloud revenue to jump roughly 90% year over year in the third quarter, following an 82% increase in the previous quarter. In the second quarter, Google Cloud generated $25 billion in revenue, trailing Amazon Web Services at $42 billion and Microsoft Azure at $29 billion.

CFO Anat Ashkenazi noted in July that only a small portion of TPU revenue from existing agreements will be recognized this year. She said the vast majority of that revenue is expected in 2027. Google plans to use more outside capacity in the third quarter while it continues to build its own infrastructure.

Anthropic, a major AI competitor to Google, is the company's largest TPU customer. It agreed last October to use up to 1 million TPUs in a deal worth tens of billions of dollars. OpenAI is also planning to purchase TPUs from Google, according to reports confirmed by CNBC. Anthropic disclosed in its IPO filing on Monday that it uses silicon from Google, Amazon, Nvidia, and Advanced Micro Devices.

Financing structures are emerging to support these purchases. Broadcom detailed a $63 billion vehicle backed by Blackstone and three major banks. This fund will buy TPUs and networking gear from Broadcom and lease them to Anthropic for five years. William Blair analysts estimate this financing covers about half of Anthropic's 2027 needs.