State of Decay 3 Receives Positive Update Amid Studio’s Resilience Against Xbox Layoffs

Things have taken a rough turn for Xbox recently. In July, the company revealed plans for significant layoffs, impacting 1,600 employees immediately and another 1,600 over the next fiscal year. As part of these cuts, Xbox announced it would be parting ways with several well-known studios, including Double Fine, Ninja Theory, Compulsion Games, and Undead Labs.

On a brighter note, Undead Labs, the team behind the open-world zombie survival franchise State of Decay, has successfully navigated its split from Microsoft. The studio has announced that it is now an independent, employee-owned entity.

The team confirmed that development on State of Decay 3 is still underway, with the game currently in alpha. They are targeting a closed beta by the end of 2026, aiming for a full release on Xbox, Game Pass, PC, and PlayStation in 2027. Despite the recent upheaval, it’s noteworthy that the game will still be available on Game Pass, indicating that the relationship between Undead Labs and Microsoft isn’t entirely severed. The announcement stated that this transition “marks a new chapter in a relationship between Undead Labs and Microsoft that spans more than 15 years.” Microsoft published the original State of Decay in 2013 and acquired Undead Labs in 2018.

“Independence brings us closer to our community and lets us focus on what matters most: making the best games we can and earning the continued support of the people who choose to spend their time with us,” said Philip Holt, studio head of Undead Labs. “State of Decay exists because millions of players have made that choice over the years, and we’re dedicated to honoring their trust.” The announcement also mentioned that more details about the studio will be shared in the future and that applications for playtesting State of Decay 3 are still open.

As for the other studios affected by Xbox’s ongoing “major reset,” Double Fine and Compulsion Games have both successfully separated from Microsoft, acquiring their intellectual properties, back catalogs, and funding. Ninja Theory, known for titles like Hellblade: Senua’s Sacrifice, DmC, and Enslaved: Odyssey to the West, is currently in a more precarious position. Microsoft reported that two separate acquisition deals fell through and is now consulting with employees regarding a proposed closure while exploring other options. Xbox is also looking to divest from Arkane Studios, the creators of Dishonored, Prey, and Deathloop.

Earlier today, Microsoft announced plans to restructure most of its remaining studios, consolidating Halo development under Activision, moving Obsidian under Bethesda, merging the Forza and Fable teams, and more.