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Short answer: A July 2018 report described two possible next-generation Xbox devices: a conventional console and a cheaper, cloud-focused box informally called “Scarlett Cloud.” Microsoft never released that streaming box as a consumer product. The broader idea survived through Project xCloud, now Xbox Cloud Gaming, which runs on supported consoles, PCs, phones, browsers, TVs and handhelds rather than requiring dedicated Scarlett hardware.
What the 2018 report actually claimed
On July 23, 2018, Thurrott reported that Microsoft was considering more than one next-generation Xbox device. One would be a conventional locally powered console. The other was described as a lower-powered streaming device, referred to in the report as “Scarlett Cloud.” The report was based on unnamed sources, not a Microsoft product announcement or technical specification.
According to the report, Microsoft’s Azure cloud infrastructure would perform most of a game’s demanding computation. The small local box would still handle selected latency-sensitive work, reportedly including controller input, image processing and collision detection. The resulting output would be combined with the cloud-rendered portion of the game.
The article also said Microsoft wanted games to run across both Scarlett devices and expected the streaming hardware to cost less than a full next-generation console. It did not establish a retail price. A subscription or other recurring payment for access to cloud-hosted games was presented as a likely business model, not a confirmed plan.
#1 Best Overall
- MODERNIZED DESIGN — Experience the modernized design of the XBOX Wireless Controller with sculpted surfaces and updated geometry that enhances comfort and control during long gaming sessions.
- PRECISION PERFORMANCE — Stay on target with a hybrid D-pad and textured grips on triggers, bumpers, and back case for improved accuracy and handling.
- SHARE BUTTON: Seamlessly capture and share content such as screenshots, recordings, and more with the new Share button.
- VERSATILE CONNECTIVITY — Connect via USB-C for plug-and-play on console and PC, or quickly pair and switch between supported devices with XBOX Wireless and Bluetooth support.
- BUILT-IN AUDIO SUPPORT — Plug in compatible headsets using the 3.5mm audio jack for direct voice chat and immersive in-game sound.
Read the original Thurrott report.
Reported, not confirmed
| Claim | Evidence status |
|---|---|
| Microsoft was developing Project xCloud | Confirmed by Microsoft |
| Microsoft was developing Project Scarlett hardware | Confirmed by Microsoft |
| A dedicated “Scarlett Cloud” box was being built | Unconfirmed reporting; no such consumer product launched |
| Local collision detection, image processing and input handling | Unconfirmed technical details from the report |
| Both devices would run the same games | Reported development goal, not a final compatibility promise |
| A 2020 release was expected | Reported expectation that did not materialize as described |
| The device would be substantially cheaper | Strategic positioning, not a confirmed price |
Why put some processing in the box?
Cloud gaming normally sends controller input to a remote server, runs the game there, encodes the resulting video and sends that video back to the player. Every stage adds delay. The proposed Scarlett design tried to keep some work close to the player while leaving the expensive simulation and rendering workload in Azure.
That could theoretically reduce the delay associated with input and selected game systems. It would not make the network irrelevant. Responsiveness would still depend on the distance to a cloud region, routing and congestion, Wi-Fi interference, video encoding and decoding, display latency, frame pacing and the game’s own networking model. The 2018 report offered no independently measured latency result, so its local-processing concept should be treated as a proposed mitigation, not proof of local-console responsiveness.
What Microsoft officially said about xCloud
Microsoft’s own messaging soon separated its cloud service from the rumor’s hardware premise. In March 2019, Microsoft described Project xCloud as a way to provide more choices for playing Xbox games and explicitly said it was intended to complement consoles, not replace them. Microsoft’s March 2019 announcement is the clearest contemporary statement of that position.
Rank #2
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A May 2019 update focused on compatibility and playing across devices. Microsoft said more than 1,900 Xbox One games were in development or available for the platform at that time; that was an early technology update, not a permanent catalog guarantee. Read the update.
The September 2019 public preview required Android 6.0 or later, Bluetooth 4.0, a Microsoft account, a Bluetooth-enabled Xbox One Wireless Controller and an invitation. Those were preview requirements for 2019, not current universal requirements. See Microsoft’s preview announcement.
Project Scarlett became Xbox Series X
At E3 2019, Microsoft publicly presented Project Scarlett as a next-generation console planned for holiday 2020 alongside Halo Infinite. The announced hardware used a custom AMD processor with Zen 2 CPU architecture, Radeon RDNA graphics, GDDR6 memory, hardware-accelerated ray tracing, variable refresh rate, 8K capability, ultra-low-latency input and a next-generation SSD. Microsoft’s E3 2019 recap documents that direction.
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That project became Xbox Series X. Microsoft also released Xbox Series S, a smaller, less powerful conventional console. Series S renders games locally, uses local storage and can support ordinary offline play where a game permits it; it is not the cloud-only terminal described in the 2018 report.
Microsoft later described Series X as being “designed with the cloud in mind.” In context, that meant the relationship among console hardware, Game Pass and xCloud—not the arrival of a Scarlett-branded streaming box. Microsoft’s 2020 overview presented Xbox Series X and Project xCloud as complementary parts of the strategy: read the overview.
What happened to the second console?
No consumer product matching the reported Scarlett Cloud box was released. The available evidence supports saying that the specific device was not shipped as described; it does not establish every internal prototype, cancellation decision or reason for the change.
Rank #4
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- CORE ESSENTIALS: Includes just the components you need to unleash your best game. Additional components sold separately for even more customization with the Complete Component Pack.
- LIMITLESS CUSTOMIZATION: Exclusive button mapping options in the Xbox Accessories app—even pick which color the Xbox button lights up with.*
- CUSTOM PROFILES: Save up to 3 custom profiles on the controller and switch between them on the fly.*
- EXTENDED GAMEPLAY: Stay in the game with up to 40 hours of battery life and refined components that are built to last.*
Microsoft instead expanded cloud gaming as a service that could use hardware people already owned. Its 2020 strategy emphasized Xbox Series X, Game Pass and the ability to play across devices with Project xCloud. See that announcement. Earlier Xbox All Access materials offered an upgrade path to “Project Scarlett” in the United States and United Kingdom, subject to program conditions, reinforcing that Scarlett referred publicly to console hardware: Xbox All Access details.
Scarlett Cloud, Series S and Xbox Cloud Gaming are different things
| Option | Where the game runs | What it requires |
|---|---|---|
| Reported Scarlett Cloud concept | Mostly Microsoft’s cloud, with proposed local processing | A hypothetical dedicated streaming box and cloud access |
| Xbox Series S | On the console itself | Console, storage and game license; internet is not required for ordinary local play |
| Xbox Cloud Gaming | Microsoft’s cloud infrastructure | Supported device, region, account or plan, compatible input and a stable connection |
| Xbox Remote Play | The player’s own Xbox console | An Xbox running the game and a remote-play-capable device |
Cloud Gaming and Remote Play are therefore not interchangeable. Cloud Gaming uses Microsoft’s servers and a catalog governed by service and licensing rules. Remote Play streams games installed or owned on the user’s own console.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What Xbox Cloud Gaming is now
As of August 18, 2026, Microsoft’s current materials describe Xbox Cloud Gaming on supported Xbox consoles, Windows PCs and the Xbox PC app, mobile devices, supported browsers, select Fire TV devices, LG TVs, Samsung TVs and handhelds. Availability varies by country, device, title, account and subscription tier. Not every Xbox game is streamable, and a supported brand does not mean every model is compatible.
Best Value
- MODERNIZED DESIGN — Experience the modernized design of the XBOX Wireless Controller with sculpted surfaces and updated geometry that enhances comfort and control during long gaming sessions.
- PRECISION PERFORMANCE — Stay on target with a hybrid D-pad and textured grips on triggers, bumpers, and back case for improved accuracy and handling.
- SHARE BUTTON: Seamlessly capture and share content such as screenshots, recordings, and more with the new Share button.
- VERSATILE CONNECTIVITY — Connect via USB-C for plug-and-play on console and PC, or quickly pair and switch between supported devices with XBOX Wireless and Bluetooth support.
- BUILT-IN AUDIO SUPPORT — Plug in compatible headsets using the 3.5mm audio jack for direct voice chat and immersive in-game sound.
Microsoft’s December 2025 guide connects cloud gaming with Game Pass tiers, whose prices, catalogs and benefits can change. Check the current terms before subscribing: Xbox’s getting-started guide.
On February 25, 2026, Xbox announced a rollout of up to 1440p resolution and higher-bitrate streaming for Game Pass Ultimate members on Xbox Series X|S, Xbox One X and Xbox One S consoles, subject to supported titles and regions. That is evidence of continued service development, not proof that Microsoft implemented the 2018 local-processing architecture. Read the February 2026 update.
Would a dedicated streaming box have made sense?
Potential benefits
- Lower upfront hardware cost than a high-performance console.
- Access to high-end games without equivalent local graphics hardware.
- Small, simple hardware whose capability could improve as cloud servers improved.
- A way to reach people who did not want to buy a full console.
Persistent drawbacks
- Dependence on broadband quality, data allowances and regional service availability.
- Video-compression artifacts and delay from transmission, encoding and decoding.
- Recurring subscription or access costs rather than straightforward ownership.
- Games can leave a service, while offline access and preservation are limited.
- Microsoft would need sufficient server capacity and regional coverage.
A low-cost local console avoids many of those uncertainties, which helps explain why Series S was a clearer consumer product even though it does not offer the same theoretical price or size advantages as a streaming terminal.
The bottom line on the 2018 story
The report was directionally prescient about Microsoft’s cloud-gaming ambitions but inaccurate as a description of the hardware Microsoft ultimately shipped. “Scarlett Cloud” was an unconfirmed cloud-assisted Xbox concept, not an announced product with a confirmed price, specification or release. Project Scarlett became Xbox Series X, Series S remained a local console, and the cloud vision emerged as Xbox Cloud Gaming across existing devices.
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