Report Claims Obsidian May Still Be Working on Avowed 2 After Xbox Cancellation
A fresh report says Obsidian Entertainment has not fully stopped work on a sequel to Avowed, even after Xbox reportedly canceled the project amid its broader restructuring. Avowed arrived in 2025 and marked Obsidian’s first foray into a first-person role-playing game set in the Pillars of Eternity universe.
On July 8, 2026, Bloomberg claimed Xbox had dropped plans for a follow-up to Obsidian’s Avowed—a mostly positive RPG that, while well received, apparently didn’t reach the level of financial performance the publisher had hoped for. The same reporting suggests Xbox wants Obsidian to pivot toward building a new Fallout title with Josh Sawyer, citing a lack of interest in pursuing additional smaller or unfamiliar intellectual properties. Still, a new insider update argues that Avowed 2 might not be finished being developed after all.
A leak indicates Xbox has directed Obsidian to continue work on a new Fallout game. Below are the key points that the report says are confirmed.
Obsidian Reportedly Hasn’t Given Up on Avowed 2 Following Xbox Restructuring
Jason Schreier, the journalist who previously broke the news about Avowed, is now saying that Avowed 2 is still active inside Obsidian despite earlier claims that it was canceled. In a YouTube update posted on July 10, Schreier states that a small group of developers continues to make progress on Avowed 2 while they wait for Fallout or other assignments to be ready for them—possibly hoping Xbox will revisit the decision and “uncancel” the sequel. The report also claims that Avowed 2 is already fairly far into development, with the team aiming to get it close enough to completion that Xbox will decide it’s not too expensive to finish and ship. Schreier’s claims are said to line up with remarks former Obsidian creative lead and co-founder Chris Avellone made on Twitter, where he said the studio is still attempting to “re-pitch” the project because considerable work has already been invested.
“Obsidian, they actually have a small team that was working on Avowed 2 that is still going to keep working on Avowed 2, even though it is canceled, while they wait for other projects like Fallout to be ready for them, maybe in hopes of getting it uncanceled. It was actually planned farther along than I think people would expect for a sequel to a game that came out last year. So I think their hope is that they’ll get it so close to being finished that Xbox will look at it and say, ‘Okay, yeah, you can finish and release this. It won’t cost that much more to finish it.’” – Jason Schreier (YouTube)
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Xbox has not issued an official response about Avowed 2 or what Obsidian will do next, and it seems unlikely that clarification will arrive quickly. Reports indicate Xbox is reorganizing its studios under Zenimax into a “franchise-first” approach. If that’s the case, Obsidian would likely concentrate on Fallout, while Bethesda would focus on The Elder Scrolls 6, at least for the time being. Under this plan, newer ideas like Avowed could be sidelined—something that would disappoint many players. That said, this is still based on insider information rather than confirmed statements, and the direction could shift as the restructuring continues.
For Avowed fans, Schreier’s update at least leaves room for hope that a sequel could still happen. Players can keep rooting for the developers and hope the work already done on Avowed 2 won’t vanish—since Xbox could choose to postpone rather than fully cancel the project. Even if Microsoft’s new direction leans toward established franchises over fresh IP, there’s still a chance Avowed 2 gets approval later if business priorities evolve.
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As Xbox continues layoffs and reorganizes internally, fans do still have the original Avowed to return to. Even if some of Xbox’s earlier choices contributed to tougher times for the publisher, it was that willingness to let studios like Obsidian experiment with new IP—such as Avowed or Pentiment—that helped produce the kinds of games players want to see followed up. Until Microsoft or Obsidian makes any public comment, the status of Avowed 2 remains uncertain. Still, fans can reasonably hold onto cautious optimism that they may revisit the Living Lands again, as Obsidian continues pushing forward on the project.
