Will Alphabet Soar After July 22? Here's What History Says.

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is the owner of something most of us use on a daily basis: Google Search. And that has helped pave the way to success for this technology giant. Google Search has been the leading search engine worldwide for years, and as a result, advertisers pay for billions of dollars in advertising quarter after quarter -- ads across the Google platform actually make up the lion's share of the company's revenue.

On top of this, Alphabet also has scored a win in another huge market, and that's cloud computing. As one of the leading players, Google Cloud has generated explosive growth in recent times, particularly due to demand for AI products and services. The stock has climbed 10% this year, though it's been under pressure along with other AI stocks over the past couple of weeks.

Considering the full picture, will Alphabet soar after a potential catalyst on July 22? Let's turn to history for an answer.

Image source: Getty Images.

Alphabet's impressive track record

Alphabet has appealed to a broad range of investors in recent years, thanks to its strong market position in the search business and its growth in cloud. The company has delivered impressive earnings growth over time, and it's easy to imagine this continuing well into the future. In the latest quarter, Alphabet's total revenue soared 22% to more than $109 billion, and Google Services and Google Cloud revenue each climbed in the double-digits.

In fact, AI demand is driving tremendous growth at Google Cloud -- backlog there almost doubled from a quarter ago to more than $460 billion in the latest period. That offers us reason to be optimistic about revenue growth moving forward.

Though Alphabet is heavily investing in the AI build-out, this growth in backlog, general comments from peers about strong AI demand, and the company's history of benefiting from its investments -- as we can see in the chart below -- offer us additional reasons to like Alphabet.

GOOG Return on Invested Capital data by YCharts

In recent days, though, Alphabet and other AI stocks have stumbled amid concerns about the high levels of tech investing in the build-out -- and whether the revenue opportunities justify it. It's impossible to predict exactly what will happen in the future, but so far, the long-term AI story remains intact. AI has already started to address real-world problems and help companies reduce their costs and become more efficient and innovative. And we're in the early days of this use of AI, so a great deal of growth may happen over the coming years.

A catalyst ahead

Now, let's consider the potential catalyst on July 22. Alphabet is set to report second-quarter earnings after the market closes.

Will the stock soar afterward? A look at history shows us that Alphabet stock advanced in the five trading days following four of the past five quarterly reports.

So, history suggests that Alphabet, with a strong track record of climbing after recent earnings reports, would do the same once again. Meanwhile, the current valuation, with the stock trading at 24x forward earnings estimates, is reasonable -- that's another element that may encourage investors to buy the stock.

That said, it's important to remember two things. First, history isn't always right. It's possible that Alphabet will stray from the recent trend -- even if its earnings report is positive. Second, as I mentioned earlier, AI stocks have come under pressure in recent days, and this could continue.

What does this mean for investors? Alphabet's long-term story remains very bright, thanks to its well-established search business as well as its cloud unit. The company is winning in AI too, and this offers growth potential -- even if AI stocks face headwinds in the near term, quality AI players still have bright long-term prospects.

So, Alphabet shareholders may cheer if the stock soars after the earnings report -- but if it doesn't, they shouldn't worry. This tech giant is well-positioned to generate significant earnings growth and share price performance over the long run.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.