Obsidian Entertainment is being redirected toward a new Fallout title under the direction of Josh Sawyer following Microsoft's latest round of Xbox restructuring. The studio, which lost roughly a quarter of its staff in the broader 3,200-job cuts, has canceled its planned sequel to last year's Avowed along with other unannounced projects to align with Xbox's focus on its largest franchises. Sawyer, who previously directed Fallout: New Vegas, had reportedly been leading a separate RPG that shared structural and thematic similarities to the series before the pivot. A small team is expected to remain on Avowed 2 in hopes of reviving it later.

The move comes days after Xbox CEO Asha Sharma outlined the division's most significant overhaul in its history, citing an unhealthy business and the need to prioritize big brands such as Fallout and The Elder Scrolls. Bloomberg's Jason Schreier reported the details, noting that Bethesda will collaborate with Obsidian on the new project. Avowed 2 had been progressing well enough to target a 2027 reveal before the cancellation.

Community reaction on X has been mixed, with some expressing cautious optimism about Sawyer returning to Fallout territory while others note the layoffs and studio's prior reluctance to revisit the IP. Multiple outlets including IGN, Kotaku, VGC, and Gematsu have corroborated the Bloomberg reporting with additional context on the staff reductions confirmed via California WARN notices.