Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) reports earnings after the bell. The Google parent has marched higher in recent weeks and now approaches the coveted $1-trillion market cap. With the company releasing earnings on Feb. 1, investors will have to weigh whether the rally can continue to that level or if GOOGL stock will pull back.

However, in recent weeks, GOOGL stock has been hyped for reasons unrelated to its core offering of ads. Given the company’s reputation for stable high growth, investors should focus on profits of non-core offerings rather than overall profits themselves.

AI and VR Get the Attention, Ads Produce the Revenue

Analysts are looking for 4Q 2017 earnings of $9.98 per share generated from $31.87 billion in revenue. For all of 2017, they expect $32.31 in earnings and $110.4 billion in revenues. GOOGL has dramatically exceeded analyst estimates for the last three quarters.

However, Alphabet’s most recent earnings miss occurred in 4Q 2016. Whether earnings miss or greatly exceed expectations matters only to short-term traders. GOOGL stock watchers should look just as closely at sector growth.

As I mentioned in a recent article, ads remain the primary revenue driver for GOOGL stock. Most of the recent media attention has focused on the company’s artificial intelligence (AI) offerings, such as Google Home, and virtual reality (VR) products, such as the Mirage Solo, built in conjunction with Lenovo Group Limited (ADR).

With the treasure trove of data that the company compiles, both business lines will grow in importance. Still, the ABCs of Alphabet revenues lie with ads.

These very ads have given Google’s revenues an average growth rate of almost 19% per year over the last five years. And with that revenue growth, profits have grown at an average yearly rate of about 15% for the same period.

Recent reports showed Google deriving nearly 90% of its revenue from advertising. If the percentage of ad revenue stays at or exceeds that range, that could serve as a sign that its non-core products are not taking off.

$1-Trillion Market Cap for GOOGL

Another focus lies in a psychologically important milestone — reaching the $1-trillion market cap. No company has achieved this to date. GOOGL’s market cap stands at about $825 billion.

Its only competitors in this regard are Apple Inc. (NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN). Apple’s market cap stands at just over $855 billion, while Amazon could also catch up with its market cap over $700 billion coupled with its high growth.

From a fundamentals standpoint, winning this race has little relevance. With current growth rates, reaching that market cap is a near certainty. Still, psychology plays an important role in market behavior. The emotional impact of being part of the $1-trillion milestone draws interest and buyers in the near term.

GOOGL’s current price-to-earnings (PE) ratio stands at around 39. That’s not very high for a high-growth tech giant.

Though Facebook, Inc. (NASDAQ:FB) has a slightly lower PE, Alphabet has among the lowest valuation of the so-called “FANG” stocks—GOOGL stock along with Facebook, Amazon and Netflix, Inc. (NASDAQ:NFLX). Alphabet stock trades much lower than stratospheric PE stocks such as Amazon or Netflix, but it’s still double the valuation of Apple.

Final Thoughts on GOOGL Stock

Due to Alphabet’s reputation for high growth and stability, the area of interest in the upcoming earnings report will revolve around non-core products. Whether company earnings and revenues will exceed or miss expectations remains unknown.

Still, whatever numbers the company reports, investors should look for the sources of revenue and earnings as closely as the overall numbers themselves. Most of the publicity for GOOGL stock has revolved around AI and VR products. However, despite this focus, ads still account for nearly all of Alphabet’s revenue.

Also in focus is the race to the $1-trillion market cap. While not crucial to company fundamentals, this market cap milestone will likely draw investor interest in the near term. With its virtual ownership of the internet, GOOGL stock will remain a long-term buy. How much of a buy will hinge on its continued success, both inside and outside of its core offerings.

As of this writing, Will Healy did not hold a position in any of the aforementioned stocks.