The same day Undead Labs celebrated becoming an independent, employee-owned studio, it also confirmed it had let go of a significant number of its staff. The announcement came via LinkedIn — a post of studio pride and studio loss, arriving together.
Employee-Owned and Free of Xbox
Microsoft acquired Undead Labs back in 2018, eight years after the Seattle studio first released State of Decay in 2013 and built a cult following around its open-world zombie survival formula. That chapter is now closed. As of 22 September 2026, Undead Labs has “successfully transitioned” out of the Xbox Game Studios umbrella, completing a separation process that mirrors the paths taken by Compulsion Games and Double Fine, who similarly returned to independent management in August.
Unlike a typical studio sale, this one left ownership in the hands of the people who work there. Undead Labs now operates as an employee-owned company — no shareholders, no parent publisher deciding its direction. Studio head Philip Holt framed it simply: “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.”
What makes the arrangement unusual is that Undead Labs still hasn’t named the publisher handling State of Decay 3’s release. Both Compulsion and Double Fine at least outlined their new arrangements when they announced independence. Undead Labs offered no equivalent clarity — the new financial backer and distribution partner remain undisclosed.
Significant Layoffs on the Same Day as Independence
The studio’s announcement of freedom and its announcement of job losses arrived on the same date. “Unfortunately, today we are also saying goodbye to a significant number of our colleagues,” Undead Labs wrote on LinkedIn. “It’s difficult to reach this moment knowing that not everyone who helped get us here gets to make the rest of the journey with us.”
No headcount has been provided. The studio has not said how many people were cut, which departments were affected, or what the losses mean for production schedules. “Significant” is the studio’s own word, and readers should treat it accordingly — not as a precise figure, but as an acknowledgement that the impact is not trivial.
Keep in mind: Undead Labs’ layoffs are separate from Xbox’s 268 job cuts announced the same day. The studio had already completed its exit from Xbox before making its own reductions.
The timing is suggestive. Becoming independent means operating on whatever funding the studio has secured rather than a parent company’s budget. Resizing on day one of independence suggests those resources required a smaller team than the one that made the journey out of Xbox. But the studio has made no official connection between the two events, and none should be assumed.
State of Decay 3 Is Still Coming in 2027
For players who have been following State of Decay 3, the practical picture remains unchanged. The game is still in alpha and still targeting a closed beta before the end of 2026. The full release is planned for 2027, and it will land day one on Xbox Game Pass — a commitment that survived the independence process intact, which is not something every departing Xbox studio managed to negotiate.
The franchise is also breaking exclusivity for the first time: State of Decay 3 will release on Xbox Series X|S, PC via Steam, and PlayStation 5. For the roughly twelve years of State of Decay’s existence, PlayStation players were locked out. That changes with this entry.
Xbox confirmed the Game Pass commitment in an internal memo published on Xbox Wire, noting that Undead Labs, “with a new publisher, will release State of Decay 3 day one on Game Pass.” The publisher’s name was absent from the memo, as it was from Undead Labs’ own announcements. At some point before the 2027 launch, that information will need to come out — but for now, the studio is keeping it close.
