Microsoft's next-gen gaming strategy: A handheld, a PC-like Xbox, or both?

[Daniel Sims]

Rumor mill: Microsoft has long hinted at a handheld gaming device without providing specific details. While the company continues to refine the software experience for Windows gaming handhelds (to an extent), reports conflict on when an official Xbox device might be released. Looking further ahead, speculation persists about whether Microsoft's next console will even follow the traditional console model.

Windows Central claims to have heard from sources that Microsoft plans to launch its long-teased handheld device before the end of 2025, likely as a reference device for Windows-based handheld gaming PCs. However other publications dispute this claim, stating that an Xbox-branded handheld is not expected to arrive this year.

Rumor is Microsoft is collaborating with a third-party manufacturer to develop a handheld device codenamed "Keenan," which will run Windows – similar to the Asus ROG Ally or Lenovo Legion Go. However, unlike those devices, it will feature an Xbox guide button and incorporate Microsoft's console design language.

This handheld would likely mark the introduction of Microsoft's planned updates to the Windows gaming UI to better support handheld gaming PCs.

Although devices like the ROG Ally, Legion Go, and MSI Claw are technically more powerful than Valve's Steam Deck, the latter remains significantly more popular – likely due to its more polished UX and console-style operating system. While Windows handheld users struggle with a UI not designed for controllers or small screens, the Steam Deck boots into a compact, user-friendly interface while still retaining the flexibility of a PC.

Microsoft has repeatedly acknowledged the need for improvement in this area. At CES, the company vaguely outlined its goal of merging elements of Windows and Xbox to address these issues sometime this year. Responding to Windows Central's report, Tom Warren stated that Keenan is simply a broader initiative for PC gaming handhelds in collaboration with OEMs, not a dedicated Xbox-branded handheld.

I've seen the report about Microsoft's Project Keenan, and just to be clear there is no first-party "Xbox handheld" arriving in 2025. Keenan is part of PC gaming handheld work with OEMs, like Microsoft's VP of Next Gen told us at CES www.theverge.com/2025/1/7/243...

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– Tom Warren (@tomwarren.co.uk) March 10, 2025 at 5:09 PM

The Xbox rumor mill doesn't stop there, but reportedly Microsoft has fully approved a next-generation Xbox console planned for release in 2027.

The device, which Xbox head Phil Spencer previously boasted would provide the biggest technical leap in the company's history, will behave more like a PC than any prior console. It will support backwards compatibility, and developers will require less work to port games between PC and Xbox.

Taken together with the plans Microsoft described at CES and Spencer's past comments about bringing alternate storefronts to Xbox, reports about a more PC-like next-generation console raise the question of whether it will be a console at all. If the next Xbox is essentially a full-fledged Windows-based system, it could signal a complete shift in Microsoft's approach to the video game industry.

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Microsoft's next-gen gaming strategy: A handheld, a PC-like Xbox, or both?

 

[The Talking Tech]

As a former Xbox fan I can surely say that there won't be a point of buying a new Xbox if those new systems won't have any exclusive games.

If everything Microsoft comes to PlayStation and Nintendo might as well buy any of the other two systems for a more complete package.

 

[NumberNine]

C'mon Microsoft, let's see if you can do better than existing options. Show me what you got!

How long before Xbox force installs Copilot to get the numbers up?

 

[godrilla]

As a former Xbox fan I can surely say that there won't be a point of buying a new Xbox if those new systems won't have any exclusive games.

If everything Microsoft comes to PlayStation and Nintendo might as well buy any of the other two systems for a more complete package.

True unless Microsoft somehow makes an api that can port all the previous games in Windows and Xbox to this handheld to run efficiently. It only makes sense for maximum returns on minimal investment to milk handheld market for all the previous content that is already available on the market like Steam is doing imo.

Every year Microsoft stalls handheld support and PC gaming improvements is every year that Steam OS becoming a reality to eat it's lunch. Them royalty and licensing fees are not insignificant besides the potential for them to get more Live subscriptions as well.

 

[Megalomaniac]

Where are all the AAA games?

I'd rather spend that money on a Steam deck where I know there are plenty of games.

 

[Watzupken]

If it’s a handheld console that’s stuck to Xbox games, it’s going to be DOA in my opinion. There are no exclusive games for people to want to buy an Xbox handheld when there are plenty of alternatives out there that are more flexible. Microsoft should instead design a console only OS to improve these handheld PCs user experience.

 

[psycros]

Microsoft is probably holding back on a mobile console because they're afraid that it will kill regular Xbox sales. If you can get a portable that also hooks to your TV to play all the Xbox exclusives you have no need for anything else (except maybe a PC).

 

[vvtunes]

I foresee a future somewhat similar to SEGA (software publishing). The handheld market will never be profitable to them (too many players) and the Xbox hardware division seems to be dying a slow death due to mismanagement.
The real battle will be between Nintendo, Sony (if they don't fk up too much and Steam machines, with SteamOS gradually replacing Windows maybe?
But if the graphics cards market keeps its current trajectory (high prices/low availability/badly optimised PC ports), buying an Xbox could be a sensible decision after all.

 

[gamerk2]

I foresee a future somewhat similar to SEGA (software publishing). The handheld market will never be profitable to them (too many players) and the Xbox hardware division seems to be dying a slow death due to mismanagement.

The only time the XBOX division has done well was during the height of Sony's hubris (the PS3). And even then, the PS3 won the generation everywhere outside the US. And given how everyone has finally figured out that console exclusives are actually costing money (as opposed to releasing multi-platform), there really isn't much incentive to invest on money-loosing hardware.

Basically, Nintendo owns the bottom of the market, Sony owns the top, and there really isn't room to support another console manufacturer.

 

[Dimitriid]

I'm actually not too pessimistic on the possibility of a Microsoft portable console. But notice that I said 'Microsoft' and not 'Xbox' since I mean something that's closer to the surface line instead of the xbox.

The reason I think they might want to get in is because I think that ironically enough, they need to do for Windows what SteamOS and Valve did for Linux: the compatibility is not a problem for games obviously, but everything else is: they haven't been able to get Windows right for tablets and mobile devices so I'm hoping they'll develop basically a big picture for windows that actually makes things like controller-only usable for windows.

The lazy way to go about it would be to just make it 'Xbox' and use that same version of the console OS except portable, but judging from the reactions on this threads being very clearly apathetic to that possibility I think that at the very least they'll create a similar-looking frontend but for full blown Windows because they know they have to complete with SteamOS so they can't just ignore desktop users since they'll want competitors to instead of considering Linux to consider their new version of Windows with a usable big-picture mode.

So if this is a surface-like portable console that enters into an OS that looks just like the xbox consoles but can be switch into regular Windows 11 desktop mode when needed, they might have maybe not a 'winner' but something that's serviceable enough to stop bleeding users to Valve and Linux if they continue to establish themselves as the name to beat on the portable market they spearheaded. I honestly think there's a non-zero chance this is actually the direction they're planning simply because it would make sense

 

[EdmondRC]

Xbox as a console is dead. They really can't release an Xbox and say, well, you can play all the games here you can also play on PC and other consoles. It just doesn't make sense anymore.

Xbox as a brand though is still marketable and I believe a line of mass-produced PCs that focus on bringing value and gaming power to the customer, under the Xbox brand, could be the way to go. MS would need to make money on each one sold, so prices would likely be higher than consoles, but they could save with economies of scale. These would not be fully upgradeable machines, likely only storage would be upgradeable, maybe the GPU in some models. Microsoft could release upgraded machines on a fairly regular schedule perhaps ever 4 or 5 years.

With the Xbox-PCs, Microsoft could work with developers to have them spec out their PC games for the different tiers and that way give gamers easy options that will run at a specified FPS on their machine. However, the full ability to tweak settings should still be available, and the Xbox specs should also be available to regular PCs.

Along with this, I think Microsoft should develop an Xbox OS that is an extremely lean version of Windows that focuses on gaming. Has a sleek, more console like UI. Has console like features like suspend mode and even allow users into the file system so that they can install mods, etc. They should make this OS available to all PC users as boot option for Windows or standalone. The OS should evaluate your PC and put it in a tier system to give you a good idea of where your system's performance should land for the Xbox pre-configured specs in games, a good starting point for tweaking performance. Microsoft should work with the larger store fronts to deliver a seamless experience whether your game is on Steam, EPIC, GOG, GamePass, etc.

 

[yukka]

I just want a handheld that can play my Xbox console library locally. If I want to play pc games id buy them on steam and play them on a handheld like steam deck or on my gaming pc. It’s the Xbox library locked behind the Xbox console drm that is only available via cloud that id like access to.

I’m not sure the Xbox handheld will be that. If its windows with less functionality aimed at gaming but with games that won’t crossplay with steam and receive patches at different rates that’s not going to be a guaranteed sell.