Obsidian Entertainment’s Strategic Pivot: From Avowed 2 to a New Fallout Chapter

Amid sweeping Xbox layoffs, Obsidian is shelving its Avowed sequel to embark on a new Fallout project—led by a familiar hand and rooted in deep franchise legacy.

</div>

Layoffs and the Fallout of Xbox’s Reset

On July 6, 2026, Xbox CEO Asha Sharma announced a sweeping “reset” of the company’s gaming division, aiming to reduce approximately 3,200 roles across fiscal year 2027 to restore financial health . As part of this wave, Obsidian Entertainment—long viewed as one of Xbox’s most resilient studios—saw roughly 25% of its staff laid off, with a WARN notice in California confirming 52 employees were let go .

Avowed Sequel Canceled Despite Being On Track

Bloomberg’s Jason Schreier reports that among the casualties was the planned sequel to the 2025 RPG Avowed. Although development had been progressing smoothly and was expected to be announced within the year, the project was ultimately axed for not aligning with Xbox’s new strategic direction . Despite the cancellation, some team members remain assigned to the Avowed sequel in hopes the project might be revived in the future .