A recent report has shed light on Microsoft's ambitious plans for its video game hardware, hinting at a full next-gen Xbox slated for release in 2027 and an Xbox-branded gaming handheld expected to hit the market later in 2025. According to Windows Central, a partner PC gaming handheld codenamed "Keenan" is in development and expected to launch in late 2025, while a successor to the Xbox Series X and S, fully in production, is due in two years.

Microsoft has yet to officially comment on these reports. However, its gaming executives have hinted at these developments in various interviews. In January, Jason Ronald, Microsoft’s VP of 'Next Generation,' spoke to The Verge about plans to merge Xbox and Windows experiences for PC gaming handhelds produced by original equipment manufacturers (OEMs) such as Asus, Lenovo, and Razer. It's worth noting that Keenan does not refer to a first-party Xbox handheld, which, according to Microsoft gaming boss Phil Spencer, is still years away.

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Windows Central also claims that the next-gen Xbox has been fully greenlit by Microsoft CEO Satya Nadella. This premium console, set to succeed the Xbox Series X, is expected to be accompanied by a first-party Xbox gaming handheld and new controllers, completing Microsoft’s console lineup in 2027. It appears that Microsoft has no plans for a direct next-gen successor to the less powerful Xbox Series S, possibly positioning the handheld to fill the niche for a cheaper, less powerful console.

The next-gen Xbox is anticipated to resemble a PC more than any previous Xbox, with support for third-party storefronts like Steam, the Epic Games Store, and GOG, while continuing to offer backwards compatibility. Last year, Xbox president Sarah Bond emphasized that Microsoft is "moving full speed ahead on our next generation hardware, focused on delivering the biggest technological leap ever in a generation."

The future of consoles is a topic of much speculation. The Xbox Series X and S have struggled in the 'console war,' and Sony has indicated that the PlayStation 5 is entering the second half of its lifecycle. Meanwhile, Nintendo is preparing to launch the Switch 2 later this year, raising concerns about the viability of traditional video game consoles.

Phil Spencer has noted in interviews that the console market has not seen significant growth in recent years, with a static customer base predominantly engaging with a few major titles. Last year, former Xbox executive Peter Moore told IGN that Microsoft would likely be deliberating on the future of consoles. The latest report suggests that Microsoft believes in the continued relevance of consoles and is actively working to advance its hardware offerings.