Prey 2 is NOT cancelled.
The internet loves a good rumor, but (thankfully) Bethesda has come out and squashed at least one of them. Bethesda made a post on their blog today stating that while Prey 2 has been delayed, it definitely hasn’t been cancelled. According to Bethesda the reason for the delay is that the development for Prey 2 hasn’t “progressed satisfactorily” and doesn’t meet their current quality standards. Bethesda says they have made a major investment in the development of Prey 2 and will not sacrifice quality to meet the release schedule. As a fan I’m totally OK with that.
Source: Bethesda Blog