Updated July 2, 2026, at 3:38 p.m. BST / 10:38 a.m. ET / 8:38 a.m. PT

Bloomberg reporter Jason Schreier has denied reports that Obsidian is in negotiations to avoid closure. While the studio could certainly be affected by layoffs next week, XBOX reportedly still intends to keep it open.

Original article

We were warned: no one is safe from the next wave of layoffs at Microsoft. Arkane Studios, Double Fine, Compulsion Games, Ninja Theory, and Undead Labs are all under threat.

Now, The Game Business reports that another top-tier developer is currently fighting for its survival. That developer is Obsidian Entertainment. After launching Avowed, Grounded 2, and The Outer Worlds 2 last year, the American company is now in negotiations with Xbox to avoid closure.

While the studio was extremely prolific in 2025, commercial success was notably lacking. The failure of Call of Duty: Black Ops 7 could not be offset by the other productions from the Xbox studios, and these studios generate little revenue compared to giants such as Candy Crush, Minecraft, and Warcraft.

Microsoft now wants to refocus on its most profitable franchises.