- Primary Subject: Obsidian Entertainment's New Fallout Game
- Key Update: Plans have shifted at Obsidian Entertainment, as the studio has been instructed to start working on a new Fallout game.
- Status: Reported
- Last Verified: July 8, 2026
- Quick Answer: Xbox has new plans for Obsidian Entertainment, as the studio has been instructed to abandon the Avowed sequel and work on a new Fallout game.
Just days after Asha Sharma announced a major restructuring at Xbox and a new round of layoffs, priorities are shifting among its studios.
A new report from Jason Schreier published on Bloomberg states that Xbox has cancelled the Avowed sequel in development at Obsidian Entertainment and has instructed them to start working on a new Fallout game.
The report indicates that the Avowed sequel development was going well and they were on course to reveal the title "within the next year."
Now, the California studio has to cancel the sequel and shift its focus to a brand-new Fallout game. This won't be the first time the studio works in the post-apocalyptic franchise, as they released Fallout: New Vegas in 2010.
Josh Sawyer, the director of New Vegas, who rejoined the studio just last year, will direct the project. According to Schreier, Sawyer was previously directing a roleplaying game with a similar structure to Fallout, but unrelated to the franchise.
The shift in projects doesn't surprise us, as it was previously reported that Xbox will now focus on its major franchises as part of the restructure the new CEO, Asha Sharma, is conducting.
Back in February 2026, it was revealed that Avowed, one of the titles Obsidian released in 2025, failed to meet sales expectations. The game took around six years to develop, and the results were simply not there. It's to be expected that a sequel gets replaced with a new entry in the Fallout franchise, especially because it has grown in popularity thanks to the Prime Video show.
A month after the first season premiered in 2024, Fallout 76's popularity boomed, having more concurrent players than in the six years prior. For a game that had a troubled release, filled with bugs and not competing with sales from the previous titles (Fallout 4 and Fallout: New Vegas), this was something.
As far as the new game goes, we still don't know if this will be a story-focused game, like Fallout 3 and 4, or some sort of spin-off. We will have to wait for more news in the coming months.
READ MORE: The OG Fallout 3 Was Reportedly One Demo Away From Avoiding Cancellation
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