Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is undoubtedly one of the biggest and best mega-cap stocks on Wall Street.

Google stock is coming off another solid year. And increasingly, Google’s cloud services are a growing part of the company’s success.

While it didn’t show some of the amazing returns enjoyed by some of the biggest tech stocks in the world, Google stock still managed to pull a 27% return in 2020. That easily topped the greater Nasdaq composite, which gained roughly 15%.

Now as Alphabet barrels toward its fourth quarter and full-year earnings report (expected February 2), the big question is what investors can expect from Alphabet. The company has its hands in everything from AI to cloud storage, internet services, advertising, entertainment and autonomous vehicles.

Such reach gives Alphabet huge advantages to pull in profits from a variety of sources, making the company relatively impervious to long-term downtrends.

But Alphabet is also in keen competition with other mega-cap tech companies that are vying for the same slices of pie that are fueling Google stock.

Here’s what you should be looking for as Alphabet prepares its earnings report.

Google Stock at a Glance

The big question for Alphabet is whether it will be able to replicate the success it showed for Q3. In the third quarter, Alphabet posted revenue of $46.2 billion and earnings per share of $16.40.

Analysts had expected revenue of $42.9 and EPS of $11.21, so the earnings beat was a big one.

The beat was especially significant as the company saw its first-ever decline in revenue in the second quarter, thanks to a fall-off in advertising revenue during the novel coronavirus pandemic.

Those numbers turned around in Q3, with advertising revenue of $37.1 billion compared to $33.8 billion in the third quarter of 2019. Alphabet will need to continue that positive trend in Q4.

While advertising is a core business for Alphabet, there’s yet another reason why I think Google stock is one worth watching as we head into the Q4 earnings report.

Growing Cloud Coverage

Undoubtedly, there are some big players in the cloud computing and storage game.  Competition is fierce and the market is growing.

So it’s notable that that Alphabet isn’t just sitting on its laurels when it comes to building out the Google Cloud Platform (GCP).

Three years ago, Cockroach Labs began issuing annual comparative cloud reports, giving consumers and businesses an indication of which company was doing the best in cloud services and computing. And in that early study, Google ranked far behind competitors such as Amazon (NASDAQ:AMZN) Web Services and Microsoft (NASDAQ:MSFT) Azure.

Not any longer.

In the Cockroach Labs 2021 report released this month, Google is ranked as providing the best overall performance.

The margins are tight. For instance, Google gets top scores for running online transactional processing workloads. Amazon is considered to be the best value for the money.

“Declaring a winner was much harder to declare in years past,” the authors say in the study.

Amazon, Microsoft and Google are three mega-heavyweights. It’s like a prize fight with Muhammad Ali, Mike Tyson and George Foreman all in their primes.

Alphabet will have to work hard to continue to improve its cloud services, but it’s on the right track. And more importantly for Google stock, the company’s cloud services are a reliable money-maker. In the third quarter, Google stock recorded $3.44 billion in revenue from the company’s cloud services, versus $3.32 billion that analysts had expected.

Just this month, Alphabet announced some new AI tools that will help retailers using Google’s cloud services to deliver a better user experience to their customers. The tools will allow retailers to suggest products based on their browsing history and will be able to adapt in real time to user behavior.

Nobody collects browsing data like Alphabet. The company’s Google Chrome web browser is by far the dominant browser in the United States, with more than a 50% market share.

Tools such as these are doubly important for retailers who are doing more business online, thanks to changes in customer behavior brought on by Covid-19. They will help Alphabet compete with Microsoft and Amazon for cloud dominance.

The Bottom Line

Google stock had a good — though not great — 2020. But there’s good reason for optimism, particularly with the company’s emphasis on cloud computing and services.

Forrester Research estimates that the public cloud computing infrastructure market will grow by 35% to $120 billion. Now that Alphabet has made up the ground with Amazon and Microsoft, it’s going to be important for Google stock that the company keep investing in its cloud products.