Bill Ackman's Pershing Square Capital Management raised its Microsoft stake by nearly 10% in the second quarter, making it the fund's third-largest position. The purchases came before a strong July earnings report sent the stock sharply higher, leaving Microsoft's valuation less attractive than it was when Ackman bought in.
Pershing Square Capital Management increased its Microsoft holding by nearly 10% during the quarter, and the stock now ranks as the fund's third-largest position, accounting for nearly 12% of its portfolio. Those purchases were reported as of the end of the second quarter on June 30, before Microsoft's most recent earnings report moved the stock significantly.
Microsoft has been an up-and-down investment in 2026, and it is basically flat for the year. However, the S&P 500 has returned more than 10% this year, making Microsoft a disappointing investment by comparison. Yet investors who bought Microsoft at one of its low points fared much better: shares purchased on the last day of June are up 30%.
Earnings drove the rally
Microsoft reported earnings in late July, and the results were well received, sending the stock sharply higher. The company posted 18% revenue and operating income growth. Its Azure cloud computing segment reported 43% revenue growth. What most excited the market was Microsoft not increasing its data center spending guidance for the year, unlike many other AI hyperscalers during their recent earnings calls.
Valuation has climbed since Ackman bought
Before the earnings report, Microsoft traded for less than 20 times forward earnings. Now, following the rally, it trades for about 25 times forward earnings, still cheaper than the 30 times forward earnings it commanded for a long time. Fool.com contributor Keithen Drury argues the current price is fair for Microsoft, calling it a viable investment, but not one of the best AI stocks to buy right now, since several other AI stocks are trading at cheaper valuations.
Source: Fool
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