Microsoft is reportedly gearing up to make a significant impact in the video game hardware market with ambitious plans for new devices. According to a recent report from Windows Central, Microsoft is set to launch a full next-generation Xbox in 2027, alongside an Xbox-branded gaming handheld expected to hit the market later in 2025. While Microsoft has yet to officially confirm these plans, its gaming executives have hinted at these developments in various interviews.

The upcoming Xbox handheld, codenamed Keenan, is slated for release in late 2025. This device is being developed in partnership with PC gaming original equipment manufacturers (OEMs) like Asus, Lenovo, and Razer. Jason Ronald, Microsoft's VP of 'Next Generation,' emphasized the company's intention to integrate Xbox and Windows experiences for these PC gaming handhelds. However, it's important to note that Keenan is not a first-party Xbox handheld; Phil Spencer, Microsoft's gaming boss, has indicated that a true first-party Xbox handheld is still years away.

The next-gen Xbox, fully approved by Microsoft CEO Satya Nadella, is said to be a premium successor to the Xbox Series X. This console, along with a first-party Xbox gaming handheld and new controllers, is expected to complete Microsoft's console lineup by 2027. Interestingly, there are no plans for a direct next-gen successor to the less powerful Xbox Series S, suggesting that the handheld might fill the role of a more affordable gaming option.

Windows Central also suggests that the next-gen Xbox will be more akin to a PC than any previous Xbox, supporting third-party storefronts such as Steam, the Epic Games Store, and GOG. Backwards compatibility is expected to continue, ensuring a seamless transition for gamers. Xbox president Sarah Bond has expressed enthusiasm about the project, stating 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 remains a topic of intense speculation, especially as the Xbox Series X and S struggle in the 'console war' and Sony hints that the PlayStation 5 is entering the second half of its life cycle. Nintendo is gearing up to release the Switch 2 later this year, yet there is a growing concern about the sustainability of the traditional video game console market. Phil Spencer has noted the stagnant growth of the console business, which largely caters to a static customer base focused on a few major games. Former Xbox executive Peter Moore has even questioned the future viability of consoles. However, based on this latest report, it appears Microsoft is betting on the continued relevance of console gaming.