State Of Decay 3 Was Announced Early To Keep Undead Labs On Microsoft’s Radar
Undead Labs, the developer behind the State of Decay franchise, has departed from Microsoft’s Xbox Game Studios to become an independent, employee-owned studio. The announcement highlights a significant shift for the studio, which had announced State of Decay 3 back in 2020—a decision made partly as a strategic move to keep both the project and the studio on Microsoft’s radar during the company’s aggressive acquisition phase.
This departure represents one of several exits from Microsoft’s gaming division following what has been characterized as a “bloody reset” throughout 2026. The restructuring has resulted in widespread job cuts across Xbox Game Studios, fundamentally altering Microsoft’s gaming portfolio and strategic direction.
The transition to independence came with difficult decisions for Undead Labs, requiring the studio to reduce its workforce as it adapted to its new status outside Microsoft’s corporate structure. The announcement raises questions about the circumstances surrounding the separation and whether internal tensions contributed to the parting.
The 2020 announcement of State of Decay 3 proved strategic for the studio at the time, helping maintain visibility within Microsoft’s organization when the company was actively expanding through acquisitions. However, Microsoft’s subsequent gaming division overhaul has altered the landscape considerably, leading to the studio’s independence and its own necessary adjustments.