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Can the Minecraft Deal Boost Microsoft's Gaming Segment?

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Earlier this week, Microsoft (MSFT - Free Report) and NVIDIA (NVDA - Free Report) announced that they will be working together to provide a more realistic experience to the widely popular video game Minecraft of the former. The game will be equipped with the latter’s real-time ray tracing technology for enhanced graphics on personal computers.

What’s more, the ray tracing update will be available for free to gamers. A beta version bearing the update is scheduled for release in the New Year. This partnership indicates Microsoft’s inclination toward enhancing its gaming experience fast so it may push its gaming segment, which didn’t bode well for the company last quarter.

Microsoft Posts Glum Q2 Gaming Revenues

The software giant’s gaming revenues for the quarter ended June 2019 stood at $2.1 billion after undergoing a 10% slump on a year-over-year basis (8% at constant currency). The decline was largely due to lower-than-expected sales volume from consoles and monetization across third party titles.

Despite the disappointing gaming revenues in Microsoft’s fiscal Q3, the number of Xbox live monthly active users increased 14% year over year and came in at $65 million. The company hopes to boost its gaming wing by empowering user experience and provide an unrestricted arena for streaming, connecting and playing video games. (Read more)

Can Nvidia’s Technology Really Boost Minecraft?

Nvidia’s real-time ray tracing, which allows its graphics cards to simulate how light rays interact with virtual objects along a visual scene, will bring about more life-like graphics to Microsoft’s video game. Minecraft is essentially a construction game, which allows players to build anything block-by-block. It imitates a Lego-like world where players can mine for precious minerals.

According to Nvidia, Activision Blizzard’s Call of Duty:Modern Warfare, Ubisoft Toronto’s Watch Dogs: Legion and Tencent NExT Studios’ Synced: Off Planet would use the same graphic technology.

Nvidia’s graphics technology could give Minecraft a significant push because of three important factors. First, Minecraft has an existing base of 91 million players (as of March). Second, Minecraft has already sold about 176 million copies globally (as of March) and is among the top 10 most-popular video games in the world.

Lastly, the new technology is specifically aimed at enhancing gamers’ visual appeal of the game, which is always a win. Therefore these imply that this new update will witness further popularity through its dedicated stream of gamers and could result in boosting Microsoft’s gaming revenues ahead.

 

Microsoft carries a Zacks Rank #2 (Buy). In fact, the company’s stock price has already outperformed the Zacks Computer – Software Market on a year-to-date basis (+36.7% vs +28.2%). The Zacks Consensus Estimate for its current-year earnings has risen 0.2% over the past 30 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

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