Undead Labs goes independent as layoffs accompany transition

Undead Labs has become an independent, employee-owned studio after separating from Microsoft and Xbox Game Studios, the developer said, while confirming that State of Decay 3 remains in development and is still planned for release on Xbox Game Pass on its launch day. The studio also said it is laying off a significant number of staff as part of the transition. The studio disclosed the layoffs in a LinkedIn statement but did not provide a headcount. Its announcement described the separation as a new chapter for the developer, which Microsoft acquired in 2018. Undead Labs said independence would allow it to focus on making games and maintaining support from its community. State of Decay 3 is in development, with a closed beta planned before the end of 2026 and a 2027 release target, according to statements from the studio. The game is also planned for Xbox Series X|S, PlayStation 5 and PC. Microsoft said the title will have a new publisher but has not identified the company. The continued Game Pass plan means the game is still expected to be available to subscribers on launch day despite Undead Labs’ separation from Microsoft.