Guinness fund manager defends Microsoft after Azure miss
The fund manager argues the market overreacted to Microsoft’s cloud growth figures, citing strong backlog growth despite OpenAI concentration concerns.
Guinness Global Innovators released its first-quarter 2026 investor update for the Guinness Global Equity Income Fund, reporting a return of -0.5% in GBP. This performance outpaced the MSCI World Index, which fell 1.6%, and the IA Global Equity Income sector average of 0.1%. The manager attributed the fund’s relative resilience to a strategic shift towards defensive and value-oriented stocks as market sentiment moved away from mega-cap technology amid geopolitical tensions.
Microsoft Corporation was identified as the fund’s weakest performer during the quarter. The stock suffered a double-digit decline following its earnings release in late January 2026, triggered by Azure cloud division growth missing market expectations. Guinness Global Innovators characterised the market reaction as excessive, noting that Azure growth remained robust at 38% year-on-year.
The fund manager argued that Azure’s growth trajectory would have exceeded 40% had Microsoft allocated all its graphical processing unit capacity to third-party services rather than internal workloads. This distinction was highlighted to counter the narrative that the cloud division’s performance had significantly deteriorated, suggesting the underlying demand for compute resources remains strong.
Concerns were raised regarding the concentration of Microsoft’s commercial Remaining Performance Obligation, with OpenAI accounting for approximately 45% of the $625 billion backlog figure. However, the fund noted that total backlog grew 110% year-on-year. Excluding OpenAI, the remainder of the backlog still increased by 28%, which the manager described as a strong signal of underlying demand breadth.
Microsoft reported revenue of $82.9 billion for the third quarter of fiscal 2026, an increase of 18% or 15% in constant currency. Despite the company’s dominant position in software and cloud infrastructure, Guinness Global Innovators stated that while Microsoft remains a potential investment, they believe other AI stocks offer greater upside potential with less downside risk.
Hedge fund interest in Microsoft slightly decreased during the period, with 282 portfolios holding the stock at the end of Q1 2026, down from 312 in the previous quarter. Microsoft shares closed at $397.36 on June 10, 2026, with a market capitalisation of $2.95 trillion.
