Microsoft's Xbox Hardware Sales Plunge 70%, Future Focus on Cloud Gaming
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Dec 21 2025
0mins
Should l Buy MSFT?
Source: Newsfilter
- Sales Decline: Microsoft's Xbox hardware sales plummeted 70% year-over-year, struggling against strong performances from competitors Nintendo Switch and Sony PlayStation, indicating a challenging position in the gaming console market.
- Layoffs and Restructuring: Microsoft laid off 1,900 employees, about 9% of its gaming division, and shut down several studios, reflecting cost-cutting pressures in pursuit of a 30% profit margin target amid rising operational costs.
- Cloud Gaming Strategy: Microsoft aims to create an open system for its next-gen Xbox that allows players to switch seamlessly between console, PC, and cloud gaming, intending to broaden its user base and adapt to future market dynamics.
- Subscription Service Growth: Xbox Game Pass subscribers reached 34 million in 2024, with annual revenue nearing $5 billion, showcasing strong growth potential for cloud gaming services despite challenges from recent price hikes.
Trade with 70% Backtested Accuracy
Stop guessing "Should I Buy MSFT?" and start using high-conviction signals backed by rigorous historical data.
Sign up today to access powerful investing tools and make smarter, data-driven decisions.
Analyst Views on MSFT
Wall Street analysts forecast MSFT stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for MSFT is 631.36 USD with a low forecast of 500.00 USD and a high forecast of 678.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
34 Analyst Rating
32 Buy
2 Hold
0 Sell
Strong Buy
Current: 430.290
Low
500.00
Averages
631.36
High
678.00
Current: 430.290
Low
500.00
Averages
631.36
High
678.00
About MSFT
Microsoft Corporation is a technology company that develops and supports software, services, devices, and solutions. Its Productivity and Business Processes segment consists of products and services in its portfolio of productivity, communication, and information services, spanning a variety of devices and platforms. It comprises Microsoft 365 Commercial products and cloud services; Microsoft 365 Consumer products and cloud services; LinkedIn, and Dynamics products and cloud services. The Intelligent Cloud segment consists of its public, private, and hybrid server products and cloud services. It comprises server products and cloud services, including Azure, and enterprise and partner services, including Enterprise Support Services. Its More Personal Computing segment primarily comprises Windows and Devices, including Windows OEM licensing; Gaming, including Xbox hardware and Xbox content; Search and news advertising, comprising Bing and Copilot, Microsoft News, and Microsoft Edge.
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.
Microsoft Reports Record Earnings Amid AI Spending Concerns
- Strong Earnings Report: Microsoft reported a 17% year-over-year revenue increase to over $50 billion, with operating income up 21% and adjusted EPS rising 24%, yet the stock fell 10.5% due to concerns over AI investment pressures.
- Surge in Capital Expenditures: The company spent $37.5 billion in capital expenditures this quarter, with two-thirds allocated to short-lived assets like GPUs and CPUs, indicating rapid investment in AI infrastructure, which is impacting profit margins.
- Reliance on OpenAI: 45% of Microsoft's $625 billion in remaining performance obligations is tied to OpenAI, raising investor concerns about whether OpenAI can meet its insatiable demand for AI infrastructure, potentially affecting Microsoft's future revenue growth.
- Challenges in Software Sector: Despite Microsoft's proactive AI strategies, the software industry faces increasing pressures, with CEO Nadella noting that all software is being rewritten, and enterprise customers will need new application platforms to adapt to the rapid evolution of AI.
See More
Schneider Electric Unveils New Grid Management Solutions for Utilities
- Grid Management Innovation: Schneider Electric's new software solutions are designed to help utilities manage severe weather events, enhancing grid resilience and reducing outage times, thereby improving customer satisfaction and market competitiveness.
- Real-Time Visualization Enhancement: The enhanced EcoStruxure™ ArcFM Web and Energy Transmission Operation software enable utilities to achieve clearer real-time visibility of their networks, improving decision-making processes and supporting more efficient resource allocation and emergency responses.
- Enhanced Predictive Capabilities: The new platform integrates intelligent data from Microsoft, AiDASH, and Technosylva, enhancing risk modeling and emergency response capabilities, allowing utilities to predict and respond to potential grid disruption events more swiftly.
- Sustainability Drive: Schneider Electric's AirSeT™ portfolio supports California's phased-out regulations on SF₆ insulated switchgear, prompting utilities to transition to SF₆-free alternatives, aiding long-term compliance and reducing greenhouse gas emissions.
See More
Analysis of Robinhood's Most Popular Stocks
- Palantir's Technological Edge: Palantir's median target price of $202.50 implies a 38% upside, with its software enabling clients to convert complex information into actionable insights, as evidenced by a 63% revenue increase to $1.1 billion last year, reflecting strong market demand and positive customer feedback.
- Microsoft's Market Position: Microsoft's median target price of $600 implies a 39% upside, with its leadership in enterprise software bolstered by the integration of generative AI, particularly the 160% user growth of Microsoft 365 Copilot, indicating significant market potential.
- Impressive Financial Performance: Palantir reported a 110% year-over-year increase in non-GAAP net income to $0.21 per share in Q3, showcasing exceptional performance in the software industry, despite a 29% drop from its record high, maintaining a valuation of 230 times earnings.
- Investor Strategy Recommendations: Analysts suggest investors wait for a better entry point, particularly as Palantir needs to achieve 45% annual revenue growth over the next five years to justify its current stock price, indicating a cautious market outlook on its future growth.
See More
Analysts Favor Palantir and Microsoft for Gains
- Palantir Financial Performance: Palantir reported a 63% revenue increase to $1.1 billion in Q3, marking its ninth consecutive acceleration, with non-GAAP net income soaring 110% to $0.21 per share, reflecting strong market demand and profitability.
- Valuation Concerns: Despite Palantir's impressive Rule of 40 score of 114%, its stock trades at a staggering 230 times earnings, leading analysts to suggest that investors should wait for a more favorable entry point due to high current valuations.
- Microsoft's AI Integration: Microsoft has integrated generative AI copilots into its software products, resulting in a 160% increase in paid copilot seats and a tenfold rise in daily active users in the December quarter, showcasing its robust growth potential in the AI sector.
- Solid Financials but Stock Volatility: Microsoft achieved a 17% revenue growth to $81 billion in the December quarter, exceeding estimates; however, its stock fell 10% due to Azure narrowly missing expectations, indicating market caution regarding its future growth prospects.
See More
Concerns Arise Over Nvidia's $100 Billion OpenAI Investment Deal
- Investment Deal Stalled: Nvidia's $100 billion investment agreement with OpenAI has reportedly stalled due to concerns over OpenAI's business discipline, as Nvidia CEO Jensen Huang expresses worries about competition, potentially impacting Nvidia's position in the AI market.
- Market Sentiment Shift: Despite Nvidia's stock gaining 0.8% in early trading on Tuesday, sentiment on Stocktwits shifted from 'neutral' to 'bearish', reflecting investor uncertainty and heightened market reactions regarding the stalled investment deal.
- Technological Dependency: OpenAI's computing infrastructure leader emphasized that Nvidia's technology is foundational for their operations, indicating that their relationship is not merely vendor-based but involves deep co-design, which could influence future technological advancements.
- Revenue Growth Concerns: Investors are worried whether OpenAI's revenue growth will meet its ambitious capital investment targets, particularly regarding payouts to cloud service providers, which could negatively affect Nvidia's long-term investment returns.
See More
Nvidia Faces Internal Competition Risks
- Market Share Growth: Nvidia's market cap has surged by nearly $4.3 trillion since the beginning of 2023, underscoring the critical role its hardware plays in AI data centers, despite competitive pressures from AMD and Broadcom.
- Maintaining Competitive Edge: CEO Jensen Huang is launching a new chip each year, with the Vera Rubin GPU expected to succeed the Blackwell Ultra later this year, ensuring the company's leadership in AI, even as competitors struggle to match its computing power.
- Internal Competition Threat: Major customers like Meta, Microsoft, and Amazon are developing their own AI chips, which could undermine Nvidia's pricing power and gross margins, impacting future GPU sales.
- Shifting Market Dynamics: As customer-developed chips become more prevalent, demand for Nvidia's GPUs may be affected, particularly if future data center upgrade cycles are delayed, potentially leading to decreased demand for next-generation GPUs.
See More
Microsoft Reports Record Earnings Amid AI Spending Concerns
- Strong Earnings Report: Microsoft reported a 17% year-over-year revenue increase to over $50 billion, with operating income up 21% and adjusted EPS rising 24%, yet the stock fell 10.5% due to concerns over AI investment pressures.
- Surge in Capital Expenditures: The company spent $37.5 billion in capital expenditures this quarter, with two-thirds allocated to short-lived assets like GPUs and CPUs, indicating rapid investment in AI infrastructure, which is impacting profit margins.
- Reliance on OpenAI: 45% of Microsoft's $625 billion in remaining performance obligations is tied to OpenAI, raising investor concerns about whether OpenAI can meet its insatiable demand for AI infrastructure, potentially affecting Microsoft's future revenue growth.
- Challenges in Software Sector: Despite Microsoft's proactive AI strategies, the software industry faces increasing pressures, with CEO Nadella noting that all software is being rewritten, and enterprise customers will need new application platforms to adapt to the rapid evolution of AI.
See More
Schneider Electric Unveils New Grid Management Solutions for Utilities
- Grid Management Innovation: Schneider Electric's new software solutions are designed to help utilities manage severe weather events, enhancing grid resilience and reducing outage times, thereby improving customer satisfaction and market competitiveness.
- Real-Time Visualization Enhancement: The enhanced EcoStruxure™ ArcFM Web and Energy Transmission Operation software enable utilities to achieve clearer real-time visibility of their networks, improving decision-making processes and supporting more efficient resource allocation and emergency responses.
- Enhanced Predictive Capabilities: The new platform integrates intelligent data from Microsoft, AiDASH, and Technosylva, enhancing risk modeling and emergency response capabilities, allowing utilities to predict and respond to potential grid disruption events more swiftly.
- Sustainability Drive: Schneider Electric's AirSeT™ portfolio supports California's phased-out regulations on SF₆ insulated switchgear, prompting utilities to transition to SF₆-free alternatives, aiding long-term compliance and reducing greenhouse gas emissions.
See More
Analysis of Robinhood's Most Popular Stocks
- Palantir's Technological Edge: Palantir's median target price of $202.50 implies a 38% upside, with its software enabling clients to convert complex information into actionable insights, as evidenced by a 63% revenue increase to $1.1 billion last year, reflecting strong market demand and positive customer feedback.
- Microsoft's Market Position: Microsoft's median target price of $600 implies a 39% upside, with its leadership in enterprise software bolstered by the integration of generative AI, particularly the 160% user growth of Microsoft 365 Copilot, indicating significant market potential.
- Impressive Financial Performance: Palantir reported a 110% year-over-year increase in non-GAAP net income to $0.21 per share in Q3, showcasing exceptional performance in the software industry, despite a 29% drop from its record high, maintaining a valuation of 230 times earnings.
- Investor Strategy Recommendations: Analysts suggest investors wait for a better entry point, particularly as Palantir needs to achieve 45% annual revenue growth over the next five years to justify its current stock price, indicating a cautious market outlook on its future growth.
See More
Analysts Favor Palantir and Microsoft for Gains
- Palantir Financial Performance: Palantir reported a 63% revenue increase to $1.1 billion in Q3, marking its ninth consecutive acceleration, with non-GAAP net income soaring 110% to $0.21 per share, reflecting strong market demand and profitability.
- Valuation Concerns: Despite Palantir's impressive Rule of 40 score of 114%, its stock trades at a staggering 230 times earnings, leading analysts to suggest that investors should wait for a more favorable entry point due to high current valuations.
- Microsoft's AI Integration: Microsoft has integrated generative AI copilots into its software products, resulting in a 160% increase in paid copilot seats and a tenfold rise in daily active users in the December quarter, showcasing its robust growth potential in the AI sector.
- Solid Financials but Stock Volatility: Microsoft achieved a 17% revenue growth to $81 billion in the December quarter, exceeding estimates; however, its stock fell 10% due to Azure narrowly missing expectations, indicating market caution regarding its future growth prospects.
See More
Concerns Arise Over Nvidia's $100 Billion OpenAI Investment Deal
- Investment Deal Stalled: Nvidia's $100 billion investment agreement with OpenAI has reportedly stalled due to concerns over OpenAI's business discipline, as Nvidia CEO Jensen Huang expresses worries about competition, potentially impacting Nvidia's position in the AI market.
- Market Sentiment Shift: Despite Nvidia's stock gaining 0.8% in early trading on Tuesday, sentiment on Stocktwits shifted from 'neutral' to 'bearish', reflecting investor uncertainty and heightened market reactions regarding the stalled investment deal.
- Technological Dependency: OpenAI's computing infrastructure leader emphasized that Nvidia's technology is foundational for their operations, indicating that their relationship is not merely vendor-based but involves deep co-design, which could influence future technological advancements.
- Revenue Growth Concerns: Investors are worried whether OpenAI's revenue growth will meet its ambitious capital investment targets, particularly regarding payouts to cloud service providers, which could negatively affect Nvidia's long-term investment returns.
See More
Nvidia Faces Internal Competition Risks
- Market Share Growth: Nvidia's market cap has surged by nearly $4.3 trillion since the beginning of 2023, underscoring the critical role its hardware plays in AI data centers, despite competitive pressures from AMD and Broadcom.
- Maintaining Competitive Edge: CEO Jensen Huang is launching a new chip each year, with the Vera Rubin GPU expected to succeed the Blackwell Ultra later this year, ensuring the company's leadership in AI, even as competitors struggle to match its computing power.
- Internal Competition Threat: Major customers like Meta, Microsoft, and Amazon are developing their own AI chips, which could undermine Nvidia's pricing power and gross margins, impacting future GPU sales.
- Shifting Market Dynamics: As customer-developed chips become more prevalent, demand for Nvidia's GPUs may be affected, particularly if future data center upgrade cycles are delayed, potentially leading to decreased demand for next-generation GPUs.
See More
