Obsidian Shifts Focus to New Fallout Title After Canceling Avowed Sequel

Obsidian Entertainment will develop a new Fallout game, Bloomberg reported, as the studio cancels several in-progress projects, including a sequel to its 2025 RPG Avowed. The shift aligns with Xbox’s strategy to prioritize its largest franchises, with studio design director Josh Sawyer leading the Fallout effort.

The change follows Xbox-wide layoffs that have reduced Obsidian’s staff by roughly 25%, affecting long-time employees such as art director Daniel Alpert. While the Avowed sequel was reportedly on schedule for an announcement within a year, it does not fit the new corporate direction set by Xbox CEO Asha Sharma. Bloomberg says a portion of the team may continue limited work on the sequel in hopes of a future revival.

Avowed was one of three titles Obsidian released in 2025, alongside Grounded 2, which entered early access, and The Outer Worlds 2. Both Avowed and The Outer Worlds 2 received generally positive reviews but fell short of sales expectations. The studio will maintain development on Grounded 2 and continue delivering downloadable content for The Outer Worlds 2 while the new Fallout project progresses.