For a while, it looked like Microsoft was preparing to enter the handheld console market with a device of its own—one that would directly rival the Steam Deck, the Nintendo Switch, and now the Nintendo Switch 2.
According to reports, development got underway early on a portable system under the Xbox brand. But recently, that goal was quietly shelved. The Verge stated that Microsoft has abandoned its plans for an in-house Xbox handheld.
Instead, the company is now pouring its efforts into improving Windows gaming performance and licensing its Xbox ecosystem out to third-party manufacturers.
Is The ROG Ally An Xbox Console?
Yes, but instead of releasing its own handheld, Microsoft teamed up with ASUS to create the ROG Xbox Ally and the premium Ally X.
Though they resemble PC gaming handhelds, these devices are positioned under the Xbox brand umbrella.
They have Xbox-style controls, a Windows 11 build made for handhelds, and built-in access to Game Pass and Xbox services.
Microsoft now sees “Xbox” as a platform that works on multiple devices, not just one piece of hardware.
Why Did Xbox Pull the Plug on Its Own Handheld?
The move fits into Microsoft’s broader plan to prioritize software, services, and OS integration over hardware console manufacturing.
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+ 3The company finds it easier and safer to back a Windows-based system than to create and promote a proprietary handheld device from scratch.
Microsoft knows it can still profit from licensing fees, Xbox Game Pass subscriptions, and software sales across multiple platforms without taking on the cost of building hardware itself.
Many longtime Xbox fans, however, are understandably frustrated. Not all Xbox games are available on PC, and only a portion of them are part of the Play Anywhere program.
This keeps much of the Xbox catalog, particularly older and console-exclusive titles, unavailable to users aiming to play on handheld PCs like the Ally.
Some players had hoped Microsoft would deliver a true portable Xbox experience that could run their existing digital libraries natively. But as of now, it looks like those users are left either waiting for better compatibility tools or relying on cloud streaming.
Is Microsoft Playing It Smart?
Looking at it business-wise, the choice is smart and logical.
click to enlarge + 3The handheld gaming market is already crowded with devices like the Steam Deck, Lenovo Legion Go, and even upcoming Switch successors. Instead of competing in hardware, Microsoft lets ASUS carry that burden and prioritizes deeper Xbox functionality in Windows.
That means better performance, controller-based UI designs, and perhaps emulation support eventually, though it hasn’t been officially confirmed. Microsoft is also inching closer to a future where the line between console and PC disappears.
Xbox execs have hinted at a next-gen strategy that prioritizes platform unification, where any screen—be it a TV, laptop, or handheld—can function as an “Xbox” if it supports the right software and services.
Under those circumstances, making a first-party handheld would overlap with the ongoing development of Windows-based devices.
Is the Dream of an Xbox Handheld Over?
No, the idea of an Xbox-branded handheld isn’t completely dead—it’s just being reimagined.
click to enlarge + 3Microsoft is skipping building its own device and instead lets partners handle the hardware while it designs the software and services behind Xbox.
Whether the gamble works out or not is still unknown, but Microsoft isn’t launching the Xbox handheld people hoped for, and that is exactly how they planned it.
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