Anonymous sources suggest a slim 2016 console could precede a VR-ready upgrade next year.
A pair of reports from anonymous Microsoft sources suggest the company is preparing to launch at least one downsized version of the Xbox One later this year and a more powerful, potentially VR-capable version of the console next year.

Kotaku cites "three people familiar" with the matter describing the new, more powerful Xbox One model. Code-named Scorpio, this version is set for 2017 release according to the report. Kotaku writes that the console will be able to support the Oculus Rift, and it could have a GPU technically capable of supporting 4K resolutions. This year, meanwhile, the anonymous sources suggest Microsoft will release a cheaper, smaller Xbox One, perhaps with an upgraded 2TB hard drive.

Elsewhere, Brad Sams at the Microsoft-focused Thurott Report posted a podcast with similar but slightly different information on Microsoft's Xbox hardware plans. Sams' sources suggest that Microsoft will announce two "miniature" Xbox systems for release this year. The smaller one (priced around $100) will reportedly be a streaming-focused stick comparable to devices like the Chromecast and Amazon Fire. The larger one, coming in "a little bit smaller than a large lunchbox," might be able to play "lightweight" Windows Store games thanks to Microsoft's recent integration with Universal Windows apps, Sams suggested.

As for next year's Xbox upgrade, Sams' sources suggest it could have a "completely new architecture" and "VR might be built in," but the report had little in the way of concrete info.

Both Kotaku and Sams suggest Microsoft will be working to integrate Windows and Xbox brands more closely going forward. Kotaku suggests future Halo games will launch on both Xbox and Windows, following on recent multi-platform Microsoft exclusives like ReCore and Sea of Thieves (and the recent announcement of a limited free version of Halo 5 for windows 10). Sams' report says that an Xbox-style interface could be coming to Windows and that future "Xbox" games could run natively on PCs with suitable specs, essentially unifying the platforms.

These new reports follow on FCC filings from April suggesting a slimmer Xbox One was in development. Comments from Microsoft's Phil Spencer earlier this year also indicated the Xbox platform may see more PC-like upgradability in the future (though Spencer later walked back those comments).
As for the Xbox's big competitor, 2016 has been the year of many, many persistent rumors surrounding an upgraded "PS4K" system as well. This supposed release would expand the capabilities of the existing PlayStation 4 without being a completely new console.

Details about the new Xbox hardware will reportedly be revealed at next month's Electronic Entertainment Expo, according to the anonymous reports.