Well, that happened fast. Per the XBOX restructure, Bloomberg reports that Obsidian Entertainment is changing course on its plans in favor of a new Fallout title.
BREAKING: Obsidian Entertainment is making a big pivot as part of the Xbox restructuring. It has laid off a quarter of its staff, canceled a planned sequel to Avowed, and is now beginning work on a new Fallout game, according to people familiar with the plans www.bloomberg.com/news/article…
— Jason Schreier (@jasonschreier.bsky.social) July 8, 2026 at 10:53 AM
According to people familiar with the matter, Obsidian has canceled multiple projects, including a planned sequel to Avowed. Progress was going well and was on track to be revealed within the next year but ultimately, an Avowed sequel does not fit in with XBOX CEO Asha Sharma’s plans, part of which was to shift things around and focus on its major franchises such as Fallout.
Some employees at Obsidian will continue working on the Avowed sequel as they wait for new projects like Fallout to be ready in hopes of possibly reviving the game in the future.
Obsidian design director Josh Sawyer, who directed the critically acclaimed Fallout: New Vegas, is leading the new Fallout title. He had been working on something that was structurally and thematically similar to Fallout but it was not part of the franchise.
Update: 136 employees have been laid off at id Software, a large majority of the studio
➡️ https://t.co/BVSRmCE58V pic.twitter.com/0lPgA9jUyq
— Shinobi602 (@shinobi602) July 8, 2026
All of this comes after XBOX’s restructuring plans were announced. 3,200 jobs will be cut, and five studios will be divested. ID Software has lost what is now being reported as 136 employees, which is a large majority of the studio. Obsidian was also hit with layoffs, with 60-70 developers cut, including producers, artists, designers, programmers, QA testers, writers, and other parts of the studio.