Xbox says it's not exiting the hardware business, next-gen console still in development

Microsoft responds to the rumor that it has canceled its next-generation Xbox console, says it is 'actively investing in future first-party consoles.'

Xbox says it's not exiting the hardware business, next-gen console still in development
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TL;DR: Microsoft reaffirmed its commitment to developing next-generation Xbox hardware despite rumors of exiting the console market. The multi-year partnership with AMD focuses on AI-powered gaming chips for future Xbox devices, countering concerns fueled by Xbox's brand shifts, studio changes, and Game Pass price hikes.

A few months ago, in June 2025, Microsoft announced a new multi-year agreement with AMD for the development of AI-powered gaming chips. "I'm thrilled to share we've established a strategic, multi-year partnership with AMD to co-engineer silicon across a portfolio of devices, including our next-generation Xbox consoles," Xbox President Sarah Bond said at the time.

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The specific mention of 'next-generation Xbox consoles' can mean only one thing: Microsoft is actively developing a next-generation Xbox console or consoles to replace the existing Xbox Series X|S combo. Or is it? Fast-forward to today, a new rumor from a credible source suggests that Xbox is leaving the hardware business for good to become a third-party publisher.

Now, you'd think that this rumor would be viewed through a skeptical lens. However, based on the past couple of years of Xbox brand realignment and behavior that seemingly points to it becoming a software-first Microsoft division, this rumor has firmly taken root. To the point where Microsoft has had to release a statement confirming that it's still committed to designing, engineering, and building Xbox hardware.

The statement, which was supplied to Windows Central, reads, "We (Microsoft) are actively investing in our future first-party consoles and devices designed, engineered, and built by Xbox. For more details, the community can revisit our agreement announcement with AMD."

The reason why Microsoft has had to respond to a rumor (credible or not) is that the Xbox brand feels like it's in a state of transformation, and is in danger of no longer existing as a brand that can compete with Sony's PlayStation or Nintendo's Switch.

From first-party Xbox titles now making their way to PS5 on day one (or soon after), multiple layoffs, game cancellations, and studio closures, through to marketing campaigns that increasingly push dedicated Xbox console hardware to the background in lieu of 'everything is an Xbox.'

It's been rough, so last week's announcement that the Xbox Game Pass subscription service was getting a 50% price increase felt like a 'nail in the coffin' moment for Xbox fans. And when you throw news that Microsoft's decision to bring Call of Duty to Game Pass has seen the franchise lose out on hundreds of millions in revenue, word that Microsoft is canceling its next-gen Xbox console doesn't feel like too big a stretch.