Obsidian cancels Avowed 2, develops new Fallout game with Bethesda

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Obsidian Entertainment has cancelled an Avowed sequel and is now reportedly developing a new Fallout game

The game is helmed by Fallout: New Vegas lead designer and project director Joshua Sawyer

This comes as part of Microsoft's major Xbox "reset"

Obsidian Entertainment is reportedly working on a new Fallout game after scrapping plans for an Avowed sequel amid Xbox's restructuring strategy.

That's according to Bloomberg , which reports that the Avowed sequel and other unannounced projects were the studio's priority, but will now focus on a new Fallout game helmed by Fallout: New Vegas lead designer and project director Joshua Sawyer, in collaboration with Bethesda.

Sawyer was working on a different role-playing game (RPG) similar to Fallout , but it's unclear which one.

While Avowed 2 has been cancelled, a small team will continue working on the game in case the project is revived in the future; for now, Fallout is the new priority.

The report comes as part of Microsoft's major Xbox "reset," which recently saw thousands of layoffs, including 1,600 immediate cuts . It's said that Avowed 2 was to be announced within the next year, but Xbox CEO Asha Sharma didn't see it fitting into the company's new strategy.

Bloomberg said these layoffs included a quarter of Obsidian, with GameFile reporting that a WARN notice in California indicated it was 52 workers in total, including 43 in Obsidian's California offices and nine in-state remote workers.

Obsidian, which was acquired by Microsoft in 2018, released three games in 2025, including Avowed , The Outer Worlds 2 , and Grounded 2 . Bloomberg confirmed that the studio will continue developing content for the latter two titles.