So Bismarck actually refrained from taking any land from Austria because he realized that Austria would actually be the best ally for the new German Empire. He probably would have avoided war with Austria if he could have, but it was necessary for Prussia to beat Austria to ensure that Prussia was recognized as the one true leader of Germany; and to remove Austrian opposition to a Prussian led Germany. Prussia and Austria had been fighting this battle for hegemony ever since Prussia ascended to the ranks of a great power at the end of the Napoleonic wars. Relations between the two powers was predictably very cold in the aftermath of the Austro-Prussian war. Austria didn't lose any land but it was forced to pay a hefty indemnity of 25 million thalers which was predictably not well received in Vienna. The new Austrian foreign minster was a man by the name of Friedrich Ferdinand von Beust, he hated Prussia, and wanted to unit the South German states and possibly France into an anti-Prussian alliance that would allow Austria to declare war on Prussia and regain its place among the German states. This plan wasn't bad as the South German states were opposed to Prussia's attempts to force them into a union, and France was also threatened by Prussia's rise to power. The plans kinda fell through when Prussia got into a war with France and the South German states rallied behind Prussia.

Friedrich Ferdinand von Beust eventually changed his mind towards the Prussian led Germany and advised the Austrian emperor that he should seek an alliance with Germany. He realized that it was futile for Austria to attempt to stay enemies with Germany. Beust was eventually let go in 1871, but his successor, Count Gyula Andrássy, followed Beust's line of thinking and began to repair relations with Germany. Bismarck, pragmatic as always, managed to create the "League of the Three Emperors" pact in 1873 which was essentially an alliance between Russia, Austria-Hungary, and Germany. The pact fell through for the first time in 1885 over more issues between Russia and Austria-Hungary in the Balkans. Eventually the pact was dissolved again in 1890 in the face of growing tensions between Austria and Russia in the Balkans, and Germany finding increasingly hard to balance their relationship with both Russia and Austria-Hungary. The successor to Bismarck, Leo von Caprivi, let the alliance fall through and didn't try repairing the relationship between Austria and Russia. In 1879 Germany and Austria -Hungary signed the "Dual Alliance" pact, the alliance was created to counter the threat Russia posed to both countries, and both countries felt that they needed a more intimate and secure alliance than the one they had with Russia. The Dual Alliance turned Austrian-Hungary into the lesser partner of Germany and it would remain that way until 1918. Austria-Hungary's goal was now to make sure that Germany was fully engaged in protecting Austria-Hungary's empire. Bismarck feared, and rightly so as WW1 would demonstrate, that Germany would be crushed by an alliance of France, Russia, and Austria. So Bismarck actually scored quite a victory by managing to secure both countries as allies. However once Russia left and formed an alliance with France in 1894, Germany was basically forced to keep Austria by its side; so while Austria-Hungary was by far the weaker country, they held quite a bit of sway over Germany because Germany could not afford to lose Austro-Hungarian support. That's a major factor behind Germany's decision to give Austrian-Hungary a "blank check" with regards to Serbia, which in turn kicked of WW1.

Source:

Iron Kingdom by Christopher Clark.

The Road to Konnigratz by Barry Qintin

Imperial Germany 1871-1918 by Barry Retallack