Obsidian Shifts Focus to Fallout Game, Cancels Avowed Sequel

WHO:

Engadget - Josh Sawyer, Obsidian’s studio design director, will head up the new Fallout game.

The Verge - Josh Sawyer will head up the new Fallout game.

Sportskeeda - Obsidian Entertainment is the developer involved in the new Fallout title.

Engadget - Microsoft is the parent company of Obsidian Entertainment.

WHAT:

Engadget - Obsidian has canceled “multiple projects,” including a sequel to Avowed, to focus on the new Fallout game.

Kotaku - About 25 percent of Obsidian’s staff was laid off this week.

Forbes - Bethesda was not slated to release a new mainline Fallout entry until well into the 2030s.

Forbes - The IP is more popular than ever thanks to the megahit Amazon Prime Fallout TV series.

Forbes - It is likely that the studio may not have much leverage to protest something like this these days.

Forbes - Xbox has completed slashing 1,600 jobs this week, with another 1,600 layoffs expected before the end of the fiscal year.

Engadget - Development of the Avowed sequel was reportedly "going well" and would have been announced within the next year.

Engadget - Obsidian still plans to work on the early access game Grounded 2 and on DLC for The Outer Worlds 2.

The Verge - Obsidian has canceled "multiple projects," including a sequel to Avowed.

The Verge - About 25 percent of Obsidian’s staff was laid off this week.

Sportskeeda - A new Fallout title is reportedly in the works.

Engadget - The sequel to Avowed has been canceled as Obsidian focuses on the Fallout game.

WHERE:

Sportskeeda - The new Fallout title is associated with the legacy franchise under the Xbox brand.

WHEN:

Screen Rant - The new Fallout game is expected to take years to develop, with estimates suggesting it may not be released for at least three years.

Forbes - It may be some time before the new Fallout game is officially announced, given the recent developments.

WHY:

Forbes - The decision to prioritize a new Fallout game is part of Xbox's long-term turnaround strategy to create games that sell copies, Game Pass subscriptions, or consoles.

Forbes - The layoffs and project cancellations are part of a long-term turnaround strategy for Xbox, aiming to create games that sell copies, Game Pass subscriptions, or consoles.

The Verge - The layoffs and project cancellations are part of Microsoft’s big Xbox “reset,” which includes shifting investments to focus on “higher priority projects.”

Engadget - The cancellation of the Avowed sequel is part of Microsoft's Xbox layoffs and a shift in focus towards legacy franchises.

HOW:

Engadget - The restructuring within Microsoft is linked to layoffs affecting 3,200 staffers across the company.

The Verge - The restructuring within Microsoft is linked to layoffs affecting 3,200 staffers across the company.

Engadget - The decision to cancel the Avowed sequel and focus on a Fallout game is linked to the restructuring within Microsoft.

(UPDATED July 9, 2026 19:24 UTC)

Obsidian’s studio design director, Josh Sawyer, will lead the development of a new Fallout game, which is expected to take years to complete, with estimates suggesting a release may not come for at least three years. In a significant shift, Obsidian has canceled multiple projects, including a sequel to Avowed, and laid off about 25 percent of its staff as part of this focus. This decision aligns with Xbox's long-term strategy to create games that drive sales, subscriptions, and console purchases, amid broader layoffs affecting 3,200 employees across Microsoft.

(UPDATED July 9, 2026 15:57 UTC)

Bethesda has announced that a new mainline Fallout game is not expected to be released until well into the 2030s, despite the franchise's growing popularity fueled by the successful Amazon Prime Fallout TV series. Given the current circumstances, it seems unlikely that the studio will have much leverage to push back against this timeline. Fans may need to wait a while longer before any official announcement about the new game is made.

(UPDATED July 9, 2026 08:08 UTC)

Xbox has completed a significant round of layoffs, cutting 1,600 jobs this week, with another 1,600 expected before the end of the fiscal year as part of a long-term turnaround strategy. Despite these cuts, development of the Avowed sequel is reportedly progressing well, and Obsidian continues to work on Grounded 2 and DLC for The Outer Worlds 2. This restructuring at Microsoft is part of a broader effort affecting 3,200 staffers across the company, all aimed at creating more successful games and boosting Game Pass subscriptions.

(UPDATED July 9, 2026 06:20 UTC)

Josh Sawyer has been appointed to lead the development of the new Fallout game, as Obsidian has recently canceled multiple projects, including a sequel to Avowed. This week, about 25 percent of Obsidian’s staff was laid off, part of a broader restructuring at Microsoft that affects 3,200 employees across the company. The layoffs and project cancellations are part of Microsoft's strategy to reset its Xbox division, focusing investments on higher priority projects.

(UPDATED July 8, 2026 22:26 UTC)

Obsidian Entertainment is developing a new title in the Fallout franchise, which is part of Microsoft's Xbox brand. As a result of this shift in focus towards legacy franchises, the sequel to Avowed has been canceled amid Microsoft's restructuring and layoffs. This decision highlights a strategic move by Microsoft to prioritize the beloved Fallout series.