Obsidians Avowed 2 Likely Safe Amid Xbox Game Studios Restructuring

Microsoft Gaming has announced a broad restructuring under new CEO Asha Sharma, with layoffs expected to begin after June 30, 2026. The move has raised concerns about the future of several Xbox Game Studios, including Obsidian Entertainment, the developer behind the action‑role‑playing game Avowed.

A social‑media post by user Shpeshal_Nick, known as XboxEra’s Nick Baker, sparked the latest speculation. The post, which featured a meme and a link to an article about a Avowed sequel, was later clarified by the user as a joke. The post’s timing coincided with reports that Microsoft was planning to close or restructure studios such as Ninja Theory and Double Fine. The confusion led fans of Obsidian’s RPG to worry that Avowed 2 might be cancelled.

In response, a leaker who identified himself as a source within Obsidian confirmed that the sequel is in production. The leaker stated, “There most certainly is an Avowed 2 in production.” The claim is consistent with statements from Obsidian co‑founder Chris Avellone, who said on social media that a sequel exists and that he was “a little surprised” by the continuation. Avellone also noted that the project is likely being led by writer George Ziets.

Obsidian Entertainment, founded in 2003 and acquired by Microsoft in 2018, has a history of developing both licensed and original titles. The studio released Avowed on Windows and Xbox Series X/S on February 18, 2025, and on PlayStation 5 on February 17, 2026. While the game received generally positive reviews, it failed to meet Microsoft’s sales targets, a shortfall that was highlighted in a Bloomberg feature on the studio’s 2025 releases. The same article noted that The Outer Worlds 2 also missed expectations, whereas Grounded 2 performed well enough to be considered a success.

The sales data suggest that Microsoft has been tightening its criteria for studio projects. According to reports, Obsidian’s two biggest releases of 2025—Avowed and The Outer Worlds 2—did not reach the parent company’s benchmarks. The company’s other projects, such as Pentiment and Grounded, have been smaller in scope and have performed more modestly.

Despite the sales challenges, the leaker’s confirmation that Avowed 2 is in development indicates that the project is not at risk of cancellation. The studio’s continued focus on the fantasy world of Eora, the setting of the first game, provides a clear narrative thread that Microsoft may view as valuable for its Game Pass lineup.

The broader context of the restructuring includes reports that Microsoft plans to lay off staff across several first‑party studios. Ninja Theory, which announced a new title, Senua, at the June 7 Games Showcase, was mentioned in Bloomberg as potentially at risk. Other studios, such as Double Fine and Arkane, have also been cited in industry discussions about possible closures.

Microsoft’s memo to staff, released in February, outlined a “reset” of the gaming division, emphasizing cost reductions in marketing and operations. The memo did not explicitly name studios slated for closure, but the timing of the layoffs and the publicized sales shortfalls have led to speculation.

In summary, while Microsoft Gaming is undergoing a significant restructuring under CEO Asha Sharma, Obsidian Entertainment’s Avowed 2 appears to be moving forward. The project has been confirmed by both a leaker and co‑founder Chris Avellone, and it is not listed among the studios reportedly at risk of closure. The next public update on the sequel’s status is expected from Obsidian or Microsoft in the coming months.