The independent studio posted on LinkedIn that it is parting ways with a "significant" number of colleagues, describing the move as a difficult but necessary step following its recent separation from Microsoft’s Xbox division.
In an interview with IGN, Undead Labs Studio Head Philip Holt emphasized that State of Decay 3 remains in active development and that the layoffs will not impact the game’s scheduled launch, reaffirming the team’s commitment to delivering the experience fans have been awaiting.
Holt added that the remaining team is continuing work on schedule and expressed gratitude to everyone who has contributed to the project, noting that the departing developers’ contributions will still be reflected in the final product.
The staff reductions are part of a broader "reset" of the Xbox brand that Microsoft publicized earlier this summer, a strategy that has seen several Xbox studios spin out as independent entities.
Holt highlighted the benefits of independence, saying it brings the studio closer to its community and allows it to focus on making the best possible games while maintaining player trust.
Industry observers note that while many Xbox teams have successfully transitioned to independence, other studios such as Ninja Theory are confronting closure after failed negotiations with potential buyers, underscoring the uncertain landscape for former Microsoft-owned developers.