Obsidian Entertainment might be building its next big project, Avowed, with Unreal Engine 5 technology. The news was first spotted by Reddit users on the LinkedIn page of the studio's Lead VFX artist, Aaron Dubois, who is specifically working on Avowed.
Obsidian Entertainment was indeed featured by Epic among the studios that are working on Unreal Engine 5 projects, but that wasn't necessarily a confirmation that Avowed would be made with the newest engine. After all, Obsidian also announced The Outer Worlds 2 last year, which is further away from release and therefore was a more likely candidate as many studios aren't that keen on switching engines mid-development.
Avowed, on the other hand, was announced in July 2020 as the studio's next epic first-person RPG set in the fantasy world of Eora, the same featured in the Pillars of Eternity games. According to rumors from late 2021, the game was approaching Alpha state and already looking good at the time.
If Avowed is to be released next year on PC and Xbox Series S|X as expected, there are good chances we'll see it again at the upcoming Xbox and Bethesda Games Showcase planned to be held on June 12th. Obsidian, which was acquired alongside fellow RPG developer inXile back in November 2018, is also working on the small-scale survival game Grounded, which should launch out of early access later this year. Furthermore, Pillars of Eternity creator Josh Sawyer is leading a small team to create a Disco Elysium-style RPG that could be released as early as this year, according to a rumor.
Last but not least, Jeff Grubb said a couple of months ago that Microsoft and Obsidian have been talking about potentially making Fallout New Vegas 2, though that project would be further down the line given the aforementioned schedule.