Avowed and The Outer Worlds 2, didn't do that well, not because Obsidian couldn't make better games anymore, they were told to make them for Gamepass, if Obsidian had stuck to their 1st trailer, and made their version of Skyrim, it would be a different story, Obsidian can still make top RPG's, but the management need to let them.
While Grounded is very Gamepass fodder, Avowed seemed to be imploding even before the MS purchase. It seemed they had to do a reset because it sounded like the team wasn't working.
I don't think the "remove multiplayer" came from Microsoft, for example, but who knows.
Also, while Microsoft may have dictated elements of OW2, I don't think anyone here has said that OW2 is "less" than OW1, it's just more of it, but maybe I'm wrong.
My vibe on OW2 release was (1) the marketing was poorly done and felt late, (2) the inflated price point set a bad tone out of the gate (even though fixed), and (3) there's the "well, I have to play the first game to make sense of the 2nd game" and if the first game isn't that great (or it's just "fine"), it's hard to get excited for the sequel.
Maybe it's me, but I feel like Pillars 2 suffered that as well - Pillars 1 seemed to draw an audience, possibly to support a struggling studio and the underdog story, but Pillars 2 didn't seem to have the same reception, could be the same reason as OW2.
Also, I think the Obsidian folks have even said something that hurt them was releasing two games in the same year because of the logistic problems, but I don't know how much that contributed to either game's reception. I usually only like playing games with a good story, and neither OW2 or Avowed seemed to have a story that players got excited about or even talked about, and the companions seemed to be largely forgettable, which is definitely different from previous Obsidian games.
Anyway, I think Obsidian unfairly gets the shaft for some things, but fixing their stories should be an easy fix, hopefully with the new people they've brought in will fix that.