Alphabet's Stock Is a Must Buy Before July 22

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) has a major event coming up: its second-quarter earnings report. This is one of the few times investors get each year to peek under the hood of a business, and with Alphabet delivering strong results in Q1 2026, investors want to see if it can back them up in the second quarter.

I think the stock is a must-buy before the company reports earnings, as there are some things that could cause the stock to skyrocket.

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Alphabet's cloud computing business takes center stage

The biggest thing I'll be watching is Alphabet's cloud computing growth. Cloud computing is becoming a huge part of Alphabet's business, with Google Cloud emerging as one of the top platforms to build and run artificial intelligence (AI) models on. Last quarter, revenue soared 63% to $20 billion.

That blew expectations out of the water, and I'm confident Alphabet will do it again this quarter. Alphabet is spending hundreds of billions on data center construction to meet demand. However, it still doesn't have enough to fulfill it all. Another reason Google Cloud will experience growth is the sales of its custom TPUs. These custom chips offer competitive advantages over GPUs in some applications, and Alphabet is starting to sell them to select clients. This is an entirely new part of its business that emerged last quarter, and it could grow to become an even larger part over the next few years. A booming cloud computing revenue growth rate will confirm the AI build-out thesis and convey an all-is-well message to investors. On the flip side, if cloud growth is slow, it could sound an alarm among investors.

Alphabet's core advertising business will also be under the microscope, as investors want to know how shifting advertising trends powered by AI are affecting the core Google search business. Last quarter, it didn't have any negative effect, and revenue soared 19% year over year -- pretty good for a business that was left for dead only a year ago.

But why is Alphabet a buy before July 22? I think its stock is priced to soar following earnings. At 25 times forward earnings, Alphabet stock isn't the cheapest around, but it still trades at a discount to some of its big tech peers despite offering a brighter future and a higher growth rate.

GOOGL PE Ratio (Forward) data by YCharts

Stocks like Amazon and Apple trade for 29 and 37 times forward earnings, respectively, and are each growing at a much slower pace (both grew at a 17% clip last quarter versus Alphabet's 22%). Alphabet's dominance in the search space, combined with a rapidly growing cloud computing division, makes it one of the most attractive big tech stocks to invest in now, as growth potential is far greater in these industries than in hardware sales (Apple's phones) or e-commerce (Amazon). Although Amazon does have a strong cloud business, it's not growing nearly as fast as Google Cloud.

If Alphabet reports a blowout quarter, I wouldn't be surprised to see the stock skyrocket to a 30 times forward earnings valuation, which would be 20% upside from here. That's a great return in a short time frame, and if Alphabet can crush its earnings, I think it's entirely possible to make that move quickly.

Keithen Drury has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, and Apple. The Motley Fool has a disclosure policy.