Microsoft has shed light on its future plans for the Xbox brand, including plans to potentially release a dedicated handheld device.

While the device is still a few years away from becoming a reality, it's bad news for the Nintendo Switch 2 and Steam Deck, which could both suddenly face some stiff competition.

The release of a dedicated Xbox handheld was teased by Microsoft executive Phil Spencer, who said the "expectation is that we would do something" regarding portable hardware.

Spencer explained that Microsoft is working on various prototypes, and will continue to develop any devices based on what it learns.

Speaking to Bloomberg, Spencer said: "Longer term, I love us building devices. And I think our team could do some real innovative work, but we want to be informed by learning and what’s happening now."

The company is also keen to make more studio acquisitions, although it could be a while before we see anything in the same league as the Activision buyout.

"We definitely want to be in the market, and when we can find teams and technology and capability that add to what we’re trying to do in gaming at Microsoft, absolutely we will keep our heads up," Spencer continued, before confirming that nothing is imminent. 

In the meantime, Microsoft is working on improvements to the Xbox app, something that should benefit players on mobile devices.

A dedicated Xbox handheld would actually be a pretty good idea for Microsoft, especially with the success of the Nintendo Switch and Steam Deck.

While Xbox Game Pass is available on plenty of mobile devices and other portable hardware, it's not quite the same as playing on a console that's been built with gaming in mind.

The PlayStation Portal is a pretty decent piece of kit for when family members are using the TV, but I'd much rather be able to download my games and play them without relying on WiFi and putting up with the inevitable lag.

With such a vast library of titles on Xbox Game Pass, customers could purchase the handheld and potentially never need to buy a game again.

If the specs were up to speed, then I genuinely think it could sell more units than the regular Xbox Series of consoles.