Obsidian reportedly shifts focus to new Fallout game as other projects are canceled

According to a new report from Bloomberg’s Jason Schreier, Microsoft is shifting Obsidian Entertainment toward development on a new Fallout game, with multiple other projects being canceled as part of the move.

The report claims that one of the games affected is a planned sequel to Avowed, Obsidian’s fantasy RPG set in the Pillars of Eternity universe. While Avowed only launched in 2025, and reportedly had a follow-up that was progressing well enough to potentially be announced within the next year, it appears Xbox has decided that, in its latest round of cuts, Fallout is now the bigger priority.

Obsidian Fallout game reportedly in development

The biggest part of the report is that Josh Sawyer is said to be leading the new Fallout project. If you’re a fan of the franchise, Sawyer is a very important name here, as he previously directed Fallout: New Vegas, which many still consider one of the, if not the strongest game in the entire series.

That instantly makes this more than just another studio making Fallout. Obsidian returning to the franchise has been something fans have wanted for years, especially after Microsoft ended up owning both Bethesda and Obsidian.

There are no details yet on what kind of Fallout game this will be, or whether this is even being treated as a full mainline entry. So, as much as everyone’s brains will immediately jump to New Vegas 2, that has obviously not been confirmed.

As previously mentioned, the move does come at a pretty large cost. Alongside the Avowed sequel reportedly being shelved, other unannounced Obsidian projects have also been canceled. The studio has also been hit by layoffs, making this potential new Fallout entry even harder to cheer for.

For now, Obsidian is still expected to continue work on Grounded 2 and DLC for The Outer Worlds 2. But if the report proves accurate, the studio’s next major project could be back in the wasteland.