🏢 What Happened to Undead Labs?
Undead Labs was previously part of Xbox Game Studios, but Microsoft began restructuring its first-party portfolio in 2026.
In September, Xbox confirmed that Undead Labs had successfully transitioned to new independent management, following the same general divestiture approach previously used for Compulsion Games and Double Fine. The studio also has a new publisher for State of Decay 3.
Important: Xbox's official announcement describes the studio as moving to independent management. It does not explicitly use the phrase "employee-owned" in the announcement, so the wiki should avoid presenting employee ownership as a confirmed legal structure unless Undead Labs provides further documentation.
🧟 What Happens to State of Decay 3?
The separation does not mean State of Decay 3 has been cancelled.
The game remains in development and is currently targeting a 2027 release. Xbox says it will launch day one on Game Pass under the studio's new publisher arrangement.
The game features:
- Open-world survival
- Settlement building
- Survivor communities
- Solo play
- Shared-world co-op for up to four players
- Expanded zombie threats
- Weapon crafting
- Unreal Engine 5
🧪 State of Decay 3 Closed Beta
Undead Labs has already been running alpha playtests during 2026.
The studio announced that State of Decay 3 would expand into closed beta testing before the end of 2026, with more players and platforms being added over time.
The testing is intended to help the team stress-test the game's large open world and untethered multiplayer while gathering feedback on combat, survival systems, movement and other gameplay features.
🔄 What Does the New Structure Mean?
The move gives Undead Labs greater independence from Microsoft's internal studio structure while allowing the team to continue working on its existing franchise.
Xbox has said the studio will have funding and a new publishing arrangement around State of Decay 3.
For players, the biggest takeaway is simple:
Undead Labs is no longer operating as a traditional Xbox-owned studio, but State of Decay 3 remains alive and is moving toward its 2027 launch.
📚 Quick FAQ
Is Undead Labs still part of Xbox?
It has transitioned to independent management as part of Microsoft's studio divestitures.
Is Undead Labs officially employee-owned?
Xbox confirms independent management, but its announcement does not explicitly establish an employee-owned legal structure.
Is State of Decay 3 cancelled?
No. It remains in development and is targeting 2027.
When is the closed beta?
Closed beta testing is planned to expand before the end of 2026.
Will State of Decay 3 be on Game Pass?
Yes. Xbox says it will launch day one on Game Pass.
🎯 Summary
Undead Labs' move away from Xbox is part of Microsoft's wider 2026 restructuring. The studio has transitioned to independent management with a new publisher, while State of Decay 3 continues toward its 2027 release. Its testing program is also expanding from alpha into closed beta, giving more players a chance to experience the game before launch.