No big deal. They seem to be hinting they talked, but saying sort of vaguely "but that doesn't mean there was a deal, or even a proposal."
So no real contract proposed, no deal signed that could be cancelled, etc.
So the reports claiming a game was "cancelled" were likely exaggerated, but they did almost certainly talk to Kojima based on that vague statement, who specifically said in 2019 that he was interested in making a cloud based game.
Kojima could make a cloud based game on his own but it would be difficult; he could do it with Sony too. I'm not saying it's definitely MS or anything, but they have a history of hyping up cloud based games (not just streaming, but one that leverages lots of servers in the cloud), and are hyping xCloud more than Sony is currently hyping PSNow. Amazon much like Google have had issues launching their service, wasting money on games, etc. MS is just the most likely place Kojima could end up getting a cloud based game made.
Or he could not be making a cloud based game at all right now, or lost interest.