The next generation of the Xbox video game console will use AMD silicon.

More pertinently for this publication, the Xbox will be available over Microsoft's growing cloud gaming service, requiring the new AMD chip to be on Microsoft Azure.

"I’m thrilled to share we’ve established a strategic multi-year partnership with AMD to co-engineer silicon across a portfolio of devices — including our next-generation Xbox consoles in your living room and in your hands," Xbox president Sarah Bond said.

"Together with AMD we’re advancing the state of art in gaming silicon to deliver the next generation of graphics innovation, to unlock a deeper level of visual quality and immersive gameplay and player experiences enhanced with the power of AI."

For several years, the company has moved to shift the Xbox brand from beyond a single piece of hardware every generation to an interface to play games across as many devices as possible.

The existing console approach, currently available as Xbox Series X and Series S, will continue. So far, the consoles have been developed internally.

But Microsoft also plans to release handheld gaming devices, this time stepping back from development, with the Xbox Ally systems set to be developed by Asus. Both upcoming devices use AMD CPUs.

Bond continued: "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."

Key to Microsoft's strategy is its cloud push, with the company hoping to avoid the challenge of convincing customers to buy expensive systems, and instead simply stream the games from its Azure data centers.

Xbox Cloud Gaming launched in limited form in late 2020, and has slowly expanded in coverage and functionality, but naturally requires fast and stable Internet connectivity.

The platform relies on custom-built server blades based on Xbox Series X hardware, with each server able to run four consoles. Future approaches could theoretically virtualize the console, but it is unclear if Microsoft plans to do that with its next Xbox.

The company has also experimented with offloading some compute to the cloud, and set up a cloud-native games publishing division, but neither appear to have progressed further.

Rival cloud giant Google previously tried to launch its own cloud gaming service, Stadia, but it lacked games and had technical issues. Google canned the project in 2023.

Amazon also has Luna, which uses Amazon Web Services. It is currently available in fewer countries than Xbox, and it's not public how many people use it regularly.

Nvidia offers GeForce Now, which claims some 25 million users. Rather than the 'Netflix-for-Games' approach favored by others, it lets users access a virtual computer, where they can install their existing games and play them remotely. The company uses a network of telecoms giants to help provide the service.

Microsoft's largest competitor in the games console space, PlayStation, was an early entrant to the cloud gaming space, acquiring OnLive in 2012 and Gaikai in 2012. Initially offered under the PlayStation Now brand, and now part of the PlayStation Plus Premium tier, its total user base is unknown (it had 2.2 million in 2020, when the company last reported it).

With the PlayStation 3 using a unique computing architecture (so unique it ended up being used in supercomputers), PlayStation was forced to operate PS3 servers as well as PS4/PS5 ones, increasing the cost and complexity of its service.

Without its own data center infrastructure, Sony in 2019 said that PlayStation would explore a partnership on cloud gaming technology, served through Microsoft Azure.

Nintendo, meanwhile, partnered with smaller provider Ubitus for a limited cloud gaming service.

While Microsoft appears to be leading the cloud gaming race, its broader gaming ambitions have struggled. After the $69 billion acquisition of publisher Activision Blizzard, a string of high-profile flops forced Xbox head Phil Spencer to apologize.

The platform still consistently undersells PlayStation, and the company's push to make its games available on any platform has rankled some users who expect exclusives for their expensive hardware.

In the last few years, the company has laid off thousands from its Xbox division and seen hardware sales decline. However, Xbox revenue grew in the last quarter, thanks to services revenue, including from cloud gaming.