Microsoft and Asus are partnering on two co-branded PC gaming handhelds, the Xbox ROG Ally and Xbox ROG Ally X, which will launch during Holiday 2025. As a leading PC and gaming PC manufacturer, Asus already shares a strong relationship with Microsoft across various parts of its business. The new handhelds will support all major PC gaming storefronts including Microsoft’s own PC games storefront, Valve’s Steam, Blizzard’s Battle.Net and Ubisoft’s Connect. 

The Xbox app and Xbox Game Pass are already available on the existing Asus ROG Ally, ROG Ally Z1 Extreme and ROG Ally X Windows-based handhelds, which currently retail for $599, $699 and $899 respectively and use different versions of AMD’s Ryzen Z1 processor. 

The new handhelds are based on the newer AMD Ryzen Z2 and are expected to be priced accordingly. Aside from an aesthetic overall, Xbox controller components and other Xbox cues, integration with Microsoft services includes an improved version of Windows 11 for gaming handhelds and a new Xbox app. These improvements will be making their way to other PC gaming handhelds in 2026. 

Why is Microsoft interested in the handheld gaming market?

The handheld gaming market has experienced a resurgence in recent years following the launch of Nintendo’s Switch and Valve’s decision to launch a PC gaming handheld, the Steam Deck. Major PC manufacturers have followed this lead and launched PC gaming handhelds of their own. There have been almost 30 different Windows-based handheld devices launched into the market from nine different manufacturers, including ASUS up until the mid-point of 2025. Additionally, Sony has launched PlayStation Portal, a streaming handheld as part of the PlayStation ecosystem. 

These portable devices support new mobility use cases for accessing existing libraries of PC games. Microsoft’s strategy to make its Xbox app and Game Pass available across all screens aligns with this emerging PC gaming handheld strategy.   

How big is this opportunity?

The PC gaming handheld market is an enthusiast segment of the overall PC gaming market. According to Ampere estimates, Windows-based PC gaming handhelds, including the ROG Ally handhelds had sold 1.2 million units through to consumers by the end of 2024. 

In comparison, Valve’s Steam Deck and Steam Deck OLED are estimated to have reached an installed base of 4.1 million in the same timeframe. Valve’s handhelds run SteamOS, which is a customized version of Linux, with a front-end based on the Steam storefront and community platform. 

Why has Microsoft decided to partner on a Windows-based device rather than build their own handheld Xbox console?

There are a few reasons why this first step into the handheld gaming space makes sense for Microsoft. Firstly, this is a much easier, less costly and quicker route to the market than building an Xbox handheld from scratch. It allows the company to take a more active role in the handheld market with a deeper integration of its content and services without huge amounts of R&D expense. It will allow the company to derive a better understanding of what role a handheld could play in the Xbox ecosystem of devices.

Secondly, this strategy supports Microsoft’s wider aims to compete more effectively in the PC gaming market. A lot of Microsoft’s recent work in Game Pass has been more directly focused on the PC gaming space, as it believes this is where there is a substantial opportunity to grow its audience reach compared to console. 

Lastly, Valve’s PC gaming storefront and PC gaming handheld dominance and its support of Linux-based SteamOS undermines Microsoft’s Window’s based PC gaming ambitions. Valve is actively looking for more support from third-party PC manufacturers to produce SteamOS-based handheld consoles. Lenovo is about to launch a SteamOS-based version of its PC gaming handheld, Legion Go S. Microsoft is responding to this competitive landscape.