My Baseless Prediction, i.e. if I ran Xbox, what I would do given their situation:

Microsoft will sunset the Xbox as a console but focus on creating a dual boot mode for Windows similar to the Steam Deck and Big Picture Mode. Probably called “Xbox Mode” or something similarly unoriginal but evocative. This streamlined mode will greatly reduce system overhead and be controller-centric, and it will have an emulation layer to support all Xbox ecosystem games along with backward compatibility. On certain form factors it will be the default boot mode, and supporting this they will release two new Windows PC form factors: a living room box and a handheld. Other PC manufacturers will be able to jump on the wagon as well. I doubt they will in any way define reference performance profiles akin to a console “generation” but they may have some kind of guidance regarding how graphics should scale seamlessly between TV/monitor and handheld form factors to allow for a Switch-like docking experience.