Microsoft Xbox Studios Face Potential Layoffs Amid Game Pass Pressures

Chris Avellone, co‑founder of Obsidian Entertainment, said on X that the studio may have started work on a sequel to its RPG Avowed, calling it "Avowed 2" and noting that George Ziets is overseeing the project. Avellone stressed the information is unconfirmed and should be taken with caution.

Separately, Bloomberg journalist Jason Schreier reported that Microsoft could announce a significant wave of layoffs across its Xbox divisions after the fiscal year ends on 30 June. He linked the pressure to the performance of Game Pass titles, past studio closures such as Perfect Dark, Everwild and Project Blackbird, and the costs of the Activision Blizzard acquisition. Studios mentioned include Compulsion Games, Double Fine and Bethesda teams working on The Elder Scrolls and Fallout, with internal references to a “bloodbath” scenario.

Microsoft has not commented on either the Avowed 2 rumor or the potential staffing cuts.