Microsoft's Xbox Division Plans Major Layoffs
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 hour ago
0mins
Source: stocktwits
- Layoff Plans: Microsoft's Xbox division is expected to implement layoffs shortly after the fiscal year ends on June 30, although the exact scale remains undisclosed, marking the first major changes under new CEO Asha Sharma, highlighting the severe challenges the company faces.
- Deteriorating Financials: Over the past five years, Xbox has spent more than $20 billion on content and platform investments, yet its annual revenue has declined by nearly $500 million, resulting in an internal profitability measure dropping to 3%, indicating significant sustainability issues for the business.
- Strategic Reset: In a memo to employees, Sharma indicated that Xbox will “evolve and rebuild” its operational framework and may consider mergers and acquisitions to strengthen its position in hardware, PC, mobile, and streaming, suggesting a fundamental shift in strategy is underway.
- Competitive Market Pressures: Xbox is grappling with declining hardware sales, inconsistent game releases, and slowed growth in its Game Pass subscription service, prompting the company to cut costs over the past two years by closing studios and canceling projects, revealing its vulnerability in a rapidly changing market landscape.
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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: 403.410
Low
500.00
Averages
631.36
High
678.00
Current: 403.410
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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- Layoff Plans: Microsoft's Xbox division is expected to implement layoffs shortly after the fiscal year ends on June 30, although the exact scale remains undisclosed, marking the first major changes under new CEO Asha Sharma, highlighting the severe challenges the company faces.
- Deteriorating Financials: Over the past five years, Xbox has spent more than $20 billion on content and platform investments, yet its annual revenue has declined by nearly $500 million, resulting in an internal profitability measure dropping to 3%, indicating significant sustainability issues for the business.
- Strategic Reset: In a memo to employees, Sharma indicated that Xbox will “evolve and rebuild” its operational framework and may consider mergers and acquisitions to strengthen its position in hardware, PC, mobile, and streaming, suggesting a fundamental shift in strategy is underway.
- Competitive Market Pressures: Xbox is grappling with declining hardware sales, inconsistent game releases, and slowed growth in its Game Pass subscription service, prompting the company to cut costs over the past two years by closing studios and canceling projects, revealing its vulnerability in a rapidly changing market landscape.
See More
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- Earnings Report Highlights: In its late April earnings report, Microsoft reported adjusted earnings per share of $4.27 on revenue of $82.89 billion, surpassing analyst expectations of $4.06 and $81.39 billion, reflecting strong performance in the AI sector.
- Market Reaction: Although the stock initially faced sell-offs post-earnings, it rebounded in May as investors returned, demonstrating confidence in Microsoft's future growth, particularly driven by advancements in AI technology.
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See More
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- Meta Platforms Performance: Meta Platforms' stock has dropped over 25% from its all-time high, yet its advertising business saw a 33% year-over-year growth in Q1; however, concerns over skyrocketing AI expenditures have led to a valuation discount, with a current P/E ratio of 18, below the S&P 500's 22.2, indicating a potential investment opportunity.
- AI Investment Strategy: Meta has raised its capital expenditure guidance by $10 billion to $135 billion for AI investments, and despite limited returns thus far, its robust core advertising business suggests that the company still holds significant value during its transformation.
- Microsoft Growth Potential: Microsoft’s stock has also fallen over 25%, but its AI business grew at an impressive 123% year-over-year last quarter, with an annual run rate exceeding $37 billion, while its cloud unit Azure achieved a 40% year-over-year growth rate, showcasing its successful AI strategy.
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See More
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- Staggering IPO Size: SpaceX plans to sell 555,555,555 shares at $135 each on June 12, raising $75 billion and starting with a valuation of approximately $1.77 trillion, making it the eighth most valuable public company globally and highlighting its significant market impact.
- Valuation Risks: Despite projected revenue of $18.7 billion in 2025, SpaceX's price-to-sales ratio reaches 93.6, far exceeding that of companies like Broadcom, indicating that its stock may be overvalued and investors should proceed with caution.
- Lack of Profitability: With a projected loss of $4.9 billion in 2025, SpaceX's lack of profitability raises concerns about its valuation, suggesting that investing at a high premium could expose investors to greater risks, particularly with potential post-IPO volatility.
- Intense Market Competition: SpaceX's stock is expected to trade 4.7 to 26 times more expensive than the
See More
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- Strong Ad Business for Meta: Meta's advertising revenue surged by 33% year-over-year in Q1, and despite its stock being down over 25% from its peak, the robust ad market indicates the company's competitive strength in this sector.
- Concerns Over AI Investments: Meta raised its capital expenditure guidance by $10 billion to $135 billion, and while its AI investments have yet to yield significant returns, market concerns about future profitability could impact investor confidence.
- Microsoft's AI Growth: Microsoft's AI business grew at an impressive 123% year-over-year in the last quarter, with an annual run rate exceeding $37 billion, and despite a similar stock decline of over 25%, its Azure cloud division's 40% growth contributed to an overall 18% growth for the company.
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See More
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- Layoff Plans: Microsoft's Xbox division is expected to implement layoffs shortly after the fiscal year ends on June 30, although the exact scale remains undisclosed, marking the first major changes under new CEO Asha Sharma, highlighting the severe challenges the company faces.
- Deteriorating Financials: Over the past five years, Xbox has spent more than $20 billion on content and platform investments, yet its annual revenue has declined by nearly $500 million, resulting in an internal profitability measure dropping to 3%, indicating significant sustainability issues for the business.
- Strategic Reset: In a memo to employees, Sharma indicated that Xbox will “evolve and rebuild” its operational framework and may consider mergers and acquisitions to strengthen its position in hardware, PC, mobile, and streaming, suggesting a fundamental shift in strategy is underway.
- Competitive Market Pressures: Xbox is grappling with declining hardware sales, inconsistent game releases, and slowed growth in its Game Pass subscription service, prompting the company to cut costs over the past two years by closing studios and canceling projects, revealing its vulnerability in a rapidly changing market landscape.
See More
