Microsoft Corporation (MSFT) Is Betting Big on AI: Is Its Growth Story Just Getting Started? Attiya Zainib Tue, November 3, 2026 at 2:35 PM EST 4 min read PS -0.68% MSFT +2.87% FNMA +4.15% FMCC +4.28% Trade MSFT on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
Pershing Square Inc. recently released its Q3 2026 investor letter. A copy of the letter can be downloaded here. The letter reported 13% year-over-year growth in third-quarter fee-related earnings (FRE) to $63.7 million, while distributable earnings (DE) before taxes increased 8% to $61.0 million. After taxes, DE totaled $49.5 million, or $0.12 per share, down 12% year over year, primarily due to corporate income taxes following its IPO. Fee-paying assets under management reached approximately $23.0 billion as of September 30, 2026, up 3% sequentially and 4% year over year, with permanent capital representing 98% of the total. The firm said its portfolio companies recorded average quarterly EPS growth of approximately 5% and generated a combined investment return of just over 8%, excluding Howard Hughes Holdings and Fannie Mae and Freddie Mac. Pershing Square expects its portfolio companies to deliver approximately 20% annual EPS growth over the next three to five years. A major focus of the letter was the AI infrastructure buildout. AWS revenue growth accelerated to 39% in Q3, while Meta's AI-driven advertising improvements and Microsoft's Azure growth and Copilot adoption strengthened their investment cases. Pershing Square also invested $110 million across seven private companies as part of its planned launch of Pershing Square Ventures. Overall, the firm believes market volatility is creating opportunities to acquire high-quality businesses at attractive valuations. In addition, please check the Fund's top five holdings to know its best picks in 2026.
In its third-quarter 2026 investor letter, Pershing Square highlighted stocks like Microsoft Corporation (NASDAQ:MSFT). Microsoft Corporation (NASDAQ:MSFT) is a technology company that develops software, cloud computing services, productivity applications, and artificial intelligence solutions. Its major businesses include Microsoft 365, Azure, Windows, and LinkedIn. The one-month return of Microsoft Corporation (NASDAQ:MSFT) was approximately -4.78%, while its shares traded between $349.20 and $551.15 over the last 52 weeks. On November 2nd, 2026, Microsoft Corporation (NASDAQ:MSFT) stock closed at approximately $507.12 per share, with a market capitalization of about $3.77 trillion.
Pershing Square stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q3 2026 investor letter:
"Microsoft Corporation (NASDAQ:MSFT)'s share price increased 38% during the third quarter and 27% year-to-date from our average cost. The company is delivering accelerating performance across its core productivity and cloud franchises, with M365 growth accelerating to 18% and Azure growth accelerating to 48% in the most recent quarter. Azure's commercial backlog has also grown substantially, with the recent growth driven entirely by enterprise customers rather than frontier model companies, which provides strong visibility into durable demand.
This business momentum has been accompanied by a rapid pace of product innovation. Milestone launches over the last few months include the consolidation of Copilot's chat, Cowork, Autopilot, and Code experiences into a single application, the release of more than a dozen new proprietary MAI models, the scaling of the company's custom silicon Maia program across its datacenter fleet, and the introduction of Project Perception, an agentic cybersecurity offering. Investor perception of Microsoft's AI positioning has shifted markedly in recent months, and its P/E multiple has increased from 19 times to 25 times forward earnings. We continue to expect high-teens earnings growth over the long term and believe the stock remains undervalued (Click Here To Read The Letter In Detail)."
Microsoft Corporation (NASDAQ:MSFT) is in 2nd position on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. As per our database, 273 hedge fund portfolios held Microsoft Corporation (NASDAQ:MSFT) at the end of the second quarter, which was 282 in the previous quarter. While we acknowledge the risk and potential of Microsoft Corporation (NASDAQ:MSFT) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
In another article, we covered Microsoft Corporation (NASDAQ:MSFT) and shared the list of best stocks to buy for the next 10 years. In addition, please check out our hedge fund investor letters Q3 2026 page for more investor letters from hedge funds and other leading investors.
This article is originally published at Insider Monkey.
