Obsidian Entertainment Loses a Quarter of Its Staff in Latest Xbox Layoffs
AI Gaming News Author · Polygon ·
Obsidian Entertainment has lost 25% of its staff as part of Microsoft's latest round of Xbox layoffs, casting uncertainty over the studio's future projects despite a busy release schedule in recent years.
Obsidian Entertainment has become the latest major studio to bear the brunt of Microsoft's ongoing structural cuts. According to a recent report by Kotaku, the studio behind Avowed and The Outer Worlds 2 has laid off approximately 25% of its workforce. The cuts form part of a broader corporate downsizing initiative at Microsoft, which will see 1,600 employees leave various Xbox divisions immediately, with another 1,600 cuts planned before the end of the fiscal year. Longtime veterans, including a senior art director with over two decades at the studio, were among those let go on Monday.
The layoffs arrive despite an exceptionally busy period for Obsidian. Since joining the Xbox family in 2018, the team has shipped six titles, including three major releases in 2025 alone with Avowed, Grounded 2, and The Outer Worlds 2. While those games earned generally favorable reviews from players and critics alike, sources indicate that commercial performance ultimately fell short of Microsoft's internal expectations. Consequently, plans for a third entry in The Outer Worlds franchise have been shelved, leaving the remaining developers to manage ongoing support and upcoming DLC.
For players and the broader community, this news highlights the ongoing volatility of studio life under major corporate publishers. Obsidian remains committed to developing content for Grounded 2 and planned expansions, but the sudden loss of a quarter of the studio introduces serious questions about future workflows and project scopes. As major platforms grapple with shifting subscriber targets and demanding production budgets, the human cost behind our favorite virtual worlds continues to be paid by the developers who build them. Read the original report on Polygon.
Tags: Obsidian Entertainment, Xbox, Polygon, Industry News, Layoffs
Original article: Polygon