What we know so far: Fallout fans have long wondered whether Obsidian would make a follow-up to its well-regarded Fallout: New Vegas after coming under Microsoft's umbrella. Following massive layoffs and new directives from Xbox's newly appointed CEO, reports indicate that Obsidian will soon begin work on the franchise's first major entry in nearly a decade.
Sources have informed Bloomberg that Microsoft is directing Obsidian Entertainment to cancel or pause its planned sequel to Avowed and develop a new Fallout game. The project would be led by Josh Sawyer, who directed 2010's Fallout: New Vegas.
If the report is accurate, it fits Xbox CEO Asha Sharma's plan to refocus Microsoft's studios on its most commercially successful franchises, including Fallout, The Elder Scrolls, Doom, Quake, and Wolfenstein. Bethesda Game Studios has managed Fallout since acquiring the franchise rights and releasing Fallout 3 in 2008, but fans have long requested a new entry from Obsidian for several reasons.
– Chris Avellone (@ChrisAvellone) July 8, 2026
Obsidian's Fallout: New Vegas remains a fan favorite. The studio was also founded by several developers who worked on the first two games in the post-apocalyptic RPG franchise before Bethesda took over. Although some remained at the company as of late last year – when original Fallout creator Tim Cain joined – it remains unclear how many survived Microsoft's latest round of layoffs.
Of 3,200 game developers set to be laid off over the next year, 1,600 lost their jobs this week, including around a quarter of Obsidian's employees. Among them was an artist who spent 21 years at the company. Microsoft acquired Obsidian in 2018 and Bethesda in 2021.
Obsidian released two large-scale RPGs last year, Avowed and The Outer Worlds 2, but neither met sales expectations. Despite reports of Avowed 2's cancellation, Chris Avellone, who worked with Obsidian on New Vegas and other projects, claims that work on the sequel continues and that the studio hopes to eventually re-pitch it to Microsoft. Furthermore, development on Grounded and downloadable content for The Outer Worlds 2 is ongoing.
Bethesda's last single-player Fallout title, Fallout 4, launched over a decade ago. While 2018's multiplayer-focused Fallout 76 remains popular, Bethesda recently turned its attention toward the highly anticipated Elder Scrolls VI, which it announced over eight years ago and is expected to arrive in 2028 or 2029. Bethesda chief Todd Howard previously stated that the company would not make another Fallout before shipping Elder Scrolls VI, but Xbox's new management might have overruled Bethesda's earlier plans.
If any new Fallout content emerges any time soon, it will likely be the rumored remastered version of Fallout 3. Jeff Gerstmann claimed to have recently seen footage of the project, which is expected to feature enhanced Unreal Engine 5 graphics resembling The Elder Scrolls IV: Oblivion Remastered, but its status remains unclear.
Fallout has become integral to Microsoft's cross-media ambitions following the TV adaptation's critical success. The second season earned 10 Emmy nominations, and production on the third is underway.
Microsoft tells Obsidian to pause or cancel Avowed 2 and make a new Fallout game
