Microsoft Prioritizes AI Investment Over Gaming Business
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 3 hours ago
0mins
Source: stocktwits
- AI Investment Priority: Microsoft is shifting its investment focus to AI and data centers, as it realizes higher returns from AI infrastructure compared to its gaming business, which has become almost irrelevant, potentially impacting its overall growth strategy.
- Layoff Impact: Microsoft recently laid off approximately 4,800 employees, with 1,600 cuts in the Xbox division and another 1,600 roles expected to be eliminated by fiscal year 2027, affecting multiple subsidiaries including Activision and Blizzard, indicating a contraction in its gaming sector.
- Xbox Business Health: Xbox CEO Asha Sharma stated that the Xbox business is not healthy, operating at margins significantly lower than peers, and facing a higher cost structure with a smaller install base in the ninth generation console market, necessitating a reset of business strategy.
- Market Expectations and Investor Sentiment: Despite negative market sentiment towards Microsoft's prospects, Luria sees this as an opportunity, anticipating that the upcoming earnings report will show accelerating growth in Azure, with Wall Street expecting a 15% year-on-year revenue increase to $87.66 billion.
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Analyst Views on MSFT
Wall Street analysts forecast MSFT stock price to rise
34 Analyst Rating
32 Buy
2 Hold
0 Sell
Strong Buy
Current: 384.280
Low
500.00
Averages
631.36
High
678.00
Current: 384.280
Low
500.00
Averages
631.36
High
678.00
About MSFT
Microsoft Corporation is a technology company. The Company develops and supports software, services, devices, and solutions. The Company’s segments include Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The Productivity and Business Processes segment consists of products and services in its portfolio of productivity, communication, and information services. This segment primarily comprises: Office Commercial, Office Consumer, LinkedIn, and Dynamics business solutions. The Intelligent Cloud segment consists of server products and cloud services, including Azure and other cloud services, SQL Server, Windows Server, Visual Studio, System Center, and related Client Access Licenses (CALs), and Nuance and GitHub; and Enterprise Services, including enterprise support services, industry solutions and Nuance professional services. The More Personal Computing segment primarily comprises Windows, Devices, Gaming, and search and news advertising.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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See More
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- Technical Challenges: The design of the Kyber architecture aims to integrate 144 powerful chips into a single giant computer, but the manufacturing difficulties of the PCB midplane have led to this significant delay, reflecting Nvidia's struggles with rapid product releases amid manufacturing constraints.
- Increased Market Competition: With Nvidia unable to provide a viable scaling solution, competitors like AMD and Google may gain a technical edge in the high-end market, further eroding Nvidia's market share.
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See More
