Microsoft (MSFT) Slipped in Q1 Despite Revenue Growth of 15%

Wedgewood Partners flagged Microsoft (MSFT.OQ) as a leading detractor in Q1 2026 despite strong fundamentals — revenue +15% and operating income growth above 20% — because the stock’s valuation contracted to multi‑year lows amid a surge in capital expenditures (+65%) and investor concerns about seat‑based software amid impending large AI IPOs. The fund notes a >$600 billion backlog and tripling commercial bookings as demand signals and argues recent capex should generate strong returns, but the market discounted Microsoft as investors rotate to other AI plays. The pullback left Microsoft a key negative contributor to the fund’s performance versus the US SP 500 benchmark.