Obsidian Entertainment, the acclaimed studio behind titles such as Fallout: New Vegas and Avowed, has been significantly affected by Microsoft's recent wave of layoffs. According to reports, between 60 and 70 employees, approximating 25% of the studio's staff, have been let go. The affected personnel span various disciplines, including producers, QA testers, and artists. Notably, some individuals who had been with the studio for over a decade were among those laid off, with reports indicating the art director for The Outer Worlds and the studio's sole recruiter were also impacted.
Despite these substantial cuts, work is expected to continue on Grounded 2 and planned downloadable content for The Outer Worlds 2. However, future projects beyond these are currently uncertain. Obsidian Entertainment, founded in 2003, has a rich history of developing beloved role-playing games. Microsoft acquired the studio in 2018, and it has since released games like Grounded, Pentiment, and Avowed. The studio's 2025 output included Avowed, The Outer Worlds 2, and Grounded 2 (in early access), a triple release that studio design director Josh Sawyer attributed to "poor planning and resource mismanagement."
Plans for future games set in the Avowed universe are reportedly still in motion, but a third installment in The Outer Worlds series is not currently in development. These layoffs at Obsidian are part of broader reductions impacting Microsoft's gaming divisions, with Id Software and Bethesda Game Studios also experiencing job cuts. These actions are a component of Microsoft's initial 1,600 layoffs, with an anticipated total of 3,200 job reductions across the company's fiscal year, representing approximately 2% of its global workforce.