Sony will use Microsoft's cloud for streaming games and the two will work together to on new image sensors.
Sony has said it is planning a follow-up device but has not provided details such as a name or timing.
Whether the PlayStation 4 successor will be called PlayStation 5 or something else, is not yet known.
Sony CEO Kenichiro Yoshida said he would focus on making stable profits from existing music, movies and other intellectual properties
CEO Kenichiro Yoshida made no secret that Sony’s new emphasis on intellectual property favors music over movies.
Sony's deal takes advantage of the rapid growth in streaming music services like Spotify and Apple Music which has driven a recovery in the music industry.
Sony reports a nearly four-fold jump in third-quarter operating profit boosted by demand for its image sensors
Sony raised its profit forecast for the year ending March to 720 billion yen from 630 billion yen, its best ever in its 72-year-old history.
During Hirai’s six-year term, Sony has exited or cut back in areas such as PCs and TVs, and capitalised on the spread of smartphones with its image sensors.
Months after Sony Corp bought So-net, the broadband provider's chief chided CEO Kazuo Hirai for having his "priorities in the wrong order".