In the wake of the recent and ongoing sweeping changes at Xbox, there has been plenty of discourse surrounding how this has and will continue to impact Microsoft’s various development studios. One team hit hard by the lay-offs has been Obsidian Entertainment – leading to the cancellation of a sequel to Avowed. According to insiders however, the project is still going ahead, with hopes that Microsoft might ‘uncancel’ it later down the line.

As reported by known industry insider Jason Schreier, the recent happenings at Microsoft has led to a great deal of confusion and lack of clarity across various Xbox Game Studios.

While we previously spoke on how Obsidian Entertainment were dealing with these changes, Schreier revealed just how in-flux things appear to be, taking to his YouTube channel to claim: “Obsidian have a small team that was working on Avowed 2, that's going to still work on Avowed 2 even though it is canceled, while they wait for other projects like Fallout to be ready for them.”

For the uninitiated, it was recently reported that Obsidian Entertainment have now been tasked with making a new entry in the Fallout franchise, leading to the aforementioned Avowed 2 being cancelled.

According to Schreier however, the project was “further along than most people would guess for a sequel to a game that came out last year,” adding that “I think their hope is perhaps they'll get it so close to finish that Xbox will look at it and say ‘Okay you can finish and release this, it won't cost that much more to finish it.”’

Based on everything we’ve heard, it seems quite clear that these latest changes at Xbox have up-ended many of the console maker’s previous plans and strategies. It will be interesting to see what ultimately becomes of Obsidian’s Avowed 2.

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KitGuru says: What do you think of all the current Xbox drama? Is Microsoft trying to change too much too quickly? Let us know down below.

[UPDATE - July 10, 2026] Jason Schreier is essentially backing Avellone's rumor in his latest YouTube video: By the way, quick side note is that Obsidian actually have a small team that was working on Avowed 2 that is still going to keep working on Avowed 2 even though it is canceled while they wait for other projects like Fallout to be ready for them. And maybe in hopes of getting it uncancelled. Maybe it was actually farther along than I think people would expect for a sequel to a game that came out last year. So, I think their […]

Read full article at https://wccftech.com/avowed-2-isnt-dead-yet-chris-avellone-says-as-obsidian-quietly-fights-to-re-pitch-it-after-xboxs-cancellation/

Obsidian Entertainment is one of the first-party Xbox studios most affected by the recent wave of layoffs. Kotaku had previously reported that the Irvine-based studio had lost around 25% of its staff, and that figure is now confirmed by two reputable sources: Bloomberg's Jason Schreier and Stephen Totilo, who wrote on Game File that 52 workers were cut from Obsidian based on a WARN (Worker Adjustment and Retraining Notification) notice filed in California. However, the studio is far from dead. According to Schreier, it's being recalibrated from its previous plans. In November 2025, former Obsidian founder Chris Avellone revealed that […]

Read full article at https://wccftech.com/obsidian-cancels-avowed-2-after-xbox-layoffs-pivots-to-new-fallout/