Rumors are swirling that Microsoft (MS) will exit the Xbox console business and focus solely on software development. Multiple red flags—reports that development of an upcoming new Xbox device has been halted and that big-box retailers are stopping sales—are surfacing at the same time, lending credibility to the speculation.

The most eye-catching development is word that plans to launch a new Xbox console have become uncertain. MS had publicly stated it would release new hardware in 2026, but the essential preparatory steps required for a console launch are reportedly not proceeding as they should.

In fact, warehouse retailer Costco has halted sales of Xbox products. Alongside Costco, there are rumors that multiple other retailers are preparing to pull Xbox products from their shelves. These reports are fueling claims that MS is stepping away from the Xbox hardware business.

Industry sources predict MS will concentrate on developing highly profitable, mass-appeal titles like Call of Duty and Minecraft. They also suggest the company may reposition the Xbox Game Pass subscription as an entry-level on-ramp primarily for cloud play via Xbox Cloud Gaming (formerly xCloud), and that popular Xbox titles could increasingly release on other consoles and platforms.

Observers believe this strategic pivot stems from an internal assessment that MS’s “big bet” of putting Call of Duty on Game Pass didn’t perform as strongly as expected. Meanwhile, there are rumors that MS is planning another large-scale round of layoffs in Q1 2026, similar in scope to its previous cuts.

This article was translated from the original that appeared on INVEN.