We recently released a comprehensive list highlighting the 12 Best Metaverse Stocks to Consider for Investment. This article aims to evaluate Microsoft’s standing among the leading metaverse stocks available for investment.
### Understanding the Metaverse Landscape
The metaverse is an emerging digital environment within the video gaming sector, characterized by its rapid growth and innovative technology that fosters interactive virtual worlds. This concept integrates various technologies like virtual reality (VR), augmented reality (AR), blockchain, and mixed reality, creating spaces for social interaction, work, education, and entertainment. By merging digital and physical experiences, it allows users to engage in personalized and immersive activities through avatars, real-time communication, and spatial computing. The shift from static web browsing to dynamic 3D interactions signifies a remarkable evolution towards fully immersive virtual environments.
### Categories of the Metaverse
The metaverse can be categorized into four distinct types: lifelogging, augmented reality, mirror worlds, and virtual reality. Its growth is significantly propelled by the integration of content streaming and blockchain technology. The latter enhances secure transactions, ownership of digital assets, and governance, fostering user-centric economies in which individuals can create, sell, and monetize digital experiences—similar to platforms like Roblox. Additionally, the emergence of 3D platforms, virtual marketplaces, and gaming realms continues to attract investment. By 2024, the global video streaming market—essential for immersive media—is forecasted to reach $674.25 billion.
### Market Projections
Research from The Business Research Company estimates that the global metaverse market will expand from $227.05 billion in 2024 to $316.34 billion in 2025, reflecting a remarkable compound annual growth rate (CAGR) of 39.3%. Conversely, S&P Global Market Intelligence anticipates a rise in global metaverse revenue from $17.5 billion in 2023 to $54.5 billion by 2028, equating to a 25.5% CAGR. Businesses have emerged as the primary consumer segment, largely due to the increasing demand for digital twin software and remote collaboration solutions. In 2023, these enterprises represented 42.8% of the total metaverse market.
### Expansion and User Engagement
With major corporations expanding their virtual platforms and enhancing streaming capabilities, metaverse services are becoming more robust across various industries. Social media and mobile internet usage have accelerated the growth of the virtual ecosystem. Services like Meta (formerly Facebook) boast over 2.4 billion users, alongside billions on platforms like WhatsApp and YouTube, creating an increasingly interconnected digital landscape. Daily activities such as socializing, entertainment, and shopping are transitioning into early metaverse forms, prompting advancements in virtual education, collaborative workplace tools, and blockchain-driven gaming economies.
### Gaming and Development Trends
According to NewGenApps, the number of players engaging in VR and AR gaming is projected to reach 216 million globally by 2025, with a market valuation of $11.6 billion. A survey conducted in 2024 revealed that 34% of game developers worldwide are creating new titles for the Meta Quest Store, indicating strong interest in immersive gaming platforms. The influence of generative AI is also transforming the next phase of the metaverse, enabling tailored content recommendations, automatic editing, and enhanced visuals. Streaming services are now leveraging advanced language models like GPT-4 to generate real-time content and ensure safer digital interactions.
### Current Market Dynamics
While the broader metaverse is still evolving, the technologies that underpin virtual economies—such as play-to-earn games, NFT marketplaces, and digital event tickets—are already generating income opportunities for users and developers. The Entertainment Software Association reports that 227 million Americans engage in video gaming weekly, with an average player age of 31, showcasing the growing acceptance of immersive content across demographics. The integration of AI within VR and AR is facilitating the expansion of platforms beyond entertainment into sectors like healthcare and business. As demand for personalized and high-quality experiences increases, metaverse technologies are advancing towards low-latency infrastructure, exemplified by platforms like hesp.live, which is revolutionizing streaming for gaming, education, and live shopping.
### The Future of the Metaverse
Initially, the metaverse encountered skepticism due to subpar user experiences and challenges in user engagement. However, despite a decrease in public enthusiasm post-2022, progress continues as the metaverse matures, with ongoing enhancements pushing its development forward. These advancements, coupled with the rising demand for video-on-demand services, illustrate the metaverse’s deep integration into contemporary digital consumption habits. North America currently leads the market in digital spending and major players, while the Asia Pacific region is poised for growth due to rapid adoption of immersive technologies. This indicates that the metaverse represents more than just a fleeting trend; it is a transformative shift in how individuals interact, communicate, and engage in digital environments. As immersive platforms disrupt traditional media, the metaverse emerges as a promising investment opportunity.
### Evaluating Microsoft Corporation in the Metaverse
To compile our list of the 12 Best Metaverse Stocks to Invest in, we undertook extensive research to identify companies significantly involved in metaverse technology. Our process involved using stock screeners, ETFs, and online rankings to create an extensive list of relevant companies. Subsequently, we analyzed the number of hedge fund holders for each company as of Q4 2024, using data from Insider Monkey’s hedge fund database. The stocks selected for our list exhibited the highest interest from hedge funds.
### Microsoft Corporation’s Position
Microsoft Corporation (NASDAQ:MSFT) is recognized as a leading global technology company with a diverse range of offerings in software, cloud services, enterprise solutions, gaming, and hardware. Within the metaverse sphere, Microsoft is making significant strides through its Azure cloud services, AI-driven platforms like Copilot Studio, and immersive products such as HoloLens and Xbox Cloud Gaming. These innovations lay the groundwork for virtual collaboration, content creation, and digital environments.
In the second quarter of FY2025, which concluded on December 31, 2024, Microsoft reported revenues of $69.6 billion, marking a 12% increase from the previous year. Operating income rose by 17%, with the cloud segment reaching a record $40.9 billion, reflecting a 21% growth—Azure services alone surged by 31%. Notably, AI services contributed 13 points to Azure’s growth, while the business software sector experienced a 14% increase to $29.4 billion, driven by strong performances from Microsoft 365 and Dynamics 365. However, the company did witness a 29% decline in free cash flow to $6.5 billion due to substantial capital expenditures.
### Future Prospects for Microsoft
Microsoft continues to enhance its AI capabilities in the metaverse through Copilot, which is now utilized by over 160,000 organizations. Azure AI has seen a remarkable year-over-year growth of 157%, and GitHub has attracted 150 million developers. Additionally, Xbox Cloud Gaming achieved record usage, with 140 million hours streamed in that quarter. The strong performance of Microsoft Fabric and Power BI underscores the company’s leadership in cloud data and analytics, both of which are essential for crafting immersive experiences.
Microsoft is poised to leverage its cloud infrastructure and AI capabilities to further integrate into the metaverse. The company anticipates continued double-digit growth in revenue and operating income, along with improved margins. Despite facing challenges in some non-AI Azure offerings, LinkedIn hiring solutions, and gaming hardware, Microsoft remains a top contender in the metaverse investment landscape due to its strong presence in digital productivity and immersive platform innovation. MSFT ranks first on our list of the best metaverse stocks to consider.
While we recognize Microsoft’s potential, we believe that certain AI stocks may offer even greater return prospects within a shorter timeframe. There is one AI stock that has already appreciated in value since the start of 2025, contrasting with other popular AI stocks that have declined by about 25%. For those looking for a compelling AI investment trading at less than five times its earnings, we recommend checking our report on this promising AI stock.
### Looking Ahead
This article originally appeared on Insider Monkey.
