A disagreement about the IP rights to Celeste hasn’t been the only reason.

Celeste's developer Extremely OK Games just announced the cancellation of Earthblade in a blog post on Wednesday.
Earthblade was meant to be the spiritual successor of Celeste, borrowing its pastel pixel art style and Metroidvania exploration elements.
First footage of the game was presented at the Game Awards of last year, showing that the game was supposed to follow main character Névoa, exploring a ruined Earth in intricate 2D levels with a gloomy tone.

Disagreement about the IP of Celeste
Explaining their decision, the developer wrote:
We made this decision in December and felt it best to wait until now to announce it. For us on the inside we’ve had some time to process, grieve, and work toward accepting this, although that process is nonlinear and still ongoing.
In the post, they mention a "disagreement about the IP rights of Celeste" between current Extremely OK Games members Maddy Thorson and Noel Berry and former art director Pedro Medeiros.
While they "eventually reached a resolution, but both parties also agreed in the end that we should go our separate ways". Medeiros left the team in November, working on a new game called Neverway.
Focus on smaller projects
Even though the disagreement wasn’t the sole reason for the cancellation of Earthblade, it prompted Extremely OK Games to "take a serious look at whether fighting through to finish Earthblade was the right path forward".
Other members of the team left the company in 2024 as well, leaving Thorson and Berry as the only remaining employees, making them realize that they want to refocus on "smaller-scale projects".
Looking forward, the team wrote:
Celeste’s success applied pressure on us to deliver something bigger and better with Earthblade, and that pressure is a large part of why working on it has become so exhausting. Pedro isn’t to blame for this – in fact the split with him has given us the clarity to see that we have lost our way, and the opportunity to admit defeat. I feel many ways about it, but one big feeling is undoubtedly relief.
Did you play Celeste? Have you been excited for the upcoming Earthblade?