Obsidian Entertainment has cut approximately 25 percent of its workforce in the latest wave of Microsoft layoffs affecting Xbox Game Studios. The studio behind The Outer Worlds and Grounded lost staff across all disciplines, including veterans with over a decade of tenure at the company.
The layoffs hit a studio that had grown significantly since Microsoft's 2018 acquisition. Obsidian was ramping up production on The Outer Worlds 2, its sci-fi RPG sequel slated for Xbox and PC. The timing disrupts development momentum on one of Xbox's marquee first-party titles. The studio also maintains Grounded, its survival crafting game that entered full release on PC and Xbox platforms in 2022 and continues receiving post-launch support.
This reduction follows Microsoft's broader restructuring across its gaming division. The company announced layoffs affecting multiple studios and support teams in December, citing the need to "refocus" resources and improve financial efficiency. Obsidian's losses mirror cuts seen at other Xbox-owned developers like 343 Industries and Bethesda Game Studios, signaling systematic downsizing rather than studio-specific performance issues.
The Outer Worlds 2 represents a significant investment for Xbox. The original game launched in 2019 to mixed commercial reception, but the franchise holds value in Xbox's portfolio as a narrative-driven RPG alternative to competitors. Losing a quarter of the team developing the sequel introduces scheduling uncertainty and potential scope adjustments.
Industry observers note the irony of Microsoft cutting staff while aggressively positioning itself as a player-friendly platform. The layoffs remove experienced developers from active projects, risking both game quality and team morale across the division. Obsidian's reputation as a talented studio built on founding RPG expertise makes these cuts particularly damaging to production continuity.
For players, the immediate concern centers on