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Obsidian released three games under Xbox last year. Now, 25% of its devs have reportedly been cut.
Workers have been affected throughout Xbox teams and its first-party game development studios, with some affected more severely than others. Since news of the cuts came on Monday morning, it's become clear that staffers under the ZeniMax and Bethesda umbrella and at DOOM dev id Software have been hit particularly hard, with the latter losing half of its entire workforce.
Reportedly, another studio that's been battered by Xbox's efforts to "reset" is Obsidian Entertainment, the RPG developer best known for creating the beloved Fallout: New Vegas as well as the Grounded series, Pentiment, Avowed, and The Outer Worlds 2 for Xbox after it was acquired by Microsoft in late 2018. Though it's not shutting down as rumors suggested, it hasn't come through the mass layoffs unscathed.
According to sources in contact with Kotaku, roughly 60-70 employees were laid off from Obsidian — a number that constitutes 25% of the developer's headcount. Affected roles are stated to include "producers, artists, designers, programmers, QA testers, writers, and others," including many senior staff members and the only recruiter at the studio.
It's been said that most of these discharges were a part of the 1,600 immediate cuts that Microsoft made on Monday, with "a few" coming later this year as the firm lays an additional 1,600 Xbox workers off in the next 12 months.
Obsidian Entertainment has developed several games under Microsoft and Xbox, the most recent of which
is 2025's open-world sci-fi RPG The Outer Worlds 2.
(Image credit: Xbox Game Studios)
One source told Kotaku that those who remain at Obsidian have concerns about how the studio will be able to proceed with further development on its "huge list of projects" after how steep these cuts have been. There's apparently been no guidance from Microsoft on the matter yet.
Reportedly, the developer plans to continue working on the Early Access survival game Grounded 2 and its two announced DLC story expansions for the open-world sci-fi RPG The Outer Worlds 2. Beyond that, though, it's unclear what Obsidian will do moving forward.
Notably, with Xbox CEO Asha Sharma recently commenting that she wants the brand to "move faster" with its core IPs and directly mentioning Fallout by name alongside The Elder Scrolls and Halo, I can't help but wonder if we'll see Microsoft bring Obsidian back to the post-apocalyptic RPG series. I would be quite excited for that...but a major portion of the studio's senior devs that helped create New Vegas were just let go.
I'll also highlight that these layoffs have come months after Obsidian confirmed it was going through some internal reorganization after recent games like Avowed and The Outer Worlds 2 failed to meet performance expectations. At the time, I hoped those changes would help the studio develop new games more efficiently. We can only hope that they will ultimately do so, and mitigate the impact of these redundancies.
How do you feel about Microsoft and Xbox reportedly laying off 25% of Obsidian's workforce? Did the firm go too far?
Hope you enjoyed this news post. Feedback welcome.
Posted Thursday 9 July 2026 at 7:47 am AEST (my time).
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