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Microsoft Ups the Ante With New Gaming Software Development

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Microsoft (MSFT - Free Report) recently introduced Game Stack with an aim to provide developers with a comprehensive platform, enabling them to design, test, publish and monetize on engaging games.

As part of Game Stack, the developers can access Microsoft’s cloud computing platform Azure, and game development tools including PlayFab, Visual Studio, DirectX, Xbox Live, Havok and App Center. Notably, the company expects developers to choose Azure as the preferred cloud partner, although it is not a compulsion.

With an intention to democratize innovation, the company extended the availability of Xbox Live to Android and iOS devices via a new SDK (software development kit) as part of Game Stack.

Also, management is looking forward to demonstrate its new services at Game Developers Conference (GDC) 2019, to be held on Mar 18-22 at San Francisco, CA.

We believe, these initiatives will enable the company to enhance its competitive position against Amazon’s (AMZN - Free Report) Amazon Web Services (AWS) and Google Cloud platform. Notably, Amazon GameLift cloud-based service enables developers to deploy, scale, operate and manage multiplayer game servers. Google is reportedly working on subscription-based streaming service, dubbed Project Yeti.

New PlayFab Service Suite

Apart from Game Stack, Microsoft rolled out five PlayFab services, namely PlayFab Matchmaking, PlayFab Party, PlayFab Insights, PlayFab PubSub and PlayFab User Generated Content.

PlayFab Matchmaking, inspired by Xbox Live matchmaking, is available for use. Meanwhile, the remaining four are under preview.

Notably, the company acquired PlayFab last January with an objective to up its game in cloud gaming market. PlayFab provides a backend services platform to help developers design and introduce enthralling cloud-connected games.

We believe, the integration of PlayFab platform with Azure and Game Stack bodes well. The managed game-development tools and LiveOps capabilities of PlayFab are expected to complement Azure’s strength in game telemetry analytics, player data security and immersive gamer experience through robust machine learning (ML) and artificial intelligence (AI) skills.

Microsoft announced that PlayFab will continue to support the major game engine platforms, cloud platforms and devices (running on Android or iOS), going forward.

This shows Microsoft’s efficient evolution on multiple platforms and open source infrastructure, thereby enabling third-party developers to build innovative tools on any device or network.

Cloud Gaming Initiatives Hold Promise

Microsoft is leaving no stone unturned to integrate cloud capabilities of Azure into its gaming segment. This is allowing the company to innovate its gaming domain beyond exclusive gaming content on X-box consoles.

Microsoft anticipates Azure’s availability scale across 54 regions globally to strengthen its upcoming “Project xCloud streaming technology”, targeting to provide an immersive gaming experience. Notably, with Project xCloud, users can stream games across major device options with suitable latency levels.

Notably, Azure already aids prominent companies like Wizards of the Coast, Rare and Ubisoft to host multiplayer game servers and monetize exciting gameplay in a secure infrastructure.

Per latest IHS Markit data, “consumer spending on cloud gaming content subscriptions reached $234 million in 2018 and is forecast to grow to $1.5 billion by 2023.”

We believe Microsoft’s domain expertise in gaming and strength in Azure sets it apart from peers in both cloud and gaming sectors. The same also positions the company well to capitalize on the cloud gaming market.

Microsoft Gaming Segment Highlights

In the second quarter of fiscal 2019, Microsoft’s gaming revenues increased 8% (9% at constant currency) to $2.25 billion, driven by a robust performance from Xbox software and services (up 32% at cc) owing to third-party title strength.

For fiscal third quarter, Microsoft anticipates Gaming revenues to grow at a moderate rate. The company is likely to benefit from an improving user engagement.

Wrapping Up

Microsoft seems to gain traction from the cloud gaming industry with the latest breakthroughs. The company’s increasing investments will possibly expand its market reach and drive innovation in the streaming games.

Microsoft is not only focusing on an exclusive original content but also making gaming easily accessible to all consumers including mobile users, which is a positive. Thus, this is likely to keep gaming revenues ticking, moving ahead.

Zacks Rank & Key Pick

Microsoft currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry are Synopsys, Inc. (SNPS - Free Report) and Symantec Corporation , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Synopsys and Symantec is projected at 10% and 7.9%, respectively.

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