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Why are Microsoft shares rebounding prior to Windows 11 unveiling?

The Microsoft share price has enjoyed an impressive 2021, despite its post-Q3 dip. With a 19% increase so far this year, and a 6% rise in the last month alone, what’s causing the recent excitement surrounding Microsoft shares?

  • Microsoft shares inch closer to $261.97 all-time high
  • 37.55% rise in the last 12 months
  • Windows 11 slated for reveal this month
  • Ready to trade the Microsoft share price? Open an account today

Why is the Microsoft share price scaling all-time highs?

It is only a matter of months since Microsoft shares plummeted by more than 10% following the release of its April Q3 results. Despite beating its earnings estimates – reporting its biggest revenue growth since 2018 – and profits up 44% to $15.5bn, investors were surprisingly bearish for a time after these figures.

However, there is a sense that the Microsoft share price has recovered quickly due to the impending release of its Windows 11 operating system. The successor to Windows 10, which was launched in July 2015, has the potential to be a gamechanger for the software giant.

Microsoft’s corporate vice president, Yusuf Mehdi, said that he hasn’t ‘been this excited for a new release of Windows since Windows 95’.

How will Microsoft shares react to its impending Windows 11 reveal?

All investor eyes will be firmly fixed on Microsoft on 24 June, when it is expected to uncover its newest iteration of the Windows operating system. It has been reported that Windows 11 will deliver a seismic visual revamp and embed a new Microsoft store.

Microsoft’s CEO, Satya Nadella, recently described Windows 11 as ‘one of the most significant updates to Windows of the past decade’.

From an investor perspective, traders will be working hard to assess the popular opinion of any new Windows operating system. If a Windows 11 release is warmly received, it could take Microsoft shares to whole new levels, as Windows accounts for around 28% of Microsoft earnings per share. At the other end of the spectrum, if the launch is anything like the failure of Windows Vista in 2006, there is the possibility investors could lose confidence in the tech company.

Certainly, its operating system remains a vital source of revenue for the company. In Q1 2021, Windows OEM revenue was up 10%, while its cloud-based services and Commercial Windows products also generated 10% revenue growth.

Could AMD’s new technology help Microsoft to trump Sony in the latest console wars?

Away from its desktop arm, Microsoft could also be set for a significant boost in the video games console sector, with the Xbox Series X locking horns with the new Sony PlayStation 5. Although the Series X is a more powerful device than the PS5, the latter’s real-world performance is considered mostly superior.

AMD, which has been one of the S&P 500’s most consistent stocks of late, supplies semi-custom processors for both the Series X and the PS5. But AMD’s new FidelityFX Super Resolution (FSR) technology is set to reach the newest Series X and Series S consoles. The addition of FSR technology will enable Microsoft’s consoles to achieve their full potential at higher resolutions and framerates.

Microsoft’s hardware sales from its Xbox consoles were up 232% year-on-year in the last quarter, with demand continuing to outstrip supply during the Covid-19 pandemic.

Supply is expected to improve as the year progresses, according to AMD CEO, Dr Lisa Su, who said that the ‘ ... level of supply will improve to meet this increase in demand ... ’. Undoubtedly, the addition of AMD's new technology will streamline the Xbox's performance, providing Microsoft with a boost in the overarching console system war, and thus placing them in a favourable position when it comes to investor opinion.

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This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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