Xbox is currently working on a series of prototypes for a new gaming handheld device, based on the latest report.

Speaking during the latest episode of The Xbox Two podcast, co-host Jez Corden mentioned that Xbox is currently working on gaming handheld prototypes. He further clarified that although the company had previously experimented with handheld prototypes, the one he referred to are more recent.

The podcast hosts explained that the existence of prototypes doesn’t necessarily mean that they will go to market. However, Corden believes that Microsoft would be “insane” to not do this. He also pointed out that Valve’s Steam Deck is benefiting from being able to run both Xbox and PlayStation exclusives, and Microsoft currently doesn’t offer a similar experience for its own ecosystem. He believes that both Sony and Microsoft are likely to be pursuing the handheld market.

Corden clarified that the Xbox handheld prototypes that Microsoft is currently working on are not cloud-based, and that they are capable of running software natively. If eventually released, the device will be digital-only, and there are unlikely to be any physical media options.

Previously, well-known insider Tom Henderson had hinted at the existence of an Xbox gaming handheld device. His tweet came in response to The Verge’s Tom Warren, who wondered if Microsoft ends up working on an Xbox handheld.

Warren had stated that his ideal Xbox handheld would be one that has the Xbox OS and UI, grants access to the existing lineup of Xbox games, and even PC games with Windows at the back-end. He pointed out that Microsoft has the technology to build an Xbox handheld device similar to the Steam Deck. Henderson responded to Warren with a smile, hinting that something along those lines may already be in development at Microsoft. This has now been corroborated by Corden.