🏢 What Happened to Undead Labs?

On September 22, 2026, Undead Labs confirmed that it had completed its separation from Xbox and is now an independent, employee-owned studio. The transition follows Microsoft's broader Xbox restructuring and studio divestitures.

The studio retains the State of Decay franchise and continues development of State of Decay 3.

👥 Layoffs After Independence

The transition was accompanied by layoffs.

Undead Labs said a "significant number" of employees were affected, including developers who had worked on State of Decay 3. The studio has not publicly given an exact number.

This is separate from the 268 Xbox roles eliminated in the wider September restructuring.

🧟 State of Decay 3 Status

Development of State of Decay 3 continues at Undead Labs.

The game is currently in alpha, with closed beta testing planned before the end of 2026 and a 2027 launch still targeted.

Xbox has also confirmed that the game will launch day one on Game Pass despite Undead Labs becoming independent.

🎮 What Is State of Decay 3?

State of Decay 3 is the next entry in Undead Labs' open-world zombie survival series.

It features:

• Open-world survival
• Community management
• Base building
• Permadeath
• Evolved zombie threats
• Solo gameplay
• Shared-world co-op for up to four players

The game is planned for Xbox, PC and PlayStation 5, with Game Pass availability confirmed.

❓ Quick FAQ

Is Undead Labs still owned by Xbox?
No. It is now an independent, employee-owned studio.

Were there layoffs?
Yes. A significant number of employees were affected, but no exact figure has been announced.

Is State of Decay 3 cancelled?
No. Development is continuing.

When is State of Decay 3 releasing?
It is currently targeting 2027.

Will it still be on Game Pass?
Yes. Xbox says it will launch day one on Game Pass.

🎯 Quick Summary

Undead Labs = Independent + Employee-Owned + State of Decay 3 Still in Development.

The studio's separation from Xbox comes alongside significant layoffs, but State of Decay 3 remains in active development and is still targeting a 2027 release.