Microsoft Reportedly Considering Free Xbox Cloud Gaming With Ads And Time Limits, Denies Ditching Physical Consoles
Amid claims Microsoft is considering a free tier of Xbox cloud gaming — supported by adverts and with time limit restrictions — the tech giant has had to deny claims from a leaker that they are ditching physical Xbox games consoles.
Tom Warren of The Verge reported on the claim at a time PR was already low for Xbox — just days after the announcement of Microsoft raising the price of the Xbox Game Pass Ultimate tier by 50%. Though such plans had been hinted at in late 2023, “sources familiar with Microsoft’s plans” now claim Microsoft is internally testing streamed games via employees.
This free service would include “some” (Warren’s words) of the games they own, along with Xbox Retro Classics, and those under Free Play Days taking place on weekends. Upon booting up a game, players would be greeted to two minutes of adverts before the game launches.
Microsoft are also testing time limits: one hour sessions, with up to five hours free a month. Warren emphasizes such limits may be changed when the service officially launches.
True to the “This is an Xbox” ad campaign (emphasizing how multiple platforms can play Xbox games), the ad-supported free Xbox Cloud Gaming intends to head to PC, Xbox consoles, and handheld devices. A public beta test is said to be coming “soon,” and launching “in the coming months.”
As if Microsoft’s dedication to digital gaming and the cloud wasn’t obvious, leaker ‘SneakersSO’ threw one last surprise to the wolves. His credibility was given credence by those reporting on the claim, and Warren on the XboxEra podcast defending it.
Despite the source being criticized as frequently sharing negative news about Xbox to the same forum, Warren noted “he knows a lot of what goes on internally.” In discussion on the Xbox Game Pass Ultimate price rise on NeoGaf, SneakersSO discussed what he had learned over the last two months since his last post.
“Without going into too much detail, not long after the last round of layoffs (next one should be coming in Q1 26 btw – and its going to be just as massive as the last one), some rumblings out of Xbox starting coming out that were a little hard to believe,” SneakersSO opened.
“The ramifications of the CoD GP [Call of Duty Game Pass] gambit not working out were just starting to get properly measured, but the thing that really stuck out to me was that suddenly, really concrete plans for actual MS Xbox HW [hardware] went from being definitive, to up in the air, which was really startling given that this thing was meant to be out relatively soon,” SneakersSO claimed.
“It was one of those situations where, despite folks being told ‘hey, we wanna pull the trigger on this in 2026’, the steps you would need to take in the lead up to delivering a new console gen weren’t being met. Lots of things that were ‘sure things’ started getting pushed,” SneakersSO elaborated.
“The Costco retailer pulling Xbox, and apparently they are one of many that we’ll learn about soon, told me all I needed to know.” Sure enough, there have been multiple reports of Costco stores no longer stocking Xbox consoles — some dating back to September — due to a “business decision,” along with other stores.
“To sum it up: the future of Xbox is software publishing,” SneakersOS insisted, “with a significantly honed-in focus on profitable IPs (CoD, WoW, Minecraft, Candy Crush, Forza Horizon), Cloud gaming being the home of the ‘Xbox platform’, transititioning GamePass into basically becoming the point of entry subscription for xCloud access (which will continue to drive its price tag higher btw, they aren’t done there just yet either), and releasing their software on any device that has a marketplace and users willing to buy their titles.”
“Maybe some OEM [original equipment manufacturer] thing will take up the Xbox name, but given what is clearly a collapse in favorable mindshare and faith in said brand, i’m not even sure a 3rd party OEM is gonna want to have an Xbox console by the time MS is done with their reorienting of the division,” SneakersSO feared.
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On the other hand, Jez Corden of Windows Central defied the source and defended Microsoft, citing their own sources giving them insight into Xbox news before official announcements. “Multiple trusted sources” refuted the notion of Xbox ditching physical, and the claim of physical plans being “up in the air”— not the same as being scrapped anyhow — were hokum.
Corden does admit that “even if Microsoft did come out to squash the rumors themselves, it’s hard to have any faith. Microsoft has been incredibly fickle over the past few years, crushed under AI hype, demands from CFO Amy Hood, and a complete dereliction of fan feedback.”
Microsoft did attempt to squash the rumors, providing a statement to Windows Central. “We 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.”
Said “multi-year” agreement, presented by Xbox President Sarah Bond, promised AMD’s collaboration; and appears to discuss physical consoles in passing, and a lot of being able to play on any device. It also predates SneakerSO’s “two month” summary — the video published in June 2025, and Sneaker SO’s time-frame starting in August.
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Summarizing the above video, Bond promises Xbox is “investing in our next-generation hardware lineup, across console, handheld, PC, cloud, and accessories.” AMD would “co-engineer silicon across a portfolio of devices including our next-generation Xbox consoles, in your living room, and in your hands.”
Along with hyping up “player experiences enhanced with the power of AI,” Bond declared, “This is all about building you a gaming platform that’s always with you, so you can play the games you want across devices anywhere you want, delivering you an Xbox experience not locked to a single store or tied to one device.”
“The next generation of Xbox is coming to life, and this is just the beginning. We can’t wait to show you what’s next.”
YouTuber Moore’s Law Is Dead also noted his sources — albeit with info from “months ago” that the next generation of Xbox consoles was still happening (codenamed “Magnus”), and would cost Microsoft “a ton” if they cancelled the contract between them.
Further, an AMD engineer speaking to Moore reportedly stated “As far as I [AMD Engineer] know, XBOX Magnus is still full steam ahead. We were literally discussing next-steps in a progress update on Friday [10/03/2025]. However, I would caution that this ‘Magnus APU’ is whatever Microsoft wants to call it.”
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“It was originally called an ‘XBOX Project’, but who knows – maybe that means a PC-Console hybrid in 2027… Or even a literal gaming PC APU that is an ‘XBOX’ in name only.” Moore’s Law Is Dead proposes that the Xbox Series X|S consoles are winding down production, and proceeded to discuss the AMD Magnus APU leak in a subsequent video.
Yet Xbox’ physical future is still unpredictable. “Reputable” AMD and hardware leaker “KeplerL2” (per Insider Gaming co-founder and Editor-In-Chief Tom Henderson) Microsoft had scrapped its own handheld console (not to be confused with their partnership with ASUS for the ROG Xbox Ally and ROG Xbox Ally X).
Once again on NeoGAF, KeplerL2 discussed, “AFAIK the handheld was cancelled because AMD wanted a commitment of 10m+ units to justify making a dedicated SoC [System on a Chip], but with Steam Deck only selling ~5 million units and ASUS ROG/Lenovo Legion only selling 1-2 million MS didn’t want to take the risk.”
Corden once again denied the claim, stating on X, “this isn’t even slightly true btw.” Other users pointed out times Corden was wrong on Xbox, and we return to boundless speculation.
Back in January last year, we reported on sources claiming Microsoft had “shut down departments dedicated to bringing Xbox games to physical retail,” which could have been a sign of outsourcing, consolidating, or abandoning the physical market.
Do you think Xbox are planning to ditch physical and go all digital and cloud? Have plans shifted, and can they change yet again? And would a free tier of cloud gaming — with all those restrictions — tempt anyone into buying premium tiers?
NEXT: ‘Call Of Duty’ Reportedly Loses $300 Million In Sales As Microsoft Increases Xbox Game Pass Price
