Microsoft is reportedly gearing up for a significant expansion in its video game hardware offerings, with plans to launch a full next-generation Xbox in 2027 and an Xbox-branded gaming handheld expected later in 2025. According to a report by Windows Central, a partner PC gaming handheld codenamed Keenan is currently in development and slated for release in late 2025. Additionally, a successor to the Xbox Series X and S is said to be "fully" in production and scheduled for a 2027 debut.

While Microsoft has not officially confirmed these developments, its gaming executives have hinted at the company's ambitions in various interviews. In January, Jason Ronald, Microsoft's VP of 'Next Generation,' discussed the company's strategy to integrate Xbox and Windows experiences for PC gaming handhelds produced by original equipment manufacturers (OEMs) such as Asus, Lenovo, and Razer. It's important to note that Keenan is not a first-party Xbox handheld; Phil Spencer, Microsoft's gaming boss, has indicated that such a device is still years away.

The next-gen Xbox, reportedly greenlit by Microsoft CEO Satya Nadella, is expected to be a premium successor to the Xbox Series X. Alongside this console, Microsoft plans to introduce a first-party Xbox gaming handheld and new controllers by 2027. This suggests that Microsoft may not plan to release a direct next-gen successor to the less powerful Xbox Series S, possibly positioning the handheld to fill the role of a more affordable gaming option.

Windows Central also suggests that the next-gen Xbox will resemble a PC more than any previous Xbox model, with support for third-party storefronts like Steam, the Epic Games Store, and GOG. Backwards compatibility is expected to be a continued feature. Last year, Xbox president Sarah Bond emphasized Microsoft's commitment to delivering the "biggest technological leap ever" in the next generation of hardware.

The future of consoles remains a topic of speculation, especially given the current market dynamics. The Xbox Series X and S have struggled in the 'console war,' and Sony has indicated that the PlayStation 5 is nearing the second half of its lifecycle. Meanwhile, Nintendo is preparing to launch the Switch 2 later this year. Amidst these developments, there is a growing concern about the sustainability of the traditional video game console business.

Phil Spencer has noted that the console market has not grown significantly in recent years, with a static customer base increasingly focused on a few major titles. Former Xbox executive Peter Moore also questioned the future of consoles in an interview with IGN last year. However, based on the latest reports, it appears that Microsoft remains committed to the console market and is planning significant advancements in its hardware offerings.