Microsoft has reportedly paused development on its long-rumored Xbox-branded handheld console. Instead, the company is shifting its focus toward optimizing Windows 11 as a more capable gaming operating system for portable devices.
Highlights
- Xbox handheld plans paused: Microsoft has shelved internal development of an Xbox-branded portable console in favor of enhancing Windows 11 for handheld gaming.
- Software-first strategy: The company is prioritizing OS-level improvements to tackle common issues like power inefficiency, poor touch UX, and limited controller support.
- Windows 11 “compact mode”: A new Xbox app interface mode simplifies navigation for smaller screens—an early sign of Microsoft’s UI optimizations for portable devices.
- Partnerships continue: While first-party hardware is paused, Microsoft is co-developing Project Kennan with Asus, a Windows 11-powered handheld expected in late 2025.
- Unified gaming ecosystem: The long-term goal is to tightly integrate Xbox Game Pass, Cloud Gaming, and cross-platform titles into Windows for seamless handheld support.
- Strategic timing: Rather than rushing hardware, Microsoft is preparing a more scalable solution amid growing competition from Valve’s Steam Deck and Nintendo’s next-gen Switch.
- Future hardware not ruled out: Microsoft may revisit proprietary handhelds when the OS is mature enough and the market demand is stronger.
The move reflects a broader strategy to strengthen Microsoft’s position in handheld gaming by improving software rather than launching new hardware.
Prioritizing Software Over Proprietary Hardware
While internal development of a first-party handheld device had been underway as part of Microsoft’s next-generation console roadmap, sources now indicate those efforts have been shelved—at least temporarily.
Instead, the company is concentrating on addressing longstanding software challenges and making Windows 11 a more competitive alternative to Valve’s SteamOS, which has gained significant traction across handheld gaming devices such as the Steam Deck and Lenovo Legion Go S.
By focusing on software enhancements, Microsoft aims to reduce limitations users often face on Windows-based handhelds.
These include inefficient power usage, unintuitive navigation on small screens, and less-than-optimal controller integration. Improvements in these areas could help third-party devices perform more reliably and appeal to a broader audience.
Windows 11’s Current Limitations on Handhelds
Microsoft acknowledges that Windows is not currently optimized for handheld experiences. Devices like the ROG Ally and Ayaneo have struggled with usability due to issues such as poor touch interface design, inconsistent controller input, and energy consumption that drains battery life quickly.
Phil Spencer, Head of Xbox, has publicly noted these shortcomings and confirmed that the company is working on solutions.
Recent Efforts to Improve the Handheld Experience
One step toward improving the user experience is the introduction of a “compact mode” in the Windows 11 Xbox app, which simplifies the interface by collapsing the sidebar into icons—creating a more touch-friendly layout better suited to small screens.
Microsoft is also exploring broader OS-level optimizations to enhance performance and UI fluidity on portable form factors.
Project Kennan
Although its internal hardware development is paused, Microsoft remains active in the handheld gaming space through partnerships.
The company is working with Asus on a co-developed device known internally as Project Kennan, which has appeared in recent FCC filings. Expected to launch in late 2025, the device will run Windows 11 and support features such as Xbox Cloud Gaming and Xbox Play Anywhere.
This collaboration represents a key part of Microsoft’s new strategy: enabling high-quality handheld gaming through ecosystem partnerships, while using Windows as the foundation instead of building entirely proprietary hardware.
Unifying Xbox and Windows Ecosystems
Microsoft’s broader goal is to bring the Xbox and Windows ecosystems closer together. By refining Windows 11 to support console-like experiences on handhelds, the company aims to offer users seamless access to Game Pass, Cloud Gaming, and cross-platform titles.
This software-first approach could provide the flexibility to support future Xbox-branded hardware when the timing and market demand align.
The shift to software optimization comes at a time when competition in the handheld gaming space is intensifying. Valve’s SteamOS continues to gain ground, and Nintendo’s next-generation Switch, expected by mid-2025, is likely to further disrupt the market.
Rather than compete directly with a new Xbox handheld at this stage, Microsoft appears to be laying the groundwork for a more flexible and scalable long-term solution.
