Undead Labs lays off "significant" staff after gaining independence from Xbox
The State of Decay studio, now employee-owned, cuts jobs as it splits from Microsoft to find a new publisher.
What to know
- Undead Labs completed its split from Xbox and is now independent and employee-owned, but announced significant layoffs without disclosing exact numbers.
- Some laid-off employees worked on State of Decay 3, which will seek a new publisher while maintaining its Xbox Game Pass day-one commitment.
- Microsoft granted the studio independence with IP, back catalogs, and runway funding—matching the terms given to Double Fine and Compulsion earlier in 2026.
“They are exceptionally talented developers who have poured years into the State of Decay franchise: solving hard problems, looking after one another, and helping shape both this game and this studio.”
Undead Labs · Game Developer ↗
Undead Labs Game developer, State of Decay studioMicrosoft Former parent company
How it unfolded 2 developments, newest first · click a bar or a number to jump articles
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Microsoft divested Undead Labs under same terms as Double Fine and Compulsion
Reports clarified that Microsoft granted Undead Labs independence with IP, back catalogs, and runway funding—the same terms under which Double Fine and Compulsion split from Xbox earlier in 2026. Undead Labs will seek a new publisher for State of Decay 3 while maintaining the day-one Xbox Game Pass commitment.
“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.”
— Undead Labs · source -
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Undead Labs announces independence and significant layoffs
Undead Labs confirmed it has successfully divested from Xbox and become an independent, employee-owned studio. The announcement included confirmation of significant layoffs, though the exact number was not disclosed. The studio noted that some of those affected worked on State of Decay 3.