Larian Studios has revealed that Baldur's Gate 3 is still planned to launch on Xbox, though it'll require 'compromises' to actually launch on the platform.
According to a new interview with IGN, the major issue with getting the game on Xbox platforms is that Microsoft requires games to work on both Xbox Series X and Xbox Series S with the same gameplay features.
Larian itself has stated that the split-screen co-op mode available in Baldur's Gate 3 works well on Xbox Series X but doesn't currently run to the level that Microsoft wants it to on Xbox Series S. The big issue is that the studio cannot remove split-screen from one of the Xbox releases without having to do that to the other version, and they don't want to do that for obvious reasons.
As stated in the IGN interview:
"We're trying to be very limited in the compromises we have to make. That's one of the reasons why we're taking more time also. But I don't want to jump ahead of the development team, which is doing remarkable things. I don't want to say it's going to be like this until we've finished and decided it's good for release."
The release of the game was yesterday brought forward to August 4th, almost a whole month earlier.