Activision Deal Boosts Microsoft, While Adobe Faces Challenges with Figma Acquisition

Microsoft and Adobe have recently made headlines, each navigating its unique path through the realm of acquisitions and market dynamics.

Microsoft, a perpetual contender for the top market cap position, secured a significant victory with its completion of the $75 billion acquisition of video game maker Activision Blizzard in October. The journey, however, was not without challenges, as British regulators initially withheld approval, prompting Microsoft to make adjustments to the proposed deal. This acquisition marked a strategic move for Microsoft, solidifying its position in the gaming industry.

On the flip side, Adobe faced its own set of challenges in the acquisition arena. The company had unveiled plans for a $20 billion takeover of the design startup Figma. However, regulatory hurdles in Europe and the U.K., particularly from Britain’s Competition and Markets Authority, led to the termination of the deal. The agency expressed concerns about the potential adverse effects on innovation in software used by the majority of UK digital designers. This setback prompted analyst Stefan Slowinski to downgrade Adobe to an “underperform” rating.

The divergent paths of Microsoft and Adobe in the acquisition realm have led to divergent outcomes, with Microsoft receiving an upgrade to “outperform” Slowinski. The successful closure of the Activision deal provided growth opportunities and self-help boosts for Microsoft, setting it on a favourable trajectory.

Beyond acquisitions, both companies are actively involved in harnessing the power of artificial intelligence (AI). Microsoft’s cloud computing platform, Azure, is anticipated to experience accelerated growth, reaching 30%, as customers increasingly focus on developing AI use cases. In contrast, Adobe is concentrating on the adoption of Generative AI (GenAI). GenAI, capable of generating text, images, or other media using a generative model, holds transformative potential. Adobe’s emphasis on GenAI reflects a strategic move, although its near-term focus is on adoption rather than immediate monetization.

The landscape of image generation and editing is transforming, with Big Tech players looking to integrate these capabilities into broader consumer and enterprise services. Slowinski’s analysis suggests that Microsoft is positioning itself for significant returns from AI investments in fiscal year 2025, particularly with offerings like Copilot Pro, a premium subscription enhancing AI capabilities.

As technology continues to evolve, the strategies of these industry giants shape the trajectory of innovation, acquisitions, and AI adoption, influencing the broader landscape of the software market.