Obsidian Entertainment announced it is developing a new Fallout game, reportedly led by Josh Sawyer, the director of Fallout: New Vegas. The project is still in its early stages and the strategy could change as development progresses [1, 2, 3, 4, 5, 6, 7, 8].

This shift comes after Obsidian canceled a sequel to its 2025 RPG Avowed along with other unannounced projects to prioritize the Fallout title [2, 3, 4, 5, 6, 7, 8]. The Avowed sequel had been in development since 2023 and was planned for a 2027 reveal before its cancellation due to Xbox's strategic reset [2, 3, 4].

Obsidian also laid off roughly 25% of its workforce, cutting about 52 employees according to WARN notices. These layoffs are part of a broader Microsoft Xbox restructuring under CEO Asha Sharma, which saw over 3,200 jobs cut across the division [1, 2, 9, 3, 5, 6, 7, 8]. Sharma called it the most "significant" restructure in Xbox history, with 1,600 staff let go immediately and another 1,600 to follow [9].

Marcus Morgan, Obsidian’s VP of Operations, acknowledged the intense fan interest in Fallout: New Vegas by saying, "I know everyone on the internet, on every game we ever announce, will constantly reference back to, 'When's the next New Vegas?'" [9]. The Fallout series’ last game release was Fallout 76 in 2018, and the franchise also has an ongoing Amazon Prime TV adaptation [1, 3, 4, 8].

Before the pivot, Sawyer was directing an RPG with a similar structure and theme to Fallout but not officially part of the franchise [1, 3, 4, 5, 7]. The Xbox restructuring aims to focus on larger franchises like Fallout, The Elder Scrolls, Doom, and Wolfenstein, shifting from planning around individual studio projects to aligning content roadmaps with major franchises, according to Bethesda boss Jill Braff [1, 2, 3, 8, 9].

A small group of Obsidian staff will remain working on Grounded 2 and DLC for The Outer Worlds 2, ensuring some ongoing projects continue despite the cuts [1, 3, 4]. Staff concerns about future projects have surfaced following the layoffs and the company’s pivot [9, 7].

Obsidian, owned by Microsoft/Xbox since 2018, is best known for its RPGs including Fallout: New Vegas, Avowed, and The Outer Worlds [9, 5, 8]. The new Fallout game’s direction and release timeline have yet to be announced.

The layoffs occurred in early August 2026 amid the wider Xbox restructuring [9, 6, 8], and the Fallout project announcement emerged shortly after [1, 2, 3, 5, 6, 7, 8].