A free tier of Xbox Cloud Gaming is in the works, Microsoft has confirmed. Currently in testing, the ad-supported Xbox service would be the company’s first game streaming offering fully independent of Game Pass.
The first beta version of Microsoft’s streaming platform debuted under the name xCloud in November 2019. It was rebranded as Xbox Cloud Gaming ahead of its September 2020 launch. After initially being offered as an XGP Ultimate membership exclusive, Xbox Cloud Gaming expanded to all Game Pass tiers except the PC plan in August 2025.
Microsoft Confirms Ad-Supported Game Streaming Test
Another expansion may now be on the horizon, with Microsoft presently working on an ad-supported version of the service. A company official revealed as much in a statement to The New York Times, saying that the free platform is being tested internally. The disclosure corroborates a recent report from The Verge that claimed an ad-supported Xbox Cloud Gaming tier was made available to some Microsoft employees as of early October 2025.
Xbox Cloud Gaming Keyboard Mouse Setup is shown.
Microsoft did not provide further details on its testing efforts, leaving it unclear how long the internal trial might continue. There is also no assurance that the test will progress to a public phase, as this is not the first time that Microsoft has explored the idea of a free gaming service. In late 2023, Xbox Chief Financial Officer Tim Stuart suggested the company was considering an ad-supported Game Pass tier, but the initiative did not lead to any consumer-facing offerings.
Is a Free Game Streaming Service Commercially Viable?
According to documents that were part of the massive Xbox leak stemming from Microsoft’s legal tango with the FTC over the Activision Blizzard acquisition, running Xbox Cloud Gaming costs approximately $0.03 per hour for offering 60 frames per second at 1080p resolution. This estimate is based on custom Series X consoles configured to run Series S profiles, which form the backbone of Microsoft’s xCloud infrastructure. The service has since expanded to support 1440p streaming, which is even costlier due to the extra bandwidth requirements.
Ad-Supported Xbox Cloud Gaming Tier Viability Scenarios
Scenario
CPM
Ads/hr
Revenue/hr
Margin*
Conservative
$2
3
$0.006
-80%
Balanced
$8
3
$0.024
-20%
Optimistic
$12
3
$0.036
20%
Aggressive
$20
4
$0.08
167%
*$0.03 cost per hour for 1080/60fps cloud gaming assumed.
A November 2023 Statista study found that the cost per mille (1,000 impressions) for social media advertising ranges from $1.20 to $7.17, depending on the platform and advertising niche. Given these figures, a fully ad-supported version of Xbox Cloud Gaming would likely not be directly profitable unless Microsoft could command a significant CPM premium from advertisers, potentially due to offering access to a highly engaged audience. If such a freemium plan does launch, it is more likely to serve as a strategic expansion effort rather than an immediate profitability initiative. As it would operate independently of Game Pass, the service would rely on the bring-your-own-game functionality that Xbox Cloud Gaming has supported since late 2024.
Source: Statista
