Microsoft and AMD have entered into a formal, multi-year strategic partnership to co-design custom silicon for the new generation of Xbox, developing chips with the capability to power consoles, handhelds, PCs, cloud services, and accessories. The announcement was made by Xbox president Sarah Bond in a brief YouTube announcement this Tuesday.
Though the alliance may not be unexpected, AMD has provided Xbox chips uninterrupted since the Xbox 360—it’s the subtleties of Bond’s comments that indicate an existential shift in Microsoft’s console strategy. She highlighted that the new Xbox hardware (specifically mentioned in the plural) will run Windows and will not be isolated to one store. That resounds loudly with previous rumors that Microsoft is forging a more open, PC-like environment.
This shift is consistent with Microsoft’s 2025 announcement of the ROG Xbox Ally, a PC-based handheld, created in partnership with Asus, which provides access to PC-focused storefronts such as Steam. Bond described the purpose of the AMD partnership as a pursuit of “a gaming platform that travels with you,” device-agnostic and hardware-storefront-free.
While the Xbox Ally can play Windows games, it won’t play straight Xbox console games natively, only those games that have PC ports available. Bond was quick to add that full backward compatibility will indeed continue to be a part of future Xbox consoles so that users can tap into current Xbox libraries.
Bond also highlighted the ambition to include AI-enhanced graphics, deeper visual fidelity, and immersive gameplay through next-gen silicon co-developed with AMD. This reflects leaked development plans hinting at AMD’s Zen 5/6 CPU, RDNA 5 GPU, and potentially an on-chip Neural Processing Unit (NPU) in future Xbox systems, possibly released between 2027 and 2028.
Bond’s delineation of Xbox as belonging to a “next-generation hardware portfolio—console, handheld, PC, cloud, and accessories” reflects the larger vision of Xbox from Microsoft as an integrated, device-agnostic gaming brand. Her mention of “consoles in your living room and in your hands” suggests Microsoft may still be deciding on its own first-party handheld, contrary to previous reports of such a project’s cancellation.
One significant compromise of the AMD alliance is Microsoft’s blocking Nvidia’s highly acclaimed DLSS upscaling, a function that Sony and Nintendo competitors are investigating or facilitating. AMD and Sony have been working on rival upscaling technologies, but DLSS is still the performance and quality leader.
Another industry rumor-buster refutes speculation that next-generation Xbox consoles could use Arm-based Snapdragon processors. Official sources report that Microsoft is committed to x86 AMD silicon, primarily to maintain smooth backward compatibility with its massive current library.
