Codename "Pembrooke" was Microsoft's initial internal Xbox handheld effort. It was always a bit unclear if Pembrooke was designed to be a native Windows 11 PC gaming-style handheld, or more of a native Xbox console-style experience. But we potentially now have the answer.
It seems that it was indeed meant to be a device that could run full Xbox games, but Microsoft has decided to prioritize its teams on the partner opportunity around devices like Kennan — at least for now. I've been told that Microsoft still has big ambitions and is investing heavily to deliver a native Xbox handheld, but the shift is about prioritizing and allocating resources right now. There have been no layoffs or anything like that as a result of this reprioritization.

EXCLUSIVE: Xbox's first-party handheld has been sidelined (for now)
Xbox's handheld ambitions continue unabated, but the focus is shifting towards improving Windows 11 for third-party handhelds — for now. The Xbox Series X 'Melrose' successor is safe, with development continuing at full pace.

The next gen console seems to be fine