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Business & Economy

Xbox Overhaul Hits Obsidian

WireByte Staff · July 9, 2026

Xbox's 3,200 job cuts lead to Obsidian Entertainment losing 25% of staff, potentially shelving Avowed sequel

Key points

  • Xbox announced a business overhaul, cutting 3,200 jobs by next summer
  • Obsidian Entertainment lost 25% of its staff in the first layoff wave
  • The remaining team will focus on a new Fallout game, possibly shelving Avowed 2
  • Reports indicate the team may continue working on Avowed 2 in the background
  • The decision is seen as a missed opportunity for Xbox to capitalize on Obsidian's potential
  • The layoffs have already affected other studios, including Doom developer Id Software

Xbox's recent business overhaul has led to significant changes within its studios. Obsidian Entertainment, known for its work on role-playing games, has been particularly affected, losing 25% of its staff. The remaining team has been tasked with developing a new Fallout game, which may mean putting other projects, such as a sequel to Avowed, on the backburner. This decision has been met with disappointment, as Obsidian had built a strong foundation with Avowed. The layoffs are part of a larger restructuring effort by Xbox, which aims to tighten its focus on its biggest intellectual properties. Other studios, including Id Software, have also been impacted by the job cuts.

The future of Avowed 2 remains uncertain, with some reports suggesting that the team may continue working on it in the background. However, for now, it appears that the project is not a priority for Microsoft. This has led to concerns that Xbox is missing an opportunity to capitalize on Obsidian's potential.

The gaming industry is closely watching the developments at Xbox, as the company navigates this significant restructuring effort. The impact of the layoffs on the studios and the games they produce will be closely monitored in the coming months.

Sources

WireByte Staff — Editorial Team

The WireByte editorial team synthesises technology news from multiple primary sources, verifies the facts, and links every source. Articles are produced with AI assistance and reviewed under our editorial policy.