Tech giant Microsoft (MSFT) recently did something that has investors clearly concerned. It has been having some serious issues in its GitHub coding platform. In a bid to address these issues, Microsoft went hat in hand to one of its biggest cloud rivals, Amazon (AMZN) to try and address the matter. The betrayal was evident to investors, who sold shares and sent Microsoft down over 2% in Tuesday afternoon’s trading.
Microsoft has a shortage of cloud space, it seems, and is looking to Amazon to offer up some extra cloud capacity. With artificial intelligence (AI) tools making it easier to write code, there are more code projects showing up on GitHub than Microsoft anticipated. This in turn is swamping GitHub, and leading Microsoft—which has owned GitHub since 2018—to look elsewhere.
Interestingly, this is not so much a betrayal as the acceleration of earlier plans. Microsoft reportedly planned to move GitHub entirely to its own Azure cloud service by 2027. GitHub was previously running its own data centers, and for a while, this did the job. But with GitHub suddenly bursting at the seams, Microsoft simply accelerated the pace of the planned move.
More Closures Planned
Meanwhile, the threat of layoffs is branching out through Microsoft, as two more game studios are under threat of closure. Both Ninja Theory and Double Fine are apparently under the closure threat. Ninja Theory is known for the reboot of the Devil May Cry series, while Double Fine is perhaps best known for Psychonauts.
This is unusual, given that Ninja Theory’s Senua is set for release soon. It would seem to make more sense to see how that game goes before shutting down the whole studio. But given Double Fine just released a party brawler focused on pottery called Kiln, well, that may be just a bit too original for its own good. Still, we know that Microsoft has been fighting to save money, and these studio cuts may be the unpleasant choice that is left.
Is Microsoft a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Strong Buy consensus rating on MSFT stock based on 35 Buys and two Holds assigned in the past three months, as indicated by the graphic below. After a 16.38% loss in its share price over the past year, the average MSFT price target of $557.64 per share implies 42.46% upside potential.
