Microsoft’s Xbox handheld gaming console, which was rumoured to launch within the next couple of years, has reportedly been cancelled. Days after Asus unveiled the ROG Xbox Ally, a report suggests that the company might have abandoned its plans to launch its own handheld gaming device, which was expected to compete with the Nintendo Switch 2. Microsoft is expected to focus on its new Xbox software platform that is expected to enable third party OEMs to design their own Xbox branded handheld gaming consoles.

Microsoft to Collaborate With Third-Party Handheld Makers

Citing insiders aware of Microsoft’s plans, The Verge reports that the company has “essentially cancelled” its plans to develop its own handheld gaming device. Instead of working on its own compact gaming console, the Redmond company will continue to develop its Xbox software that debuted on the recently launched Asus ROG Xbox Ally and ROG Xbox Ally X.

In the meanwhile, Microsoft will continue to collaborate with third party OEMs who want to launch their own handheld gaming PCs with Windows, according to Microsoft Gaming CEO Phil Spencer. “This is the tightest collaboration I’ve seen between the gaming organization and the Windows team in my three decades at the company,” he said in a recent Xbox podcast.

These new handheld consoles from Asus run on Windows, but users won’t see the actual Windows UI when the devices go on sale later this year. Instead, the Xbox-themed user interface will let them launch games or apps via a launcher that offers a console-like experience, just like SteamOS. This could solve some of the multiple problems that users might face with while dealing with Windows on a device with a 7-inch or 8-inch screen.

The latest development comes a couple of weeks after Windows Central reported that Microsoft had paused the development of an Xbox handheld gaming console, which was expected to arrive alongside its next generation of Xbox consoles. The company was said to be focusing its efforts on optimising the gaming performance of Windows 11, so that it runs better on handheld consoles. 

Instead of terming new PC games as Windows compatible, the company has started referring to these as “Xbox PC” titles, as per the report. The Xbox PC app will also be able to show Steam games, in addition to Xbox PC games that are specifically designed to run on handheld consoles. However, it appears that Microsoft has quite a bit of work to do before Xbox titles can be played on an Xbox PC using an emulator.