L1 Capital: Microsoft Needs Better Execution to Meet Higher Expectations
L1 Capital International Fund's Q2 2026 investor letter highlights that Microsoft (MSFT) has been removed from its top 10 holdings due to concerns about competitive positioning. The fund notes Microsoft lags in developing its own AI chips, faces Azure capacity constraints, and is overly reliant on OpenAI while Anthropic outperforms. Other challenges include struggling Xbox business and cyclical Windows headwinds. However, Microsoft 365 and Copilot remain critical to the investment case. New business head Jacob Andreou acknowledges the need for improved execution. The fund returned +2.6% in Q2 2026 versus a 12.5% benchmark, with underperformance driven by holdings not included. Microsoft shares closed at $393.82 on July 17, 2026, down 22.79% over 52 weeks, with a $2.93 trillion market cap.
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