Microsoft is rewriting the rules of its gaming business, but the changes come with trade-offs that are reshaping investor expectations ahead of next week’s quarterly report. The stock edged lower on Thursday, slipping to €364.50, as the market digested a strategic pivot that lowers subscription prices while removing a key perk for blockbuster titles.
A New Era for Game Pass
Under new gaming chief Asha Sharma, who took the reins after Phil Spencer’s departure in February 2026, Microsoft has slashed the price of its Xbox Game Pass Ultimate to $22.99 per month from nearly $30. The PC tier has also been reduced. The move follows mounting criticism from the gaming community over rising costs.
But the price cut comes with a catch. Future installments of the “Call of Duty” franchise will no longer land on Game Pass on day one. Instead, new titles in the series will join the library roughly a year after their retail release. The shift effectively ends Microsoft’s previous guarantee that all first-party games would be available to subscribers immediately.
Sharma is also recalibrating plans for a mobile app store. A recent error page on the project’s teaser website sparked speculation that the initiative had been shelved, but she has denied those rumors, pointing to a court document in which Microsoft underscores the importance of competition in the mobile sector. The store is intended to bring games like “Candy Crush” to iOS and Android.
Earnings on the Horizon
Microsoft reports fiscal third-quarter results after the US market close on April 29. Analysts are looking for earnings of roughly $4 per share on revenue of about $81 billion. The stock has rallied 13% over the past month, and investors will be listening for details on gaming profitability as well as the broader integration of artificial intelligence across the software stack.
Cloud remains the centerpiece. Azure grew 39% in the prior quarter, and analysts expect constant-currency growth of roughly 37.5% for the third quarter. The AI monetization story is also gaining traction: GitHub Copilot now counts 4.7 million paid users, up 75% year over year, while Microsoft 365 Copilot had reached 15 million licenses by the end of 2025.
Should investors sell immediately? Or is it worth buying Microsoft?
Analyst Views and Valuation
Citigroup has trimmed its price target on Microsoft to $600, citing valuation pressure in the current market environment, though it maintains a “Buy” rating. The stock trades at a price-to-earnings multiple of roughly 27x, well below its five-year median of 34x. Analysts peg fair value at around $542, more than 20% above current levels. Bank of America also holds a “Buy” rating with a $500 target.
The shares closed recently at €367.45, roughly 9% below their 200-day moving average. Year to date, the stock is down about 9%.
Missed Opportunity or Calculated Pass?
Microsoft reportedly considered acquiring Cursor, an AI coding startup, but ultimately walked away. SpaceX stepped in with a $60 billion purchase option. Cursor now serves more than half of the Fortune 500, including Nvidia and Salesforce. Whether Microsoft’s decision was a misstep is debatable — GitHub Copilot is growing rapidly, and Cursor is built on a fork of Microsoft’s own Visual Studio Code, meaning the company benefits indirectly from its rival’s success.
Legal Headwinds in Europe
A UK court ruled on April 21 that Microsoft must face a £2.1 billion class-action lawsuit over allegations it overcharged for software licenses. The decision adds a concrete regulatory risk to the outlook, though the financial impact remains uncertain.
With Azure growth, AI tool adoption, and gaming margins all in focus, the April 29 earnings call will test whether the bullish analyst consensus has fundamental backing — or whether the stock’s recent run has gotten ahead of the numbers.
Ad
Microsoft Stock: Buy or Sell?! New Microsoft Analysis from April 23 delivers the answer:
The latest Microsoft figures speak for themselves: Urgent action needed for Microsoft investors. Is it worth buying or should you sell? Find out what to do now in the current free analysis from April 23.
Microsoft: Buy or sell? Read more here...
