5 Takeaways From Alphabet's Strong Q3 Earnings Call

A Closer Look At Google Cloud

Alphabet, Google's parent company, notched another solid fiscal quarter, as usual deriving nearly all its revenue -- $27.8 billion in the third quarter, representing 24 percent year-over-year growth -- from the core Google subsidiary.

Google Cloud Platform still pales in scope as a revenue generator to Google's massive advertising business. But cloud, the key component of Google's enterprise-facing strategy, is a central focus of investment, both in physical assets and in workforce, Google CEO Sundar Pichai (pictured) told investors during Alphabet's third-quarter earnings call.

Google doesn't break out financials specifically for GCP, but the "other revenues" category, which encompasses cloud, Google Play and hardware, saw $3.4 billion in sales in the third quarter for 40 percent year-over-year growth. Synergy Research, an independent analyst that crunched the financials, pegged Google Cloud Platform growth above 80 percent for the quarter.

In the earnings call, Pichai discussed where Google is making its investments, what capabilities it sees as differentiators, and the company's overall cloud strategy.

We're Hiring

Not only did Google bring on board almost 2,500 more workers in the last quarter, the "vast majority" of them engineers and product managers, but the focus of hiring was squarely on the cloud business.

The largest number of headcount additions went to work developing Google Cloud Platform, both in technical and sales roles, Pichai said.

That's "consistent with the priority we place on this business," he said.

Machine Learning Is A Core Capability

Google is investing heavily to not only develop machine-learning software, but also to deliver more computational power to support those workloads.

At Google, machine learning isn't considered a premium capability. It's core to everything the company does, and seen in Mountain View, Calif., as a fundamental differentiator in the market.

Google will continue to "drive that advantage," Pichai said.

Early bets on artificial intelligence have paid off, Pichai said. He's watched the technology "go from a research project to something that can solve new problems for a billion people a day."

Now Google is rethinking how to build products around machine learning.

"Consumers can already experience how AI allows them to interact with computing more naturally than ever before," Pichai said. "Computers are adapting to people, rather than people needing to adapt to computers."

Technology Partnerships

Partnering with other leading technology companies has become a central tenet of Google's enterprise business. Those deals extend GCP into hybrid environments, a necessary attribute for large customers.

"We're striking a lot of important partnerships with leading technology vendors to scale and reach more customers," Pichai said.

The collaboration with Cisco unveiled last week is a prime example. The two companies are delivering an "open solution that gives customers an easy approach to the cloud, enabling them to run apps that span both on-prem environments and Google Cloud Platform," he said.

The Cisco deal follows the expansion of Google's relationship with Pivotal and VMware to bring to market the PKS Kubernetes management service, and work earlier this year with SAP to deliver a more robust environment for SAP HANA workloads.

"All of this helped customers more easily run their apps on-prem and in the cloud and we're doing this all in an open way with Kubernetes," Pichai said.

Drive To The Enterprise

"We continue to make progress winning over enterprise customers," Pichai told investors.

Those customers tell Google they switch to GCP because of its prowess in data analytics and machine learning; a commitment to offering open-source technologies, like the Kubernetes container orchestrator, that span cloud and hybrid environments; and "our leadership in security," Pichai said.

But there's room for improvement on the business side.

"The main area [where] we need to get better is to scale our go-to-market and be in more places to effectively get more customers," he said.

Google cloud chief Diane Greene and her team are tackling that challenge in several ways, he said, and have done a good job scaling Google's global sales force of late.

Cloud Strategy

An open cloud bolstered by partnerships with leading technology vendors, in short, is Google's strategy going forward, Pichai said.

Leveraging open-source technologies, particularly the Kubernetes container orchestration platform, to extend across hybrid environments provided by those partners, will drive continued growth of Google's cloud business, he said.

"You'll see us scale across all these dimensions for cloud in the year ahead," Pichai said.