Credit: Image Credit: Obsidian Entertainment
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Obsidian hit by Xbox cuts after Outer Worlds 2
July 8, 2026·3 min read
Obsidian Entertainment has reportedly lost around a quarter of its staff as Microsoft’s latest Xbox cuts spread across one of the company’s most respected RPG studios. The studio is best known for The Outer Worlds, Avowed, Grounded, Pentiment and Fallout: New Vegas.
The reported losses come days after Microsoft confirmed 4,800 job cuts across the company, including deep reductions tied to Xbox. Obsidian’s layoffs affected roughly 60 to 70 people, although Microsoft has not publicly confirmed a studio-by-studio number.
The cuts appear to have affected a range of roles at Obsidian, including writers, designers, artists, producers, engineers, QA staff and recruitment. Some affected employees had spent more than a decade at the studio, while others had joined only recently.
Among the names reported as affected are narrative and art staff connected to Obsidian’s recent and current projects. The studio’s long-running identity has been built around writing-heavy RPGs, player choice and compact teams, which makes the loss of experienced creative staff especially visible to fans.
The layoffs are part of Microsoft’s latest restructuring, which hit Xbox after years of studio acquisitions, Game Pass spending and higher development costs. Microsoft is cutting roles as it changes how it operates, with Xbox among the areas hit hardest.
Obsidian’s case stands out because the studio has been one of Xbox’s more productive internal teams. It released Grounded, Pentiment, Avowed and The Outer Worlds 2 across a short window, while also supporting Microsoft’s first-party Game Pass lineup.
Avowed launched on February 18, 2025, for Xbox Series X|S, PC, cloud and Game Pass. The first-person fantasy RPG returned Obsidian to the Pillars of Eternity universe and gave Xbox a high-profile first-party release early in the year.
The Outer Worlds 2 followed on October 29, 2025, from Obsidian and Xbox Game Studios. The sequel launched for Xbox Series X|S and Windows, with Xbox listing it as available through Game Pass. The cuts have landed after Obsidian delivered two Xbox-published RPGs in the same year.
For players, the concern is not only the headcount number. Obsidian’s appeal comes from institutional knowledge, writing craft and design taste built over years. Losing senior developers can affect future patches, expansions, prototypes and whatever comes after The Outer Worlds 2.
There is no announced cancellation tied to Obsidian at this stage, and the studio has not said that any released game support plan has changed. The Outer Worlds 2 remains available through Xbox channels, while Avowed is still listed across its supported platforms.
Microsoft acquired Obsidian in 2018, adding the California-based RPG studio to Xbox Game Studios before the later Bethesda and Activision Blizzard deals. Since then, Obsidian has become one of Microsoft’s most active first-party developers, moving between smaller narrative games, survival projects and full RPG releases.
The studio’s current public status has not changed. Obsidian remains part of Xbox Game Studios, and its recent games remain available across their listed platforms and Game Pass.
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