Incremental Returns

Investing in high quality companies riding a secular growth trend.

[Incremental Returns @incrmntlreturns]

@Biohazard3737 It has to do with certain safety features.

Certain cybersecurity and biology related chats/projects get shifted down to Opus 4.8 automatically.

I watched this video this morning that goes over it and says which tasks you should reserve for fable.
https://t.co/2PVwKFh0CU

[Incremental Returns @incrmntlreturns]

CRPO (Commercial Remaining Performance Obligation) is contracted revenue not yet recognized.

MSFT CRPO: $627B (+99% YoY), bigger than Google Cloud’s $462B, but ~45% comes from OpenAI.

Size supports the bull case. Customer concentration is the bear case.

[Incremental Returns @incrmntlreturns]

Cloud growth rates, Q1 2026:

Google Cloud: 63% YoY, accelerated 16 points sequentially

AWS: ~21%, accelerated 4 points

Azure: 40% constant currency, accelerated 1 point

All three are running faster. Azure is running the slowest right now.

[Incremental Returns @incrmntlreturns]

Roughly 45% of Microsoft's $627B Commercial Remaining Performance Obligation backlog is OpenAI.

Google Cloud's $462B backlog is more broadly distributed across enterprise customers.

Concentration risk always becomes more salient during a downturn.

[Incremental Returns @incrmntlreturns]

TCI sees real risk to Office/M365 and “some risks” for Azure

Ackman calls M365 a fortress that's mispriced.

https://t.co/742pEqiImC

[Incremental Returns @incrmntlreturns]

Three concentrated stock pickers. Same company. Same quarter. Opposite conclusions.

→ TCI: cut MSFT from 10% → 1% of the portfolio

→ Egerton Capital: full exit

→ Bill Ackman: initiated a ~$2.1B position

[Incremental Returns @incrmntlreturns]

Bull vs Bear

Chris Hohn vs @BillAckman 

The risks to Office and Azure that Hohn sees

vs

The misrpiced fortress and OpenAI stake that Ackman sees

https://t.co/nue9dRcASZ

[Incremental Returns @incrmntlreturns]

@BillAckman https://t.co/vnmwbFb3mu

[Incremental Returns @incrmntlreturns]

Tomorrow's post, bull vs bear on $MSFT

TCI cut $MSFT from 10% to 1% while @BillAckman initiated a $2.1B position.

I'll focus on:

1. What Chris Hohn said about the risks to Office.
2. What he meant by "azure risks"
3. Why Ackman thinks the "fortress" is mispriced.

Subscribe 👇

[Incremental Returns @incrmntlreturns]

The growth itself isn't the problem.

It’s the fact it’s growing faster than the business can fund.

https://t.co/52bX39PNKu

[Incremental Returns @incrmntlreturns]

When a company grows its asset base aggressively, it's almost always doing one of three things:

[Incremental Returns @incrmntlreturns]

All three eventually mean-revert.

Acquisitions get written down.

Returns on incremental Capex drift toward cost of capital.

Stock issued at peak multiples re-rates.

Cooper, Gulen & Schill (2008) found these firms underperform by ~8 percentage points a year for five years.

[Meidas_Charise Lee @charise_lee]

🚨🚨🚨🚨🚨 Big time shenanigans going on in UTAH‼️
Utah speaker of the house Mike Schultz owns hundreds of acres of land right near the Stratos data Center site‼️
THIS IS JOURNALISM‼️

[Incremental Returns @incrmntlreturns]

It still couldn't keep up.

Cumulative: 2.66x vs 3.50x for SPY. Annualized: 11.5% vs 14.9%. Through a favorable regime for aggressive corporate investing.

[Incremental Returns @incrmntlreturns]

The Aggressive Overinvestors basket (top-quintile asset growth + external financing + EV/Sales) had two enormous years

[Incremental Returns @incrmntlreturns]

+65% in 2020 and another strong run through 2023–24.

In both, the basket briefly closed the gap with SPY.

[Incremental Returns @incrmntlreturns]

Tomorrow’s post dives into the bear case for Paychex (PAYX)

✔️ The AI disruption story that isn’t the immediate threat

✔️ The 2 bigger threats

✔️ & what the market is pricing it today.

Subscribe at
https://t.co/vnmwbFb3mu

[Incremental Returns @incrmntlreturns]

The basket of 30 similar names rebalanced annually lagged SPY by 3.4 pp annualized over 9 years.

Even through a favorable period for aggressive corporate investing too.

https://t.co/52bX39PNKu

[Incremental Returns @incrmntlreturns]

The 3 filters that flagged $CVNA, $APP, $W, and $ROKU in the year before each lost 80%+:

1. Top quintile asset growth (ex-acquisitions)
2. Top quintile external financing as % of prior-period assets
3. Top quintile EV/Sales