The Fallout: New Vegas developer has not escaped Microsoft's Xbox layoffs unscathed.
By Ian Carlos Campbell July 8, 2026 4:18 pm EST
Bethesda Obsidian Entertainment, the developer behind the Pillars of Eternity series, The Outer Worlds and Fallout: New Vegas, is being reshuffled as part of Xbox's larger reset and mass layoffs across Microsoft's gaming business. Bloomberg reports that multiple of the studio's projects have been cancelled — including a sequel to Avowed — and Obsidian will now focus on a new Fallout game.
Josh Sawyer, the director of Fallout: New Vegas and the Medieval adventure game Pentiment, is reportedly leading development of the new game. Bloomberg previously reported that Microsoft wants to focus its studios on successful franchises like The Elder Scrolls, Doom, Wolfenstein and Fallout. Getting a new Fallout game out is particularly relevant given that Fallout 76, a multiplayer survival game from 2018, is technically the most recent release and Fallout has now been adapted into a successful streaming series on Amazon Prime Video.
This change in studio direction is also being paired with layoffs. Bloomberg reports that Obsidian is laying off around a quarter of its workforce. Based on WARN layoff notices, Game File writes that the studio is specifically cutting 52 employees, 43 who work in-office in Irvine, California, and nine in-state remote employees. Sister Xbox studio and Doom developer id Software is reportedly laying off around half of its staff, more than 90 employees, according to Game File. Outside its gaming division, Microsoft is also eliminating another 3,200 jobs.
Microsoft acquired Obsidian Entertainment in 2018, a few years before the company's massive purchase of Activision Blizzard King in 2022. Ongoing layoffs at Xbox and its studios are part of new Xbox CEO Asha Sharma's attempt to fix Microsoft's troubled gaming business, though it's hard to see mass layoffs as anything other than a further obstacle to creating good games.
