The two unnamed devices will have premium metal designs complete with IP68 certification, which means they will be as water resistant as Samsung's Galaxy S7, The Inquirer reported.
The smartphones may come up with 5.2-inch and 5.5-inch QHD screens, along with fingerprint scanner and "innovations" in the camera, the report noted.
Both the smartphones are expected to feature split-screen modes, enhanced notifications and improved gaming thanks to support for the Vulkan API and could bring "elements of touch and hover interaction", hinting 3D Touch-like technology.
The struggling company revealed in May that it licensed Finland-based HMD to produce Nokia branded mobile phones and tablets.
After acquiring Nokia's phone business for $7.2 billion two years ago, Microsoft wrote off $7.6 billion last year and cut 7,800 jobs to refocus its phone efforts.
Microsoft's Lumia and Windows Phone strategy has failed as both sales and Windows Phone market share have declined since the tech giant's mobile restructuring last year.
It is believed that the multinational technology company has been working on a 'plan B' if Nokia wasn't successful with Windows Phone.
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