Microsoft may have quietly shelved its in-house Xbox handheld project, marking a significant shift in the company’s gaming strategy.

For months, rumors swirled around a prototype device that would bring a dedicated Xbox portable console to market. The company was said to be targeting a release as early as 2027, offering a new way to play Game Pass titles on the go. However, according to a report originating from GameSpot, it seems to indicate that Microsoft has decided to put the project on indefinite hold.

ROG is More Than an Ally

Rather than pursuing its own handheld hardware, Microsoft is now focusing its efforts on optimizing Windows for portable gaming. This pivot became clear with the launch of third-party devices like the ROG Ally and the more recent ROG Ally X, which are Windows-based handhelds co-developed with ASUS. Both are heavily branded with Xbox integrations, offering Xbox Game Pass support and Xbox-style user interfaces. According to insiders, Microsoft sees more value in bolstering these types of partnerships than sinking resources into developing its own device from scratch.

Part of the reason for the shift comes down to market timing. The handheld gaming landscape is evolving rapidly, with Valve’s Steam Deck leading the charge and with Nintendo having recently seen incredible success with the Switch 2 launch, totaling over 3.5 million sales in less than a week.

Microsoft vs. The World

Competing directly with these devices would require a significant investment in hardware, software, and marketing — something Microsoft may not be ready to take on while it’s still recovering from the middling performance of its Series S and Series X consoles in key markets. Rather than risk launching an underpowered or overpriced product, Microsoft appears to be playing the long game by partnering with those already dedicated to the handheld PC market.

Microsoft’s “This is an Xbox” ad showcases how the company views its platform as available anywhere a screen may be.

Xbox boss Phil Spencer has expressed interest in handheld gaming, even hinting at his desire for a more portable Xbox experience. But he’s also made it clear that any serious hardware efforts are still years away. For now, the company’s focus is on ensuring that Xbox services, such as Game Pass and cloud gaming, are available on a wide variety of devices, including handhelds.

So while the idea of an Xbox-branded portable console may not be completely dead, it’s certainly been pushed to the sidelines. In its place, Microsoft is choosing flexibility and collaboration, betting that a better Windows experience across third-party hardware will carry the Xbox brand further than a single, expensive device ever could.

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