Jacob Andreou: Microsoft Needs to Lift Its Game and Execute Better to Clear the Higher Bar

Investment firm L1 Capital International Fund released its Q2 2026 investor letter, discussing a 'two-speed' global economy and an uncertain future. The fund returned +2.6% (net) versus a benchmark of +12.5%, with underperformance driven more by what was not held. The letter highlighted that Microsoft (MSFT) is no longer among its top 10 holdings, having rebalanced toward Alphabet. While comfortable with Azure, L1 Capital believes Microsoft is behind in developing its own chips (GPUs, CPUs, ASICs) for AI workloads, is capacity constrained after pulling back on data center investments, and is more dependent on neocloud capacity. Azure is also more OpenAI-centric, while Anthropic has been out-executing OpenAI. Other Microsoft businesses like Xbox are struggling, and Windows faces cyclical challenges. Microsoft 365 and Copilot remain critical to the investment case. New business head Jacob Andreou stated the company needs to lift its game and execute better. MSFT closed at $393.82 on July 17, 2026, with a market cap of $2.93 trillion.