Microsoft has announced a strategic partnership with AMD to develop silicon for the next generation of Xbox consoles. The collaboration will also extend to Microsoft's cloud gaming service, Xbox Cloud Gaming, which runs on Microsoft Azure.

Xbox president Sarah Bond expressed excitement about the partnership, highlighting the focus on co-engineering silicon for a range of devices, including upcoming Xbox consoles. The goal is to enhance gaming experiences with cutting-edge graphics innovation and AI technology.

Microsoft's approach to the Xbox brand has evolved from a single hardware device to a platform that allows gaming across multiple devices. While the existing console models, Xbox Series X and Series S, will continue, Microsoft is also planning to launch handheld gaming devices in collaboration with Asus, featuring AMD CPUs.

The company's cloud gaming strategy is central to its vision, aiming to provide a seamless gaming experience across various devices without the need for expensive hardware. Xbox Cloud Gaming, which launched in late 2020, leverages custom-built server blades based on Xbox Series X hardware to stream games from Azure data centers.

While Microsoft leads in cloud gaming, competitors like Google Stadia and Amazon Luna offer similar services. PlayStation, Microsoft's main rival, has also entered the cloud gaming space through acquisitions and partnerships. Despite challenges in the gaming market, Microsoft's Xbox revenue has seen growth, driven by services like cloud gaming.