Microsoft’s Activision Buy Highlights Push Toward Mobile, Metaverse

“It’s going to start a major ripple effect in terms of consolidation for other videogame publishers,” said Wedbush Securities analyst Dan Ives.

Deal-making among videogame companies has surged in recent years amid gaming’s growing popularity, particularly on mobile devices. Mobile games represent the largest and fastest-growing corner of the videogame industry at large. Last year, spending on mobile games accounted for $93.2 billion, more than the $87.1 billion that people spent on console and computer games combined.

Videogames are also seen by analysts and industry executives as a pathway to the metaverse, the virtual world where people can play, work and shop across different platforms using digital avatars. Interest in the metaverse has gained new momentum since Facebook co-founder

Mark Zuckerberg

said in October that he was renaming his company

Meta Platforms Inc.

FB -4.14%

to highlight its push to capitalize on the nascent world of virtual reality and augmented reality.

Microsoft’s purchase of Activision will accelerate more deals in the industry, analysts said, as big tech companies seek to broaden their consumer offerings by acquiring game publishers and developers that attracted players during the pandemic. Microsoft’s purchase of Activision, which owns the Call of Duty, World of Warcraft and Candy Crush franchises, would also help the company edge into the streaming and metaverse spaces, they added.

“As more big tech and media companies recognize the reach and spend that gaming drives, as well as gaming’s tip of the spear position for future metaverse opportunities, we expect to see further M&A in the space,” said Andrew Marok, analyst at Raymond James & Associates, in a note.

The prospect of more deals led to gains Tuesday among videogame stocks. Electronic Arts gained $3.47, or 2.7%, to $133.91, while U.S.-listed shares of

Ubisoft

UBI 11.87%

rose 8.5%, and

Nintendo

added 2.2%. Activision ended at $82.31, up $16.92.

The moves came as major U.S. indexes fell. The S&P 500 lost 1.8% and the Nasdaq Composite declined 2.6%, hurt by a rise in Treasury yields.

Within the global videogame industry, venture-capital investments nearly doubled last year to $11.2 billion, from $6.4 billion in 2020, while mergers-and-acquisition spending nearly tripled to $26.2 billion last year, from $8.9 billion in 2020, data from PitchBook show.

This year, the momentum in videogame deal-making has continued. Last week, Take-Two Interactive Software Inc. agreed to buy Zynga Inc. for roughly $11 billion.

In acquiring Activision, Microsoft would also be making a significant step forward in mobile games. Activision’s “Call of Duty: Mobile,” “Candy Crush Saga” and “Candy Crush Soda Saga” are top-grossing games across

Apple Inc.’s

App Store and

Alphabet Inc.’s

Google Play, according to Sensor Tower Inc. The company’s mobile games overall have amassed approximately 3.7 billion installs and $16.1 billion in player spending world-wide since January 2014, the analytics firm said.

Microsoft already has a foothold in mobile with “Minecraft,” which it acquired in 2014 when it bought the block-building franchise’s creator, Mojang AB, for $2.5 billion. Since then, the mobile version of “Minecraft” has been downloaded more than 237 million times globally and has generated roughly $1.1 billion in player spending, said Sensor Tower, making it Microsoft’s biggest mobile game. Microsoft’s second-largest mobile game by downloads and revenue is “Fallout Shelter,” which it gained when it acquired ZeniMax Media Inc., the owner of game developer Bethesda Softworks, for $7.5 billion in 2021.

Overall, consumer spending on game software jumped about 23% in 2020 from the year before, according to estimates from Newzoo BV. While that growth shrank to about 1.4% last year, total spending still reached about $180 billion, the analytics firm said.

Not all videogame companies’ shares rose Tuesday. Roblox Corp, which went public last March, has seen its shares fall 42% from highs in November amid concerns about a recent outage and its growth potential in China. The company’s stock declined 2.3% Tuesday.

“Other gaming publishers are now up because the Street is now looking at who’s next,” Wedbush’s Mr. Ives said.

Write to Sarah E. Needleman at sarah.needleman@wsj.com