In a nutshell

• Undead Labs, developer of State of Decay 3, has been named as another Xbox studio facing potential closure.
• The Seattle‑based studio is reportedly searching for a buyer, with 110 jobs at risk.
• This follows reports of Xbox’s wider restructuring, with layoffs expected across Blizzard, Bethesda, and more.

Undead Labs, the studio behind State of Decay 3, has been identified as the latest Xbox developer at risk of closure. The news comes just weeks after the game’s re‑reveal at the Xbox Games Showcase 2026, where it was confirmed for a 2027 release on PS5, Xbox Series consoles, and PC.

State of Decay 3 is Looking Shaky

According to a report by Jeff Grubb at GamesBeat, the Seattle‑based studio is actively seeking a buyer to avoid shutdown, with around 110 jobs on the line. Undead Labs was acquired by Microsoft in 2018 but has yet to release a new title under its ownership.

It’s possible some of the studio jobs will be saved if a buyer is found for any one of the four studios: Double Fine Productions (Kiln, Keeper), Undead Labs (State of Decay), Compulsion (South of Midnight), and Ninja Theory (Hellblade/Senua).

At the least, hundreds of jobs are at stake. Double Fine Productions could lose 100 jobs if it is shut down. Undead Labs could lose 110 jobs. Compulsion could lose 90 jobs, and Ninja Theory could lose 135 jobs. All told, that’s about 435 jobs that could be lost.

Wider Xbox Reset

This development follows Xbox CEO Asha Sharma’s announcement of a company‑wide “reset,” which is expected to bring significant layoffs and closures. Previously, studios such as Compulsion Games, Double Fine Productions, and Ninja Theory were reported to be negotiating independence to avoid shutdown.