Financially, Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) crushed it in its third quarter. Ahead of Q3, the tech giant's revenue growth already looked impressive. Yet the Google parent company's top-line growth still accelerated in Q3, rising 24% year over year, beating analysts' estimates by about $600 million. Alphabet's bottom line similarly beat estimates.
But there was more to Alphabet's third quarter than analyst-beating revenue and EPS. In Alphabet's third-quarter earnings call, management talked acquisitions, growth drivers, and its strategy for hardware -- all important narratives for investors to keep an eye on.
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How Alphabet thinks of capital allocation and acquisitions
With Alphabet purchasing part of HTC's business recently in order to beef up its hardware business, one analyst wanted to get an update on how management thinks of capital allocation and acquisitions. While management's approach to considering and acquiring companies hasn't changed, it's useful to review Alphabet's line of thinking on the important subject.
Alphabet CFO Ruth Porat explained (via an S&P Global Market Intelligence transcript):
Alphabet's biggest growth drivers
With Alphabet posting one of its highest year-over-year revenue growth rates in five years, one analyst wanted more color on whether there were factors during the quarter that were an anomaly, or whether the drivers were sustainable aspects of Alphabet's business. While Porat didn't answer the question directly, her response suggests Alphabet is benefiting from some major growth drivers that are likely to stick around.
In other words, Alphabet's business is benefiting from strong broad-based growth, not just across its major revenue segments, but from smaller categories like Google "other" revenue (cloud, Google Play app store, and hardware), and "Other Bets" revenue (Alphabet's smaller "moonshot" businesses).
Alphabet's hardware strategy
Considering Alphabet's recent acquisition of part of HTC's business and its recent launch of eight new Google-branded hardware products, management has clearly prioritized hardware more than it has in the past. This prompted one analyst to ask management to clarify its goals on hardware, as well as comment on how this will impact its relationships with Android partners.
Google CEO Sundar Pichai responded:
So, though Alphabet its ramping up its hardware efforts, don't expect it to soften its efforts partnering with hardware manufacturers like Samsung. It seems like the company wants to have a strong presence in hardware without overpowering its existing relationships with original equipment manufacturers.
Overall, Alphabet's third-quarter earnings call reinforced the factors behind the company's strong competitive position. Strong, broad-based growth looks poised to continue.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool has a disclosure policy.