With the Nintendo Switch 2 days away from launch and Sony eyeing a third return to the handheld market, many were wondering if Microsoft had similar plans up its sleeve. But a new report now pours cold water on plans for a dedicated Xbox handheld, with the company instead wanting to improve how its operating system works on third-party handhelds.
That's according to Jez Corden over at Windows Central, who says that Microsoft had been working on an Xbox handheld to rival the best handheld consoles like the Steam Deck and Asus ROG Ally. However, those plans reportedly changed recently, with the focus now on making sure that Windows 11 works better than it currently does on these handheld devices.
But that's not to say Microsoft is scrapping the project entirely. Corden also reports that the plans are parked for now, with the company still working on its next-generation Xbox console, as well as a third-party handheld console in partnership with Asus, codenamed 'Kennan,' which may be powered by an AMD Z2 Extreme CPU.
Microsoft deciding to change tack and focus on optimizing Windows 11 for handheld consoles could be a smart move in the long run. It's no secret that using the operating system on some handheld consoles can be a chore, with many situations requiring a PC mouse to be plugged into these devices to make it easier to navigate the Windows interface. If it focuses on Windows 11 being more usable for these handhelds, it can give gamers more confidence once its 'Kennan' handheld is announced, rumored to debut at the Xbox Games Showcase on June 8.
With Valve's SteamOS now running on Steam Deck alternatives like the Lenovo Legion Go S, Microsoft is already playing catch-up to these gaming handhelds. These are everywhere in 2025, and they're only becoming more powerful and more popular as the months pass, with other manufacturers like Ambernic and Ayaneo teasing new products with very powerful chips that can run games like Fortnite and PUBG Mobile at their highest settings.
However, this may be an example of Microsoft walking before it can run in the space. If it can show that Windows can be a great SteamOS alternative for gaming handhelds, that may generate some much-needed goodwill and faith that the company may have a future hit on its hands once it decides to resume work on a dedicated Xbox handheld.
While Microsoft rethinks its next move, take a look at our Steam Deck 2 hub to see what Valve may be planning for its next gaming handheld. Or, if you're looking at something more mobile, check out our guides to the best gaming phones and the best gaming tablets.