Ethan Crossfield 
If you were waiting on Avowed 2, don’t—Obsidian is reportedly shelving the sequel as it pivots to a new Fallout project. The change comes amid Xbox’s broader restructuring and layoffs that have reportedly hit about a quarter of Obsidian’s staff, reshaping the studio’s development priorities.
What changed at Obsidian
A Bloomberg report says Obsidian is developing a new Fallout game and has canceled several in-development projects, including Avowed’s planned sequel. Avowed 2 had been in progress and was previously described as being on track for an announcement within the next year. However, the sequel no longer fits Xbox CEO Asha Sharma’s updated company strategy, which—per the report—pushes studios to focus more heavily on the publisher’s biggest existing franchises.
As part of that shift, Obsidian’s development pipeline has reportedly moved toward the new Fallout title, with studio design director Josh Sawyer leading the project. Obsidian has worked in the franchise before, most notably on Fallout: New Vegas in 2010, which helps explain why the studio is returning to the universe now.
Importantly, the Avowed 2 effort isn’t described as fully disappearing overnight. The report indicates that some employees may continue working on the shelved sequel while the new Fallout game comes together, in a bid to preserve momentum and potentially revive the project later.
Who is affected by the layoffs
The pivot is taking place against a backdrop of cuts across Xbox’s gaming division. Bloomberg reports that roughly 25% of Obsidian’s staff has been impacted by the layoffs, including long-time art director Daniel Alpert.
That staffing reduction appears to be part of a wider Xbox restructuring effort that is reshaping which projects get funding and attention. While the report frames the Fallout pivot as aligning with Xbox’s franchise-first direction, it also suggests the studio’s internal capacity has been pressured—making it harder to sustain multiple large, long-running developments at once.
What comes next for Obsidian’s current lineup
Obsidian’s most recent slate includes three releases in 2025: Avowed, Grounded 2 (launched in Early Access), and The Outer Worlds 2. Both Avowed and The Outer Worlds 2 received generally positive reviews, but the report says they underperformed in sales—an outcome that likely influenced the studio’s need to recalibrate.
Even with the reported Fallout pivot, Obsidian is expected to keep supporting its ongoing work. Bloomberg states the studio will continue development for Grounded 2 and also work on DLC for The Outer Worlds 2.
So for players following Obsidian right now, the immediate takeaway is simple: Avowed 2 is no longer the studio’s headline priority, but Grounded 2 and The Outer Worlds 2 remain active. Meanwhile, the next major bet appears to be a new Fallout game led by Josh Sawyer—an effort that could eventually redefine Obsidian’s identity in the current Xbox era.
What players should know
- Avowed 2 is reportedly canceled as Xbox reshapes its strategy around major existing franchises.
- Obsidian is pivoting to a new Fallout game, with Josh Sawyer leading the project.
- About 25% of Obsidian staff has reportedly been affected by Xbox layoffs, including art director Daniel Alpert.
- Grounded 2 and DLC for The Outer Worlds 2 are still expected to continue.
Expert View
This looks less like a creative reset and more like portfolio triage: Xbox’s franchise-first direction plus staffing pressure makes it difficult to justify a second Avowed at the same time. The upside for Obsidian is clear—Fallout is a proven fit for the studio—but the downside is also visible: fans expecting Avowed’s next chapter will have to wait, especially since the sequel may only survive in a partial, maintenance-like state while Fallout ramps up.
