The console wars are so yesterday: Microsoft (MSFT - Get Report) and Sony (SNE - Get Report) are joining forces.

The longtime competitors inked a partnership aimed at improving their respective direct-to-consumer entertainment offerings. Sony shares were up 4.12% on Thursday and Microsoft's were up 2.31%. 

Under the agreement, "the two companies will explore joint development of future cloud solutions in Microsoft Azure to support their respective game and content-streaming services," Microsoft wrote in a blog post. It may also include some cross-pollination of their respective technologies, such as leveraging Microsoft's Azure cloud platform to enhance Sony's game streaming services, as well as a joint effort to build better development platforms for content creators.

The joint efforts also extend to semiconductors and AI, potentially including development of new intelligent sensors and the incorporation of Microsoft's AI tools in some of Sony's consumer products. 

The new partnership is particularly notable because of the longtime rivalry between the two tech giants; Sony owns Playstation, while Microsoft owns XBox.

"For many years, Microsoft has been a key business partner for us, though of course the two companies have also been competing in some areas," said Kenichiro Yoshida, president and CEO of Sony, in a statement. "I believe that our joint development of future cloud solutions will contribute greatly to the advancement of interactive content."

It also lies at the center of a fast-evolving market for cloud gaming services, which includes some formidable competition.

In March, Alphabet (GOOGL - Get Report) announced Stadia, a forthcoming cloud gaming service due out later this year. Powered by Google's own cloud servers, the service will make it possible to launch games directly from YouTube, and also includes its own custom controller.

Amazon (AMZN - Get Report) is believed to be working on its own cloud gaming service as well, and also owns the popular social game streaming platform Twitch.

For its part, Microsoft is building a cloud streaming service called XCloud and already has a deep footprint in gaming through its Xbox family of consoles and apps.  

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