Obsidian Entertainment Faces Uncertainty After Xbox Layoffs Hit Hard
In a shocking turn of events, Microsoft’s Xbox has announced a significant restructuring, resulting in the layoff of 1,600 staff members immediately, with another 1,600 to follow over the course of the current financial year. As part of this restructure, four studios have left Xbox to new management, and one is currently in consultation over its future. Obsidian Entertainment, the renowned first-person role-playing game specialist behind Avowed, The Outer Worlds, Grounded, Pentiment, and the critically acclaimed Fallout: New Vegas, has been severely impacted by the layoffs, with around 60-70 people reportedly let go from the studio.
The news has left the gaming community in a state of uncertainty, with many wondering how Obsidian’s ‘huge list of projects’ can continue in the wake of the cuts. The studio has yet to announce a new game following the commercial failure of both Avowed and The Outer Worlds 2, but it is still working on early access game Grounded 2 and The Outer Worlds 2 DLC. The question on everyone’s mind is: can Obsidian be given the green light to work on a brand new Fallout or The Elder Scrolls game, or will they be tasked with supporting the development of new games made primarily elsewhere?
Asha Sharma, Microsoft gaming boss, has made it clear that Xbox wants to double down on its biggest franchises. This sentiment is echoed by Jill Braff, Bethesda boss, who has stated that the company is shifting from a planning model primarily centered on what’s next for each independent studio to one that focuses on its strongest franchises and determining the content roadmap that best serves its players and the company as a whole. Braff added that the company will align the right talent, technology, and resources across the organization to deliver on those priorities.
The uncertainty surrounding Obsidian’s future projects has sparked speculation about the studio’s potential involvement in the development of new games. Could Microsoft give Obsidian the order to make Fallout: New Vegas 2? The game’s beloved creator, Obsidian’s VP of operations Marcus Morgan, has mentioned in the past that everyone on the internet will constantly reference back to ‘When’s the next New Vegas?’ when the studio announces a new game. The anticipation for a sequel has been building for years, and fans are eagerly waiting for any news about the project’s status.
Another mystery project that has piqued the interest of the gaming community is the unannounced game being worked on by Tim Cain, one of the creators of the original Fallout video game. Cain rejoined Obsidian in December 2025 to work on this project, but its details remain under wraps. Sharma has indicated that ‘none of our first-party publicly announced games or projects are being cancelled as part of these reductions.’ This leaves many wondering if Cain’s project is still on track for development or if it has been impacted by the layoffs.
As the gaming world continues to grapple with the aftermath of the Xbox layoffs, one thing is certain: the future of Obsidian Entertainment and its projects remains uncertain. Will the studio be given the opportunity to work on new and exciting projects, or will it be forced to adapt to the changing landscape of the gaming industry? Only time will tell.
