Phil Spencer, chief executive officer of gaming at Microsoft Corp., center, arrives to court in San Francisco on June 28, 2023.
Shelby Knowles | Bloomberg | Getty Images
When Phil Spencer took the helm of Microsoft’s gaming division in 2014, he and newly appointed CEO Satya Nadella weren’t sure if the company should keep investing in the Xbox, which was losing to Sony.
Less than a decade later, Spencer and the Xbox are at the center of the software company’s largest acquisition ever. With the close of the $69 billion purchase of video game publisher Activision Blizzard on Friday, Microsoft has made clear that gaming is no longer a question mark and is, in fact, central to the company’s future.
“It is an extraordinary amount of money for Microsoft, whose core business is not gaming,” said Don Coyner, who was the first person to work on marketing inside the company’s Xbox unit. Coyner, who left Microsoft in 2018, said he’s confident that smart people at the company can explain the high price.
Spencer’s profile at Microsoft has grown immensely in a short period of time. He told an interviewer from gaming website Shacknews in 2020 that he only got to become head of Microsoft’s gaming division because so many other people had left, and he was still there.
Activision marks one of the priciest deals ever in technology. In addition to the hefty costs, it’s also been extremely time-consuming.
Regulatory pushback from the European Commission, the executive body of the EU, and agencies in the U.S. and U.K. kept the deal at bay for nearly 21 months and forced Microsoft and Activision to extend the deadline to close, which had been mid-July, by three months.
There were numerous moments of uncertainty along the way. In July, Spencer sat in on five days of hearings before a federal judge in San Francisco, who ultimately denied the Federal Trade Commission’s attempt to quash the deal. The FTC took its effort to an appeals court, which refused to grant a motion that would have temporarily stopped the transaction from closing.
Until now, gaming has been a small piece of Microsoft and a relatively slow grower. Revenue increased 1% in the latest quarter, while the company as a whole grew by about 8%. In the most recent fiscal year, gaming revenue was $15.5 billion, accounting for 7.3% of total Microsoft sales.
Rather than ceding the market to Sony and Nintendo, Microsoft’s highest-ranking managers decided to sacrifice most of the software maker’s $111 billion cash pile on a game company.
Bobby Kotick (L), CEO of Activision Blizzard at the Allen & Company Sun Valley Conference on July 11, 2023 in Sun Valley, Idaho.
David A. Grogan | CNBC
Spencer has been vocal in touting Activision’s strengths and was a key force in driving the deal. He’s enjoyed a yearslong relationship with Activision CEO Bobby Kotick, even though the companies have had some tense moments. For example, Microsoft failed to secure the publisher’s titles for the subscription-based Game Pass library during negotiations in 2020.
In November 2021, Spencer approached Kotick and said Microsoft was interested in discussing strategic opportunities between the two companies. His outreach came just three days after The Wall Street Journal reported that Kotick hadn’t told his board what he knew about misconduct inside the company. Activision shares tumbled 11% in the next three trading sessions.
According to a regulatory filing, Spencer asked if Kotick would talk with Nadella, and Kotick agreed. The CEOs spoke the next day, and Nadella conveyed Microsoft’s interest in buying Activision. Some 59 days later the two companies announced their intent to combine.
Microsoft didn’t make Spencer available for an interview.
From intern to boss
Spencer arrived at Microsoft as a software development intern in 1988. Two years later, after graduating from the University of Washington with a bachelor’s degree in technical and scientific communication, he accepted a full-time job at the company as an engineer. He worked on Encarta, Microsoft Money, Microsoft Works and other products.
In the early days of Xbox, Spencer directed an internal game development studio, and in 2008 he took over all of its studios. In 2014, following the launch of the Xbox One console and the appointment of Nadella as CEO, Spencer took charge of Xbox.
Spencer has long understood the importance of top-shelf content. He was instrumental in getting Nadella onboard with the purchase of Minecraft developer Mojang, which Microsoft acquired in 2014 for $2.5 billion. Minecraft has since become the bestselling video game, with more than 300 million copies sold as of this week.
Spencer also took on a big role in the $8.1 billion purchase of ZeniMax Media, the publisher of Doom and Fallout games, in 2021. And at one point he was working on a bid for Warner Bros. Games, whose titles include the Batman: Arkham games, he told two marketing executives in a 2020 email. That deal never materialized.
Spencer and his Microsoft peers then turned to mobile gaming. They considered FarmVille publisher Zynga, Pokemon Go developer Niantic and others before going much bigger with Activision Blizzard.
“Mobile is the largest segment in gaming, with nearly 95% of all players globally enjoying games on mobile,” Microsoft said in its press release announcing the deal. While Activision is known for franchises such as Call of Duty and Overwatch, it also publishes Candy Crush puzzle titles that are among the most popular games on Android and iOS.
Spencer, a lifelong gamer, plays Candy Crush, he said during the July hearings. In total, he plays video games for about 15 hours per week, he told Bloomberg in an interview last year. He’s a fan of Banjo-Kazooie, a game from Microsoft’s Rare studio, and Halo Infinite. In 2021 he played Bungie’s Destiny 2 while another participant streamed the action live on Twitch.
While Microsoft dominates in PC operating systems and productivity software, Xbox remains smaller than Sony in gaming, even after two decades of battle.
“I feel we are in a huge hole with our games lineup both for platform marketing/differentiation and our Gamepass content,” Spencer wrote in a 2022 email to Xbox executives that was made public in the FTC case. This year Xbox has gained a handful of well-received titles, including Zenimax’s Starfield and Forza Motorsport, published by Xbox Game Studios.
Spencer has also recognized some improvements. In 2020, as Sony revealed details of the PlayStation 5, Spencer wrote in a message to Nadella and Microsoft finance chief Amy Hood, “After almost 12 hours of soaking in their unveil, taking apart their specs and looking at the community responses I just wanted to say that I’m proud of our team.” Microsoft had better gaming hardware, software and services, Spencer wrote.
He likes to recognize the achievements of others.
David Hufford, who works in communications and analyst relations at Microsoft, recalled asking Spencer to speak at an event in 2021 honoring the 20th anniversary of the original Xbox launch. Hufford told CNBC in an email that Spencer declined because he wanted to focus on Robbie Bach, who ran entertainment and devices until 2010, and Jeff Henshaw, an Xbox co-founder.
Hufford said that Spencer “preferred we spotlight” those people, “who played more visible leadership roles back then.” Even Bach, once Microsoft’s chief Xbox officer, couldn’t talk Spencer into offering on-stage remarks, Hufford wrote.
Correction: Gaming revenue increased 1% in the latest quarter, while the company as a whole grew by about 8%. An earlier version misstated a percentage.
Hidden among the majestic canyons of the Utah desert, about 7 miles from the nearest town, is a small research facility meant to prepare humans for life on Mars.
The Mars Society, a nonprofit organization that runs the Mars Desert Research Station, or MDRS, invited CNBC to shadow one of its analog crews on a recent mission.
“MDRS is the best analog astronaut environment,” said Urban Koi, who served as health and safety officer for Crew 315. “The terrain is extremely similar to the Mars terrain and the protocols, research, science and engineering that occurs here is very similar to what we would do if we were to travel to Mars.”
SpaceX CEO and Mars advocate Elon Musk has said his company can get humans to Mars as early as 2029.
The 5-person Crew 315 spent two weeks living at the research station following the same procedures that they would on Mars.
David Laude, who served as the crew’s commander, described a typical day.
“So we all gather around by 7 a.m. around a common table in the upper deck and we have breakfast,” he said. “Around 8:00 we have our first meeting of the day where we plan out the day. And then in the morning, we usually have an EVA of two or three people and usually another one in the afternoon.”
An EVA refers to extravehicular activity. In NASA speak, EVAs refer to spacewalks, when astronauts leave the pressurized space station and must wear spacesuits to survive in space.
“I think the most challenging thing about these analog missions is just getting into a rhythm. … Although here the risk is lower, on Mars performing those daily tasks are what keeps us alive,” said Michael Andrews, the engineer for Crew 315.
Formula One F1 – United States Grand Prix – Circuit of the Americas, Austin, Texas, U.S. – October 23, 2022 Tim Cook waves the chequered flag to the race winner Red Bull’s Max Verstappen
Mike Segar | Reuters
Apple had two major launches last month. They couldn’t have been more different.
First, Apple revealed some of the artificial intelligence advancements it had been working on in the past year when it released developer versions of its operating systems to muted applause at its annual developer’s conference, WWDC. Then, at the end of the month, Apple hit the red carpet as its first true blockbuster movie, “F1,” debuted to over $155 million — and glowing reviews — in its first weekend.
While “F1” was a victory lap for Apple, highlighting the strength of its long-term outlook, the growth of its services business and its ability to tap into culture, Wall Street’s reaction to the company’s AI announcements at WWDC suggest there’s some trouble underneath the hood.
“F1” showed Apple at its best — in particular, its ability to invest in new, long-term projects. When Apple TV+ launched in 2019, it had only a handful of original shows and one movie, a film festival darling called “Hala” that didn’t even share its box office revenue.
Despite Apple TV+being written off as a costly side-project, Apple stuck with its plan over the years, expanding its staff and operation in Culver City, California. That allowed the company to build up Hollywood connections, especially for TV shows, and build an entertainment track record. Now, an Apple Original can lead the box office on a summer weekend, the prime season for blockbuster films.
The success of “F1” also highlights Apple’s significant marketing machine and ability to get big-name talent to appear with its leadership. Apple pulled out all the stops to market the movie, including using its Wallet app to send a push notification with a discount for tickets to the film. To promote “F1,” Cook appeared with movie star Brad Pitt at an Apple store in New York and posted a video with actual F1 racer Lewis Hamilton, who was one of the film’s producers.
(L-R) Brad Pitt, Lewis Hamilton, Tim Cook, and Damson Idris attend the World Premiere of “F1: The Movie” in Times Square on June 16, 2025 in New York City.
Jamie Mccarthy | Getty Images Entertainment | Getty Images
Although Apple services chief Eddy Cue said in a recent interview that Apple needs the its film business to be profitable to “continue to do great things,” “F1” isn’t just about the bottom line for the company.
Apple’s Hollywood productions are perhaps the most prominent face of the company’s services business, a profit engine that has been an investor favorite since the iPhone maker started highlighting the division in 2016.
Films will only ever be a small fraction of the services unit, which also includes payments, iCloud subscriptions, magazine bundles, Apple Music, game bundles, warranties, fees related to digital payments and ad sales. Plus, even the biggest box office smashes would be small on Apple’s scale — the company does over $1 billion in sales on average every day.
But movies are the only services component that can get celebrities like Pitt or George Clooney to appear next to an Apple logo — and the success of “F1” means that Apple could do more big popcorn films in the future.
“Nothing breeds success or inspires future investment like a current success,” said Comscore senior media analyst Paul Dergarabedian.
But if “F1” is a sign that Apple’s services business is in full throttle, the company’s AI struggles are a “check engine” light that won’t turn off.
Replacing Siri’s engine
At WWDC last month, Wall Street was eager to hear about the company’s plans for Apple Intelligence, its suite of AI features that it first revealed in 2024. Apple Intelligence, which is a key tenet of the company’s hardware products, had a rollout marred by delays and underwhelming features.
Apple spent most of WWDC going over smaller machine learning features, but did not reveal what investors and consumers increasingly want: A sophisticated Siri that can converse fluidly and get stuff done, like making a restaurant reservation. In the age of OpenAI’s ChatGPT, Anthropic’s Claude and Google’s Gemini, the expectation of AI assistants among consumers is growing beyond “Siri, how’s the weather?”
The company had previewed a significantly improved Siri in the summer of 2024, but earlier this year, those features were delayed to sometime in 2026. At WWDC, Apple didn’t offer any updates about the improved Siri beyond that the company was “continuing its work to deliver” the features in the “coming year.” Some observers reduced their expectations for Apple’s AI after the conference.
“Current expectations for Apple Intelligence to kickstart a super upgrade cycle are too high, in our view,” wrote Jefferies analysts this week.
Siri should be an example of how Apple’s ability to improve products and projects over the long-term makes it tough to compete with.
It beat nearly every other voice assistant to market when it first debuted on iPhones in 2011. Fourteen years later, Siri remains essentially the same one-off, rigid, question-and-answer system that struggles with open-ended questions and dates, even after the invention in recent years of sophisticated voice bots based on generative AI technology that can hold a conversation.
Apple’s strongest rivals, including Android parent Google, have done way more to integrate sophisticated AI assistants into their devices than Apple has. And Google doesn’t have the same reflex against collecting data and cloud processing as privacy-obsessed Apple.
Some analysts have said they believe Apple has a few years before the company’s lack of competitive AI features will start to show up in device sales, given the company’s large installed base and high customer loyalty. But Apple can’t get lapped before it re-enters the race, and its former design guru Jony Ive is now working on new hardware with OpenAI, ramping up the pressure in Cupertino.
“The three-year problem, which is within an investment time frame, is that Android is racing ahead,” Needham senior internet analyst Laura Martin said on CNBC this week.
Apple’s services success with projects like “F1” is an example of what the company can do when it sets clear goals in public and then executes them over extended time-frames.
Its AI strategy could use a similar long-term plan, as customers and investors wonder when Apple will fully embrace the technology that has captivated Silicon Valley.
Wall Street’s anxiety over Apple’s AI struggles was evident this week after Bloomberg reported that Apple was considering replacing Siri’s engine with Anthropic or OpenAI’s technology, as opposed to its own foundation models.
The move, if it were to happen, would contradict one of Apple’s most important strategies in the Cook era: Apple wants to own its core technologies, like the touchscreen, processor, modem and maps software, not buy them from suppliers.
Using external technology would be an admission that Apple Foundation Models aren’t good enough yet for what the company wants to do with Siri.
“They’ve fallen farther and farther behind, and they need to supercharge their generative AI efforts” Martin said. “They can’t do that internally.”
Apple might even pay billions for the use of Anthropic’s AI software, according to the Bloombergreport. If Apple were to pay for AI, it would be a reversal from current services deals, like the search deal with Alphabet where the Cupertino company gets paid $20 billion per year to push iPhone traffic to Google Search.
The company didn’t confirm the report and declined comment, but Wall Street welcomed the report and Apple shares rose.
In the world of AI in Silicon Valley, signing bonuses for the kinds of engineers that can develop new models can range up to $100 million, according to OpenAI CEO Sam Altman.
“I can’t see Apple doing that,” Martin said.
Earlier this week, Meta CEO Mark Zuckerberg sent a memo bragging about hiring 11 AI experts from companies such as OpenAI, Anthropic, and Google’s DeepMind. That came after Zuckerberg hired Scale AI CEO Alexandr Wang to lead a new AI division as part of a $14.3 billion deal.
Meta’s not the only company to spend hundreds of millions on AI celebrities to get them in the building. Google spent big to hire away the founders of Character.AI, Microsoft got its AI leader by striking a deal with Inflection and Amazon hired the executive team of Adept to bulk up its AI roster.
Apple, on the other hand, hasn’t announced any big AI hires in recent years. While Cook rubs shoulders with Pitt, the actual race may be passing Apple by.
Tesla CEO Elon Musk speaks alongside U.S. President Donald Trump to reporters in the Oval Office of the White House on May 30, 2025 in Washington, DC.
Kevin Dietsch | Getty Images
Tesla CEO Elon Musk, who bombarded President Donald Trump‘s signature spending bill for weeks, on Friday made his first comments since the legislation passed.
Musk backed a post on X by Sen. Rand Paul, R-Ky., who said the bill’s budget “explodes the deficit” and continues a pattern of “short-term politicking over long-term sustainability.”
The House of Representatives narrowly passed the One Big Beautiful Bill Act on Thursday, sending it to Trump to sign into law.
Paul and Musk have been vocal opponents of Trump’s tax and spending bill, and repeatedly called out the potential for the spending package to increase the national debt.
The independent Congressional Budget Office has said the bill could add $3.4 trillion to the $36.2 trillion of U.S. debt over the next decade. The White House has labeled the agency as “partisan” and continuously refuted the CBO’s estimates.
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The bill includes trillions of dollars in tax cuts, increased spending for immigration enforcement and large cuts to funding for Medicaid and other programs.
It also cuts tax credits and support for solar and wind energy and electric vehicles, a particularly sore spot for Musk, who has several companies that benefit from the programs.
“I took away his EV Mandate that forced everyone to buy Electric Cars that nobody else wanted (that he knew for months I was going to do!), and he just went CRAZY!” Trump wrote in a social media post in early June as the pair traded insults and threats.
Shares of Tesla plummeted as the feud intensified, with the company losing $152 billion in market cap on June 5 and putting the company below $1 trillion in value. The stock has largely rebounded since, but is still below where it was trading before the ruckus with Trump.
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Tesla one-month stock chart.
— CNBC’s Kevin Breuninger and Erin Doherty contributed to this article.