Gaming Xbox Microsoft reportedly cancels Avowed sequel as Obsidian focuses on a Fallout game The Fallout: New Vegas developer has not escaped Microsoft's Xbox layoffs unscathed. By Ian Carlos Campbell July 8, 2026 4:18 pm EST Bethesda Obsidian Entertainment, the developer behind the Pillars of Eternity series, The Outer Worlds and Fallout: New Vegas , is being reshuffled as part of Xbox's larger reset and mass layoffs across Microsoft's gaming business. Bloomberg reports that multiple of the studio's projects have been cancelled — including a sequel to Avowed — and Obsidian will now focus on a new Fallout game. Josh Sawyer, the director of Fallout: New Vegas and the Medieval adventure game Pentiment , is reportedly leading development of the new game. Bloomberg previously reported that Microsoft wants to focus its studios on successful franchises like The Elder Scrolls, Doom, Wolfenstein and Fallout. Getting a new Fallout game out is particularly relevant given that Fallout 76 , a multiplayer survival game from 2018, is technically the most recent release and Fallout has now been adapted into a successful streaming series on Amazon Prime Video.

This change in studio direction is also being paired with layoffs. Bloomberg reports that Obsidian is laying off around a quarter of its workforce. Based on WARN layoff notices, Game File writes that the studio is specifically cutting 52 employees, 43 who work in-office in Irvine, California, and nine in-state remote employees. Sister Xbox studio and Doom developer id Software is reportedly laying off around half of its staff , more than 90 employees, according to Game File .

Source: https://www.engadget.com/2210958/microsoft-reportedly-cancels-avowed-sequel-as-obsidian-focuses-on-a-fallout-game/