>doesn't it make more sense for software companies to prefer self-taught applicants over university grads?

I don't like the question. It's too open, what role are the "software companies" selecting a candidate for? What skills did the self taught applicant teach themselves? Which university course and how successful, what industry experience if any comes with it?

Generally I'd say a good degree shows rigorous study, flexibility a certain amount of persistence.

University graduates are often self-taught in many aspects - a degree however comes with a transcript given a brief overview of what the applicant should know and the level of their ability. To get this from a completely self-taught applicant without formal qualifications you'd need to test them thoroughly; why do this when you can choose from pre-tested stock.

As a complete outsider, the relationship between computer science and most software to me looks like that between physics and mechanical engineering.

I'm nowhere near being an IT employer, or computer scientist I just like sticking my oar in.