The makers of New Vegas are working on a new Fallout game

• Obsidian Entertainment has cancelled an Avowed sequel and is now reportedly developing a new Fallout game
• The game is helmed by Fallout: New Vegas lead designer and project director Joshua Sawyer
• This comes as part of Microsoft's major Xbox "reset"

Obsidian Entertainment is reportedly working on a new Fallout game after scrapping plans for an Avowed sequel amid Xbox's restructuring strategy.

That's according to Bloomberg, which reports that the Avowed sequel and other unannounced projects were the studio's priority, but will now focus on a new Fallout game helmed by Fallout: New Vegas lead designer and project director Joshua Sawyer, in collaboration with Bethesda.

Sawyer was working on a different role-playing game (RPG) similar to Fallout, but it's unclear which one.

While Avowed 2 has been cancelled, a small team will continue working on the game in case the project is revived in the future; for now, Fallout is the new priority.

The report comes as part of Microsoft's major Xbox "reset," which recently saw thousands of layoffs, including 1,600 immediate cuts. It's said that Avowed 2 was to be announced within the next year, but Xbox CEO Asha Sharma didn't see it fitting into the company's new strategy.

Bloomberg said these layoffs included a quarter of Obsidian, with GameFile reporting that a WARN notice in California indicated it was 52 workers in total, including 43 in Obsidian's California offices and nine in-state remote workers.

Obsidian, which was acquired by Microsoft in 2018, released three games in 2025, including Avowed, The Outer Worlds 2, and Grounded 2. Bloomberg confirmed that the studio will continue developing content for the latter two titles.