Obsidian Loses Roughly One-Quarter of Workforce in Xbox Cuts

Roughly one-quarter of Obsidian Entertainment's staff has been eliminated in the sweeping reductions that hit Xbox on July 6, 2026.

Obsidian cuts total 60 to 70 employees. Sources indicate the reductions removed producers, artists, designers, programmers, QA testers, writers and additional roles from the developer's recent lineup of titles. Impacted workers posting on LinkedIn include many veterans, some with more than ten years at the studio.

The art director for The Outer Worlds and the company's sole recruiter numbered among the departures. Most positions ended immediately as Xbox carried out its initial round of 1,600 layoffs, although a small number of staff members were informed their exits would occur in a later wave this year.

Some roles will end later in 2026. One employee described the absence of any formal instructions so far for how remaining teams should advance current assignments, especially with what was termed an extensive slate of upcoming work.

Ongoing projects face uncertainty. Development is reportedly set to proceed on Grounded 2, which sits in early access, along with the announced DLC for The Outer Worlds 2, but everything else stays unclear. Staff anticipate further information during an all-hands session scheduled for July 7. Xbox declined to comment on specifics.

Obsidian remains open under Xbox Game Studios. The studio, founded in June 2003 by ex-Black Isle employees including Feargus Urquhart and Chris Avellone, was acquired by Microsoft in 2018. It has released The Outer Worlds, Grounded, Avowed and Pentiment since then. Pentiment won a Peabody Award and Game Developers Choice Award for best narrative; The Outer Worlds won Game of the Year at the New York Game Awards, RPG of the Year at the DICE Awards and a Nebula Award for writing.