FromSoftware abandoned the sequel to Demon's Souls due to disappointment with Sony, which did not believe in the game

FromSoftware did not want to work on the sequel to Demon's Souls with Sony because of dissatisfaction with the way the company promoted the first game. Former PlayStation executive Shuhei Yoshida told about it.
Here's What We Know
Demon's Souls was developed by FromSoftware in collaboration with Sony Japan Studio. Initially, it was planned that the game would be released globally under the Sony brand, but this did not happen. At that time, Sony did not see the game's global appeal due to its high complexity and negative feedback in early tests.
As a result, Sony decided not to localise Demon's Souls for the English-speaking market. The game was published by Atlus in the US and Bandai Namco in Europe. But we all already know that the game was a success outside of Japan.
In the Sacred Symbols podcast, Yoshida explained that Sony wanted to work with FromSoftware on a sequel, but the studio refused and decided to work with Bandai Namco on Dark Souls. "FromSoftware was already working on a sequel, but they were very disappointed with the way PlayStation treated them," he said.
Although Sony later collaborated with FromSoftware again to create Bloodborne for PS4, Yoshida admitted that the company failed to appreciate the potential of Demon's Souls in the beginning. He also shared his personal experience: "When I first played Demon's Souls, I thought it was a bad game."
Now Demon's Souls is considered a classic of the Soulslike genre and has a huge fan base.
Source: Sacred Symbols