Microsoft Shifts Focus from Xbox Handheld to Third-Party Devices

Microsoft is said to have reconsidered its internal development of a dedicated Xbox handheld console, shifting focus toward optimizing Windows 11 for gaming on third-party devices. While earlier reports suggested a potential 2027 release window for a first-party handheld—possibly in tandem with the next Xbox console—recent updates indicate a strategic pivot.

According to a report by Windows Central, Microsoft has reportedly redirected its efforts toward enhancing gaming performance on partner hardware rather than pursuing an in-house portable system. This includes close collaboration with companies like Asus, particularly around a new Xbox-branded handheld codenamed Project Kennan. Internal communications reportedly informed staff that "priorities are moving more deeply towards third-party OEM handhelds in the interim."

This comes after recent online leaks revealed images of Asus’ upcoming ROG Ally 2 device branded under Xbox. Two color variants—one white, one black—surfaced via an Indonesian certification office and were briefly listed on the U.S. Federal Communications Commission (FCC) website before being removed. According to sources, the hardware is "essentially finished" and expected to be among the first devices powered by the AMD Z2 Extreme processor.

Details on the device’s full specifications remain limited, and it's unclear whether there are functional differences between the two color models. The units are currently undergoing testing at Microsoft headquarters, according to insiders.

Last month, Asus Republic of Gamers took to X (formerly Twitter) to share a teaser showcasing both an Xbox-branded controller and handheld system. The official Xbox account responded with a playful wide-eyed GIF, hinting at an imminent announcement.

Meanwhile, development of the successor to the Xbox Series X is reportedly well underway, with Xbox president Sarah Bond stating that Microsoft is “moving full speed ahead on our next generation hardware,” aiming to deliver what she described as “the biggest technological leap ever in a generation.”