Typically, when we talk about the future of AR and VR, the first companies that come to mind are Apple, Google, Facebook, and Snapchat; however, Microsoft does not receive enough credit for the strong positioning it has already built.

As shown in our Jump Ball for the Next OS chart, Microsoft sits in third place behind Google and Apple in terms of elements necessary for a complete AR OS.

In the past week, Microsoft has made three important announcements that show the advances it’s making in order to better position itself as a key platform for VR and AR the future.

Project Scorpio. Last week, Microsoft unveiled its final Xbox Project Scorpio specifications through Digital Foundry. Project Scorpio is a mid-generation console with 4K output and VR gaming capabilities. Gaming is one of the first areas where VR will have a big impact, and Microsoft is poised to benefit from it.

Of all of the companies vying to own VR and AR platforms of the future, Microsoft is the only one to have a gaming console. In January, Microsoft shared that it had reached 55 million monthly active users on its Xbox Live platform, up 15% from the previous year. The Project Scorpio console, set to be released this fall, is powerful enough to display VR content. Microsoft’s main competition in console gaming is Sony, who released an early VR system in November of 2016. Sony has since announced that Playstation VR has sold over 915,000 units as of late February. We view Playstation VR as a step behind the HTC Vive and Oculus Rift, but ahead of smartphone-powered experiences.

While Microsoft doesn’t produce any VR hardware, it sells the Oculus Rift headset in its stores and has included the Xbox controller in Oculus Rift bundles. Oculus seems like the logical choice for a VR headset partner for Project Scorpio, but Microsoft shared that the next console will also support the Mixed Reality Headsets from Microsoft in 2018, which include headsets manufactured by Lenovo, Dell, Acer, and HP.

Mixed Reality OS Support. Microsoft recently announced that its latest Windows 10 update, the Creator’s Update, will start rolling out to users beginning on April 11th. This update will include support for Mixed Reality (MR) headsets. While this doesn’t mean much to consumers now since MR headsets won’t be available until the holiday season, developers that are soon to receive their MR development kits will be able to work on creating content and applications now. Providing developers with this early window should lead to high-quality MR content being available on day one of the MR headset releases.

It’s also important to remember that Microsoft is leading the way when it comes to MR hardware, with the Hololens. While there are improvements that can be made, Microsoft has a commanding lead in the category. Its updates to Windows 10 will further benefit Hololens developers as well. We continue to view mixed reality as true augmented reality.

Sprinkles. Microsoft has also released a photo application for iOS called Sprinkles, which is a foray into AR on a mobile platform. Sprinkles gives users photo editing tools, allowing them to add filters, stickers, and emojis. In addition, it utilizes facial recognition to position stickers and recommend celebrity look-a-likes. This app is similar to Apple’s recently released Clips.

While Microsoft clearly missed an opportunity in the shift to the mobile computing paradigm, it seems heavily invested in positioning itself as a strong company in the future computing paradigm based on its investments in AR and VR.

Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.