# Undead Labs becomes employee-owned while State of Decay 3 remains on track

- URL: https://talkfuse.com/story/state-of-decay-3-gets-encouraging-update-as-studio-escapes-xbox-layoffs/
- Published: 2026-09-22T23:34:35+00:00
- Updated: 2026-09-23T05:47:16+00:00
- Original publisher: Polygon
- Original article: https://www.polygon.com/undead-labs-state-of-decay-3-microsoft-layoffs-closures/
- Topics: Entertainment, Gaming, Software, Technology

## Key points

- Undead Labs successfully separates from Microsoft, remains independent game developer
- State of Decay 3 proceeding to 2027 release on multiple platforms including Game Pass
- Reflects mixed outcomes from Xbox's sweeping restructuring and studio diversification strategy

## Summary

Undead Labs has completed its separation from Microsoft and is now operating as an independent, employee-owned studio, marking a successful outcome amid Xbox's broader restructuring. The studio behind the State of Decay franchise will continue developing State of Decay 3, which is currently in alpha, with the game maintaining its planned release across Xbox, Game Pass, PC, and PlayStation in 2027. This separation represents a rare positive resolution within the studio diversification announced as part of Xbox's "major reset," allowing the team to operate independently whilst preserving its business relationship with Microsoft.

The separation follows Xbox's announcement in July of 3,200 job cuts across two fiscal years and plans to divest from several studios. Microsoft's restructuring has yielded mixed results among affected studios: whilst Undead Labs, Double Fine, and Compulsion Games have separated successfully with their intellectual property and secured funding, Ninja Theory faces potential closure after two acquisition deals fell through. State of Decay 3 is targeted for a closed beta before the end of 2026, with both companies emphasising the continuation of their 15-year partnership, which began when Microsoft published the original game in 2013 and acquired the studio in 2018.

## Coverage

- [Polygon: Undead Labs becomes employee-owned while State of Decay 3 remains on track](https://www.polygon.com/undead-labs-state-of-decay-3-microsoft-layoffs-closures/)
- [Push Square: State of Decay Dev Survives Xbox Layoffs, Goes Independent as Third Game Targets PS5](https://www.pushsquare.com/news/2026/09/state-of-decay-dev-survives-xbox-layoffs-goes-independent-as-third-game-targets-ps5)
- [IGN: Undead Labs Goes Independent After Xbox Separation, Confirms State of Decay 3 Is Still In Development](https://www.ign.com/articles/undead-labs-goes-independent-after-xbox-separation-confirms-state-of-decay-3-is-still-in-development)
- [Push Square: State of Decay 3 Dev Hit with 'Significant' Layoffs After Going Independent](https://www.pushsquare.com/news/2026/09/state-of-decay-3-dev-hit-with-significant-layoffs-after-going-independent)

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Summarised by TalkFuse (https://talkfuse.com/). Quote the original publisher for the reporting and link this page for the summary and discussion.