GoKawiilFairgoers play at the Xbox booth at the Cologne Trade Fair Center during the opening day of Gamescom 2025 in Cologne, Germany, on Aug. 20, 2025.
Microsoft said Wednesday that it will send video game developers prototypes of its next-generation Xbox console in 2027, as the company tries to narrow the gap with Nintendo and Sony.
The hardware will feature a custom chip from Advanced Micro Devices , Jason Ronald, a vice president in Microsoft's Xbox division, said in a blog post.
"It delivers an order of magnitude leap in ray tracing performance and capability, integrates intelligence directly into the graphics and compute pipeline, and drives meaningful gains in efficiency, scale, and visual ambition," Ronald wrote. "The result is more realistic, immersive, and dynamic worlds for players."
Microsoft's announcement comes weeks after the company said longtime gaming head Phil Spencer was retiring, and would be replaced by artificial intelligence executive Asha Sharma. In a message to employees, Sharma said the company would make a renewed commitment to Xbox, starting with console gaming.
Just over 7% of Microsoft's revenue came from gaming in the December quarter, with Xbox hardware revenue falling 32%. The company took an unspecified impairment charge in its gaming business during the quarter.
Xbox consoles have undersold alternatives from Nintendo and Sony since the flagship Xbox Series X and more affordable Series S came out in 2020, according to estimates from video game website VGChartz. In the fall, Asus released hand-held Xbox-branded devices.
The Xbox Series S and X, originally released in 2020, also contained AMD processors.
"I'm excited to share we plan to ship alpha versions of the hardware to developers beginning in 2027," Ronald wrote.
Microsoft is reportedly pushing for its video game unit to reach a 30% profit margin. Last year, the business laid off some employees and scrapped titles that had been in development.
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