Obsidian Entertainment, the RPG studio behind Avowed and Fallout: New Vegas, lost roughly a quarter of its staff in Xbox's latest round of cuts, a bloodletting that swept up everyone from a 21-year company veteran to an engineer hired just two months ago.
Kotaku reported that 60-70 of Obsidian's 285 employees were let go on July 6, part of Xbox's first wave of 1,600 layoffs this year. A smaller number were told they'd be cut later in 2026 as part of a second wave. The studio had previously navigated every round of Xbox job cuts since 2020 without a scratch.
The layoffs hit across disciplines, producers, artists, designers, programmers, QA testers, and writers. PC Gamer identified senior artist Daniel Alpert, a 21-year veteran with credits dating back to Neverwinter Nights 2, among those cut.
Avowed area designer Bre Seale also lost her job. The timing is brutal. Obsidian just shipped Avowed and The Outer Worlds 2, both of which reportedly failed to hit commercial targets.
The studio has no announced project beyond Grounded 2 (currently in early access) and announced DLC for The Outer Worlds 2. A studio-wide meeting was scheduled for July 7 to brief remaining staff on what comes next.
Bloomberg's Jason Schreier pushed back against an earlier report that Obsidian was negotiating with Xbox leadership to avoid outright closure. "Plenty of details are still up in the air surrounding the layoffs but Xbox is keeping Obsidian, according to people familiar with the situation," Schreier said in a social media post.
The cuts come under new Xbox boss Asha Sharma, whose internal "reset" memo revealed Microsoft's gaming business operates on a razor-thin 3% accountability margin. Sharma is reportedly accelerating development on new Elder Scrolls, Fallout, and Halo titles.
Some had speculated Obsidian might be tapped for a Fallout: New Vegas follow-up, studio director Feargus Urquhart previously told IGN that when it comes to another Fallout game, "who knows? It's how it happened with New Vegas." For now, the studio that defined modern RPGs for two decades is operating at three-quarters strength, with its next major project unclear.
