Obsidian Entertainment Loses 25% of Staff in New Xbox Layoffs Round
Obsidian Entertainment has lost roughly a quarter of its workforce in Microsoft’s latest round of Xbox layoffs, with a California WARN notice confirming at least 52 job cuts and Bloomberg reporting that the RPG studio has scrapped its planned Avowed sequel to redirect resources toward a new Fallout project.
WARN Filing Puts a Hard Number on the Cuts
A Worker Adjustment and Retraining Notification filed in California and obtained by Game File confirmed that a Worker Adjustment and Retraining Notification revealed that at least 52 Obsidian workers are being laid off by Microsoft. According to the same filing, that total includes 43 staff members based in Obsidian’s office in California and nine remote workers also located in the U.S. state.
The legal filing lines up with earlier reporting from Kotaku, which first broke the studio-specific figures on July 6. Kotaku understood that roughly one-quarter of Obsidian Entertainment, the first-party studio behind Avowed, The Outer Worlds, and Pentiment, was being let go, with somewhere around 60-70 people cut. As a company with more than a hundred employees, Obsidian, as a company of over 100 employees (285 in 2025), is obligated by the WARN Act to provide advance notice of layoffs in excess of 50 employees, which explains why the filing surfaced days after the initial cuts landed.
Every Department Hit, Including the Studio’s Only Recruiter
The layoffs were not confined to a single team. Kotaku reported that the layoffs included producers, artists, designers, programmers, QA testers, writers, and others who have worked across Obsidian’s prodigious slate of recent releases, and that many of those impacted were senior talent, including some with over a decade of experience at the studio, with the art director on The Outer Worlds and the studio’s only recruiter among those laid off.
PC Gamer subsequently named several of the departed staff after they posted publicly on LinkedIn. Among them was artist Daniel Alpert, who has been with the company for 21 years, with credits on Neverwinter Nights 2, Fallout: New Vegas’ DLC, Alpha Protocol, and most recently The Outer Worlds 2. On the other end of the tenure scale, engineer Wenzheng Huang had only just started at the company in May. Writer Jay Turner also confirmed his departure; Turner’s only credit with Obsidian was Avowed, but his industry experience stretches back to the golden age of BioWare, with credits on Jade Empire, Dragon Age: Origins, Mass Effect 2, and many more games.
Bloomberg: Avowed Sequel Cancelled as Josh Sawyer Moves to a New Fallout Game
The most consequential detail to emerge since the initial cuts came from Bloomberg’s Jason Schreier, as relayed by Gematsu. Sources familiar with the matter told Bloomberg that Obsidian Entertainment has canceled multiple projects, including a planned sequel to Avowed, and laid off a quarter of its staff as it starts work on a new game in the Fallout series. That’s a striking reversal, since it was reportedly going well and on track to be announced within the next year, but ultimately did not fit into Xbox CEO Asha Sharma’s revised priorities for the division.
The new Fallout title will reportedly be led by a familiar face at the studio. Bloomberg’s sources indicated the new Fallout title will reportedly be led by Obsidian Entertainment studio design director Josh Sawyer, who was previously directing a role-playing game similar structurally and thematically to Fallout, but was not part of the franchise. Obsidian’s history with the license runs deep, as Obsidian Entertainment previously developed Fallout: New Vegas, the only entry in the Bethesda Softworks Fallout universe not developed by Bethesda Softworks itself. Not all Avowed work is dead, either: some staff are reportedly still tending to the shelved sequel while other projects ramp up, and Bloomberg’s report noted that Obsidian Entertainment will also continue to develop downloadable content for The Outer Worlds 2, as well as work on Grounded 2.
A Rough Patch Follows a Crowded 2025 Release Slate
The cuts land after a bruising year for Obsidian commercially, even as it hit its 25th anniversary. The Outer Worlds 2 launched in October 2025 to strong reviews but underwhelming sales, and studio design director Josh Sawyer had already acknowledged internal missteps, saying earlier this year that the crowded 2025 output of Avowed, The Outer Worlds 2 and Grounded 2 was the result of things going wrong due to poor planning and resource mismanagement. Studio head Feargus Urquhart pushed back on the harshest reading of that year, however, insisting neither game was a “disaster.”
The layoffs also fit a wider pattern across Microsoft’s gaming division this month. Xbox CEO Asha Sharma opened the day of cuts by telling staff the business is “not healthy,” arguing the reductions were necessary to course-correct after big bets on “Game Pass, multi-platform, and a broader portfolio of content” failed to pan out, and pointing to an industry “facing the most severe hardware crisis in its history.” Xbox’s initial wave removed 1,600 roles company-wide, with a 3200-person layoff started that day at Xbox, with 1600 immediately and 1600 further cuts expected within the next year, a rolling reduction that has also battered id Software, Bethesda Game Studios and ZeniMax’s wider portfolio.
Read also: id Software: Studio Still Has “Crew We Need” Despite Xbox Layoffs
What It Means for Game Pass Players in Australia and New Zealand
Obsidian’s output has been especially visible to Xbox players in this region, with Avowed and The Outer Worlds 2 both landing day-one on Game Pass rather than at full retail price locally. A studio operating with a quarter fewer staff, alongside a scrapped Avowed sequel and a pivot toward a new Fallout project under Josh Sawyer, raises real questions for local subscribers about the pacing of Obsidian’s next RPG and how substantial the promised Outer Worlds 2 story expansions will end up being.
Microsoft has not issued a standalone statement addressing the Obsidian-specific numbers beyond the WARN filing, and Xbox has so far declined to comment on the studio’s internal restructuring in detail. For now, Grounded 2 and the previously announced Outer Worlds 2 DLC remain in active development, giving Obsidian’s remaining team a clear, if narrower, roadmap while the fate of the Avowed universe and the new Fallout project play out.
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