State of Decay Studio Goes Independent From Xbox, Announces Layoffs Same Day

Undead Labs, the State of Decay studio, has split from Xbox and gone independent, confirming layoffs in the same announcement. State of Decay 3 is still on track for 2027, now also coming to PS5.

Undead Labs, the studio behind the State of Decay series, officially left Xbox's umbrella this Tuesday (September 22). The company is now independent and employee-owned, closing out more than a decade under Microsoft.

The good news came wrapped in bad news. In the same announcement where it celebrated the new chapter, the studio confirmed a round of layoffs it called "significant". No exact number was shared, just that it was saying goodbye to a lot of people who helped build the studio.

Studio head Philip Holt tried to strike a balanced tone in the official post: "Independence brings us closer to our community and lets us focus on what matters most: making the best games we can and earning the continued support of the people who choose to spend their time with us," he said, also thanking Xbox for the years together.

This kind of deal isn't exactly new. Microsoft had already done something similar with Double Fine and Compulsion Games, letting those studios leave with their own IP, back catalog and enough runway money to survive on their own. The difference this time is that it came bundled with job cuts, which changes the mood of the whole celebration quite a bit.

And the game holding all of this up? State of Decay 3 remains in development, currently in alpha, with a target of entering closed beta before the end of the year and a planned 2027 launch. The change that actually matters to players is that the game is no longer an Xbox exclusive: it's now confirmed for PS5 and PC too, while keeping its day one spot on Game Pass.

There are two ways to read this. Going independent usually means less corporate red tape and more creative control, which sounds like good news after the reports of burnout and a rough work environment that leaked out during the game's development. On the other hand, a studio that just left the nest and is already trimming staff isn't exactly a picture of stability, and nobody can promise the 2027 window survives untouched.

The timing stands out too. Undead Labs is getting through this the same week Xbox announced more internal cuts, while Ninja Theory wasn't so lucky and is shutting down after failing to find a buyer. For anyone just wondering if State of Decay 3 is still happening, the answer for now is yes. Just keep an eye on whether the dust from these layoffs ends up costing extra waiting time down the road.