The app may instead decide on an initial public offering, knowledgeable sources told The Wall Street Journal.
Microsoft recently traded at $257.72, down 0.4%, compared to a 1.25% slide for the Nasdaq Composite.
Microsoft was reportedly set to pay more than $10 billion for Discord, which had been talking to other potential buyers, too.
Microsoft has been looking to expand its offerings in ways that will enhance its game- and subscription-focused businesses.
The Redmond, Wash., software giant last year sought to buy social-media app TikTok, and more recently expressed interest in acquiring Pinterest PINS.
Specifically, Microsoft has been looking for acquisitions that connect communities of users to its current offerings, like Xbox.
The Xbox business has also been expanding the suite of subscription perks it provides as part of its Game Pass offering.
San Francisco-based Discord is best known for its free service that lets gamers communicate by video, voice and text. That medium that has taken off through the pandemic as users have increasingly turned to the platform to congregate virtually and chat via video, voice and text.
The platform has roughly 140 million monthly users and has been elaborating its communication tools to turn it into a “place to talk” rather than merely a gamer-centric chat platform, according to the company.