Undead Labs Goes Independent After Xbox Separation, Confirms State of Decay 3 Is Still In Development

Undead Labs has confirmed that State of Decay 3 is still in development after the studio separated from Xbox, becoming an independent, employee-owned developer.

Undead Labs shared this information in a September 22 blog post, where they revealed that State of Decay 3 is currently in alpha, with plans to enter a closed beta by the end of 2026. The game is scheduled to launch in 2027 on Xbox, Game Pass, PC, and PlayStation.

“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. State of Decay exists because millions of players have made that choice over the years, and we’re dedicated to honoring their trust," Studio Head of Undead Labs Phillip Holt said in a statement.

“We’re enormously grateful for our years as part of XBOX and for everything that relationship has made possible. Microsoft has been part of the State of Decay story from the very beginning, and we’re proud of everything we’ve accomplished together.”

While the latest round of Xbox layoffs has resulted in some baffling business decisions that are leaving fans equal parts confused and concerned, players are largely welcoming Undead Labs' most recent announcement, particularly the fact that the studio is now owned by its own employees.

"Employee owned? That's awesome, happy for the crew! I think that is a great sign that the team really believes heavily in the work they've put into State of Decay 3," one user wrote on Reddit.

"Independent but keeping it on GamePass... has to be the biggest double win I've seen in a long time. Devs get their studio and subscribers still get to play it. While people who canceled their GamePass just outright buy it," another said.

"Nice to have some seemingly good news. Not a small feat to free themselves from Xbox," another wrote.

Xbox's latest shakeup comes as part of its continued restructuring that began this summer. Perhaps the biggest takeaway from today's events is the news that Call of Duty developer Activision is now taking over development of Halo, with Rare also shoved under their umbrella.

This follows Xbox's divestment of several other studios over the last few months. One of the most notable of these was Psychonauts developer Double Fine, which has managed to stay afloat in the aftermath and was even given full ownership of its IPs in the amicable separation. It seems that Undead Labs has also followed this path, and is still going full-speed ahead to give players its next game.

IGN's Michael Highham got the chance to play a 30-minute demo for State of Decay 3 at Gamescom this August, and walked away from his time with the game feeling like it showed "a lot of promise."

"Even as an early alpha build, I got a good impression of the improved gunplay and movement, and the general feeling that this is a State of the Decay worthy of the current generation while building on the series' fundamentals," he wrote.