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Microsoft Follows Apple by Raising Bets on Gaming Industry

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Gaming sector

Last week, Microsoft (MSFT) and Sony announced a partnership in which the “two companies will partner on new innovations to enhance customer experiences in their direct-to-consumer entertainment platforms and AI solutions.” According to the release, Microsoft and Sony will “explore joint development of future cloud solutions in Microsoft Azure to support their respective game and content-streaming services. In addition, the two companies will explore the use of current Microsoft Azure datacenter-based solutions for Sony’s game and content-streaming services.”

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Microsoft and Apple

Microsoft and Sony are competitors in the gaming console market. Competition has been heating up in the gaming industry. In March, Apple (AAPL) also announced its gaming subscription service. We saw some selling pressure in gaming stocks after Apple’s announcement as well as after Microsoft and Sony announced their partnership.

The gaming industry has been out of favor with markets. While Electronic Arts (EA) is sitting on double-digit year-to-date gains, Activision Blizzard (ATVI) and Take-Two Interactive Software (TTWO) are underperforming the NASDAQ Composite Index (QQQ). Revenue growth has especially been a concern for the sector, and over the last two quarters, most gaming companies have missed top-line estimates. Tencent (TCEHY), which reported its first-quarter earnings last week, also missed consensus revenue estimates.

Price action

Meanwhile, gaming stocks are in the red today with Activision Blizzard down 5.1% as of 10:50 AM EST. Electronic Arts and Take-Two Interactive Software are also down 3.3% and 1.2%, respectively, while the NASDAQ Composite Index is down 1.3%.

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