Obsidian's Avowed Sequel Cancelled After Layoffs, Skeleton Crew Keeps a Sliver of Hope Alive

Xbox has cancelled the in-development sequel to Avowed and laid off roughly 52 Obsidian Entertainment staff — about a quarter of the studio — redirecting the California-based RPG developer toward a new Fallout game. The news broke via a Bloomberg report on July 8, with additional detail from Game File.

According to Bloomberg, the Avowed sequel was actually going well and was on track to be announced within the next year. Obsidian had planned to build on the original faster than usual, leveraging the already-built world and technology from the first game. Despite that momentum, Xbox CEO Asha Sharma's broader strategic vision for the platform had no room for it — Fallout is the bigger franchise, and that's where Obsidian is being pointed. A small but real caveat: Bloomberg reports that a skeleton crew of remaining staff is still working on the sequel, holding out hope that Xbox might reverse course and greenlight it down the line. That outcome remains firmly uncertain.

Avowed launched in February 2025 to a mixed commercial reception — Microsoft confirmed it missed sales targets — though it landed an 80 on Metacritic and a "mostly positive" rating on Steam. GameSpot scored it 6/10. Set in Eora, the fantasy world shared with Pillars of Eternity, it was an action-RPG playable in first- and third-person, blending melee, gunplay, and spellcasting across expansive environments. The game's narrative ends on a cliffhanger, which makes the cancellation sting harder for fans invested in the story. Former director Carrie Patel, who left Obsidian in May 2025 to join Netflix-owned Night Dive, has publicly said she wants to see more Avowed — but Microsoft clearly isn't aligned with that sentiment right now. Pillars of Eternity is in a similar limbo; the last entry, Pillars of Eternity II: Deadfire, came out in 2018 with no follow-up in sight.

The broader picture here is grim for Obsidian's original IP. A February 2026 report had suggested the studio would double down on Avowed's universe, making this reversal feel abrupt. Community reaction has been predictably frustrated — the sequel was close enough to announcement that its cancellation feels like a real loss rather than an early-stage cut. For now, the Fallout project is Obsidian's future, and Avowed 2 is on life support at best.