By
Rebekah ValentinePublished July 6, 2026
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Among the massive cuts made today across Xbox, Kotaku understands that roughly one-quarter of Obsidian Entertainment, the first-party studio behind Avowed, The Outer Worlds, and Pentiment, is being let go
Speaking to sources with knowledge of the matter, Kotakuunderstands that somewhere around 60-70 people were cut. The layoffs included producers, artists, designers, programmers, QA testers, writers, and others who have worked across Obsidian’s prodigious slate of recent releases. Looking through LinkedIn posts from impacted employees, it’s apparent that many of those impacted were senior talent, including some with over a decade of experience at the studio. The art director on The Outer Worlds and the studio’s only recruiter were among those laid off.
Most of these roles were eliminated on July 6, as part of Xbox’s first 1,600 layoffs, while a few were told they would be let go later this year as part of the second wave of cuts. One individual told me that employees who will remain at the studio have not yet received formal guidance on how their existing projects can continue with so many staff members missing, particularly given what they characterized as a “huge list of projects” in the works at the studio in the coming months
Kotaku understands that work on Grounded 2 (which is currently in early access) and the announced DLC for TheOuter Worlds 2 is expected to continue, but plans beyond that are up in the air. Employees expect to hear more at a studio-wide meeting on July 7
Xbox declined to comment on specifics
Obsidian Entertainment is 23 years old and was founded back in June 2003 by ex-Black Isle employees Feargus Urquhart, Chris Avellone, Chris Parker, Darren Monahan, and Chris Jones. It has become beloved over the years for a diverse set of projects, including Star Wars: Knights of the Old Republic II: The Sith Lords, Neverwinter Nights 2, Alpha Protocol, Fallout: New Vegas, Pillars of Eternity, and its sequel. Following the studio’s acquisition by Microsoft in 2018, Obsidian has released The Outer Worlds1 and2, Grounded 1 and 2 (early access), Avowed, and Pentiment.
Pentiment launched in 2022 and won a Peabody Award as well as the Game Developers Choice award for best narrative. The Outer Worlds, released in 2019, won Game of the Year at the New York Game Awards, RPG of the year at the DICE Awards, and a Nebula Award for game writing, among other accolades
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