Microsoft is advancing its gaming hardware lineup with plans to release its first Xbox handheld console, codenamed “Keenan,” in 2025.
Developed in collaboration with a leading PC original equipment manufacturer (OEM), such as ASUS, Lenovo, MSI, or Razer, the device is reportedly designed to merge the flexibility of Windows with the familiar experience of Xbox gaming.
This strategic expansion positions Microsoft to compete in the portable gaming space, directly challenging competitors like the upcoming Nintendo Switch 2.
Windows Integration and Cross-Platform Access
The “Keenan” handheld is expected to run a full version of Windows, offering access to the Microsoft Store, Xbox Game Pass, and third-party gaming platforms like Steam, reports Windows Central.
This approach reflects Microsoft’s commitment to enhancing its Microsoft Gaming ecosystem, enabling players to access their game libraries across devices without restrictions.
The device will reportedly retain distinctive Xbox branding, including the guide button, ensuring a cohesive design that aligns with existing Xbox consoles.
The integration could reshape portable gaming by offering an expansive and flexible platform. With support for Game Pass and other services, the handheld is positioned to offer a broad gaming experience, appealing to both dedicated Xbox users and PC gamers seeking portability.
The company is reportedly also working on the next iteration of Xbox consoles, with a release targeted for 2027.
These consoles are expected to align more closely with Windows architecture, streamlining the development process for game creators while maintaining backward compatibility with legacy Xbox titles.
AI Integration Through Copilot
Alongside hardware development, Microsoft is also pushing AI advancements in gaming. The company plans to integrate 3D gaming features into its suite of AI Copilots.
A job listing from Microsoft highlights plans to “integrate advanced 3D rendering and AI-driven gaming features,” leveraging engines like Unity and Babylon.js to streamline game development and enhance creative flexibility.
The AI-driven features aim to simplify complex development processes, offering creators tools to craft interactive gaming experiences more efficiently. While specific applications for a gaming Copilot remain under development, its capabilities could significantly enhance the design of games tailored for portable platforms like “Keenan.”
Muse AI and the Shift to Dynamic Gameplay
In February 2025, Microsoft introduced Muse AI, an AI tool designed to assist developers in crafting “real-time, player-responsive gameplay sequences.” Muse AI operates through the WHAM model (World and Human Action Model), “trained on over 1 billion image-action pairs derived from games like Bleeding Edge.”
The AI model enables dynamic adaptation to player behavior and environmental changes, allowing for more personalized gaming experiences.
Muse AI’s strength lies in its ability to simplify rapid prototyping. Developers can test and refine gameplay mechanics without manually scripting every scenario. This approach could be particularly valuable for handheld games, where dynamic and flexible gameplay is essential. By reducing the workload for developers, Muse AI supports the creation of richer, more interactive gaming worlds.
Microsoft’s AI innovations also extend into game storytelling. In January the company filed a patent for a system that “enables real-time, player-driven changes to video game storylines.” The suggested system would allow narratives to evolve based on player choices, enhancing immersion and replayability.
Such AI-assisted storytelling aligns with Microsoft’s wider investments in generative AI, aiming to empower developers to craft richer, personalized narratives.
For handheld gaming, where players seek engaging experiences during shorter play sessions, adaptive storytelling could significantly elevate the gaming experience.
The Future of Xbox and Portable Gaming
With the “Keenan” handheld expected in 2025 and new Xbox consoles projected for 2027, Microsoft is preparing for a more interconnected gaming future. By fusing AI-driven software with versatile hardware, the company is setting a trajectory for gaming experiences that are adaptive, dynamic, and deeply personalized.
AI technologies like Muse AI and a gaming Copilot, combined with the architectural flexibility of Windows-powered devices, will likely redefine how players engage with Xbox platforms.
Whether through AI-enhanced gameplay, adaptive storytelling, or simplified development processes, Microsoft’s strategy points to a future where the boundaries between console, handheld, and PC gaming continue to blur.
