Microsoft may be leaning hard into its “everything is an Xbox” messaging, but that apparently doesn’t mean dedicated hardware is going away at least not on the handheld front.

According to a new report from Jez Corden, plans for a first-party Xbox handheld are still alive internally, even as the company prioritizes its next-generation home console.

Handheld Ambitions Aren’t Dead

In 2025, ASUS rolled out the ROG Xbox Ally lineup enhanced versions of the existing ROG Ally handheld PCs, built with tighter Xbox integration and easier access to PC storefronts like Steam and the Epic Games Store, alongside Xbox Game Pass.

While those devices represent Microsoft’s growing partnership-driven hardware strategy, Corden’s report suggests they’re not the endgame. Instead, they may be a stepping stone.

Despite the marketing pivot toward platform ubiquity where your console, PC, cloud stream, and handheld are all “Xbox” Microsoft reportedly still wants a true first-party handheld under its own banner.

That said, the company’s immediate hardware focus remains squarely on its next mainline console.

In the short term, major updates are coming to the ASUS ROG Xbox Ally X.

Corden’s report notes Microsoft is testing a new NPU-driven highlights feature that automatically converts gameplay moments into shareable clips. Powered by on-device AI processing, the feature is expected to roll out in March 2026.

The push toward AI-assisted content creation aligns with Microsoft’s broader push for accessibility and seamless sharing—two pillars of its evolving Xbox philosophy.

If the reports hold true, the next few years could see Microsoft delivering not just a new console but an entirely reimagined hardware ecosystem, potentially anchored by its own portable system.