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Microsoft's (MSFT) Cloud Gaming Comes to Windows 10 PCs & iOS

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Microsoft (MSFT - Free Report) extended Xbox Cloud Gaming to Apple’s (AAPL - Free Report) iPhones and tablets as well as Windows 10 PCs through browsers (Microsoft Edge, Chrome or Safari) for Xbox Game Pass Ultimate subscribers. The service, currently, is available in 22 countries.

Microsoft’s Game Pass Ultimate is a subscription service that allows gamers to play more than 100 video game titles for a monthly fee of $14.99.

Further, the tech giant announced that its customized Xbox Series X hardware is fueling the Xbox Cloud Gaming service. The company has been working on revamping its datacenters with latest Xbox hardware. This will deliver enhanced frame rates and load times, thereby upgrading the entire video gaming experience, added the company.

 

Behind Microsoft’s Cloud Gaming Push

According to a Mordor Intelligence report, global cloud gaming market is forecast to witness a CAGR of 45.2% between 2021 and 2026.

Cloud gaming, also known as “gaming on demand”, has been witnessing increasing usage as it allows access to video games on various device anywhere, anytime and eliminates the need for costly gaming consoles/hardware.

Increasing penetration of smartphones and utilization of innovative technologies like augmented/virtual reality for next-generation video games along with accelerated 5G deployment are key catalysts driving the market.

This bodes well for Microsoft, which is a dominant name in the video game space. The company has doubled down on expanding its video game business as the gaming industry witnesses a boom.

Per a report available on Research And Markets, worldwide video game industry is expected to witness a CAGR of 9.24% between 2021 and 2026 and reach $287.1 billion.

Last year, the pandemic and subsequent lockdowns imposed worldwide gave massive impetus to video gaming activity.

Microsoft’s focus on attracting more subscribers for its Game Pass service is expected to up its ante in the video game space against the likes of Sony and Nintendo. Subscription services ensure a stable and recurring revenue stream. The company’s Game Pass service rolled out in 2017 has been a huge success with more than 18 million subscribers.

At no additional cost, combining cloud gaming with Xbox Game Pass Ultimate service, is likely to be a gamechanger for Microsoft and fortify its competitive position in the cloud gaming space.

Also, Microsoft recently stated that it was working on developing various streaming devices for its cloud gaming service that will enable players to access games on variety of devices like TV or monitor, thereby removing the need for a console.

For its upcoming Windows 11 operating system, Microsoft provided an in-built Xbox app that facilitates effortless access to the company’s Xbox Game Pass for PC and Xbox Game Pass Ultimate subscription services.

The company’s acquisition Bethesda Softworks’ parent company ZeniMax Media is also expected to bolster Microsoft’s position in the video game space.

In the last reported quarter, Microsoft’s gaming revenues surged 50% (up 48% at cc) in driven by increased engagement led by stay-at-home wave. Moreover, Xbox content and services revenues jumped 34% year over year (up 32% at cc), backed by healthy growth in first-party titles.

Nonetheless, Microsoft needs to watch out for increasing competition in the cloud gaming space from the likes of Amazon (AMZN - Free Report) and Facebook.

At present, Microsoft carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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