Microsoft has paused the development of its Xbox handheld gaming console, according to a report. Previously expected to arrive as part of the company’s next generation of consoles, the native Xbox handheld has been put on the back-burner. The Redmond company is reportedly working on optimising Windows 11 for handheld consoles, so that it is on par with Valve’s SteamOS, which offers better performance and battery efficiency. Other upcoming consoles, like the Xbox-branded Asus device (codenamed Project Kennan) are said to be unaffected by Microsoft’s decision.

Microsoft Shifts Focus to Windows 11 Amid Threat From SteamOS

Windows Central reports that Microsoft’s internal Xbox handheld console has been shelved, which indicates that it might not arrive in 2027, alongside Microsoft’s next-gen Xbox consoles. The first party handheld is not the same as other upcoming portable consoles like Asus’ Project Kennan, which is still expected to arrive later this year.

The company plans to work on optimising Windows 11 to run on handheld consoles, which means that upcoming third party handhelds could arrive with a more optimised version of Microsoft’s desktop operating system. In our reviews of previously released handhelds, we’ve found that some of the biggest issues with Windows running on these devices include poor battery life, navigation issues, and software updates.

Microsoft’s decision to focus its efforts on Windows 11 for handhelds might have been spurred by the SteamOS’ expansion beyond the Steam Deck. Earlier this year, Lenovo unveiled the Legion Go S, which offers better performance than the Steam Deck, and also runs on Valve’s operating system. SteamOS is also expected to arrive on similar handheld devices in the future.

SteamOS-powered devices won’t be Microsoft’s only concern, with the Nintendo Switch 2 right around the corner. The Japanese firm’s handheld is slated to arrive in select markets in June, and will compete with existing portable consoles.

The Redmond company’s focus on optimising Windows 11 for handhelds could improve the overall experience of using these devices. Asus is expected to launch its Project Kennan console later in 2025, as per recent reports. The device was recently spotted in a listing on the US FCC website, giving us a good look at its design.

The report indicates that the first-party handheld from Microsoft might have been capable of running Xbox games, and the company still plans to launch a native handheld. It’s currently unclear whether this device will make its debut in 2027 or 2028, which is when the company’s next-gen consoles are expected to arrive.