Obsidian Reportedly Set to Lose a Quarter of Its Staff Amid Xbox Layoffs

Staff at Obsidian Entertainment are reportedly concerned about the studio’s future projects after it was hit hard by Microsoft’s Xbox layoffs.

Yesterday, Microsoft gaming boss Asha Sharma announced the most “significant” restructure in Xbox history, with 1,600 staff let go immediately, and another 1,600 staff to follow over the course of the current financial year. As part of the restructure, four studios are leaving Xbox to new management, and one is now in consultation over its future.

According to Kotaku, around 60-70 people were cut from Obsidian, which is the first-person role-playing game specialist behind Avowed, The Outer Worlds, Grounded, Pentiment, and, most famously, Fallout: New Vegas. Some of the staff who are leaving were Obsidian veterans.

Kotaku quotes one person who said they were unsure how Obsidian’s “huge list of projects” could continue following the cuts to the business. Obsidian has yet to announce a new game following the commercial failure of both Avowed and The Outer Worlds 2, but it is continuing to work on early access game Grounded 2 and The Outer Worlds 2 DLC.

Could Obsidian be put to work on a brand new Fallout or The Elder Scrolls game, or support the development of new games made primarily elsewhere? Sharma has made it clear that Xbox wants to double down on its biggest franchises. Bethesda boss Jill Braff has told staff much the same.

Without naming games, Braff said “to best position Bethesda for future growth, we are shifting from a planning model primarily centered on what’s next for each independent studio to one that focuses on our strongest franchises and determining the content roadmap that best serves our players and Bethesda as a whole.”

“From there, we’ll align the right talent, technology, and resources across the organization to deliver on those priorities,” Braff added. Could Obsidian be roped in to help out?

Could Microsoft give Obsidian the order to make Fallout: New Vegas 2? “I know everyone on the internet, on every game we ever announce, will constantly reference back to, ‘When’s the next New Vegas?'” Obsidian’s VP of operations Marcus Morgan said last year, referencing the studio’s beloved Fallout game that’s served as the inspiration for the hit Amazon TV series’ second season setting.

There are also question marks over the mystery project Tim Cain, one of the creators of the original Fallout video game, rejoined Obsidian to work on in December 2025. Sharma has indicated that “none of our first party publicly announced games or projects are being cancelled as part of these reductions.” Cain’s project remains unannounced.