Obsidian reportedly cancels Avowed 2 to focus on a new Fallout game

Microsoft is reportedly reshaping the future of Obsidian Entertainment. According to a report from Bloomberg, the studio has canceled several projects, including Avowed 2, to focus its resources on a new Fallout game.

The move is said to be part of Xbox's ongoing restructuring, which aims to prioritize the company's biggest franchises.

Obsidian reportedly returns to Fallout

The report states that the new project will be led by Josh Sawyer, Obsidian's design director and the creative lead behind Fallout: New Vegas, widely considered one of the franchise's best entries.

Although the project has not been officially announced, it is reportedly being developed in collaboration with Bethesda Game Studios, the owner of the Fallout franchise.

The strategy could still change, but Microsoft is reportedly looking to accelerate Fallout's return while Bethesda remains focused on other projects.

Avowed 2 reportedly canceled

One of the projects affected is said to be the sequel to Avowed, the RPG released in 2025.

According to Bloomberg, development was progressing well and the game was expected to be announced within the next year. However, it reportedly no longer fit the new strategy introduced by Xbox CEO Asha Sharma, which prioritizes greater investment in the company's strongest franchises.

Some developers are expected to remain temporarily assigned to Avowed 2 while awaiting new projects.

Xbox restructuring and layoffs

The reorganization has also reportedly affected Obsidian's workforce.

According to the report, the studio has laid off approximately 25% of its staff, following Microsoft's recently announced restructuring, which includes 3,200 job cuts and the divestment of five studios.

Xbox plans to focus more heavily on established franchises such as Fallout, which has sold millions of copies and recently reached a wider audience through Amazon's television series.

Fallout becomes a priority again

The franchise has not received a new mainline entry since Fallout 76 launched in 2018, as Bethesda Game Studios has spent recent years working on other projects.

If the report proves accurate, this would become the first Fallout title developed by Obsidian since Fallout: New Vegas, released in 2010.

Meanwhile, the studio will continue supporting The Outer Worlds 2 with additional content and remain at work on Grounded 2, one of the projects that survived the restructuring.