Undead Labs goes independent and worker-owned as State of Decay 3 targets 2027
Undead Labs has split from Xbox and become an independent, worker-owned studio. The State of Decay developer confirmed the change in details published on 23 September 2026. State of Decay 3 is still in development.
Microsoft had owned Undead Labs since 2018. Studio head Philip Holt said the move to independence includes layoffs affecting a significant number of staff. No exact count of roles was given.
State of Decay 3 is aiming to enter closed beta, a limited test with outside players, before the end of the year. The release target is 2027. The game is in development for PC, PlayStation and Xbox, which would take the series beyond its Xbox and PC roots.
It will remain a Game Pass game, part of Microsoft's subscription library, after the separation. Eurogamer reported the studio has a new publisher that has not been publicly named. A publisher is the company that funds, markets and distributes a game, so that deal will shape how State of Decay 3 reaches players.
The split follows Xbox's restructuring announced on 6 July 2026. At the time, Xbox said Undead Labs was one of the studios it was parting with and that a buyer had been found without naming one. In its announcement, Xbox said Ninja Theory and Undead Labs had entered terms to join new ownership with funding to complete and grow their games. Xbox
That restructuring involved about 1,600 role eliminations on the day of the announcement, according to Xbox. A separate report put the planned total at 3,200 employees and said Double Fine and Compulsion Games were also to become independent. Kotaku Those figures show the scale behind the summer shake-up.
State of Decay 3 had featured at the Xbox Games Showcase and was running playtests in late June 2026. Overnight reports at that time suggested the game and studio were at risk as Xbox job cuts loomed. IGN The new plan points in a different direction. The studio is not closing.
For players, this means the same survival series with a new structure. The studio is worker-owned, so staff hold a stake in the organisation. The game is still coming. The platforms are wider.
