By Fletcher Wilkinson 
A new report has claimed that Undead Labs, the studio behind State of Decay 3, could be among several Xbox studios facing an uncertain future as Microsoft reportedly prepares for another round of restructuring.
While Xbox has not officially confirmed any plans, multiple reports suggest the company could make significant changes to parts of its Xbox Game Studios division following the close of its financial year (30th June 2026).
According to a report from GamesBeat, Microsoft is exploring options for a number of its first-party studios with the possibility that some could be sold if suitable buyers are found.
The report claims the following studios are among those potentially affected:
- Undead Labs (State of Decay 3)
- Double Fine Productions
- Compulsion Games
- Ninja Theory
According to the report, Microsoft may look to sell some studios rather than close them outright although no decisions have been officially announced.
It’s important to stress that these claims remain unconfirmed and Microsoft has yet to comment publicly on the reports.
The speculation gained further momentum after Jez Corden of Windows Central stated that the GamesBeat report aligns with information he had independently received.
According to Corden, Undead Labs is believed to be among the studios Microsoft is considering as part of broader cost-cutting measures.
The report comes from GamesBeat, which apparently confirms and coincides with information I received over the weekend. Indeed, Undead Labs seems to be among the studios Microsoft is looking to offload or shut down as part of its fiscal year end.
I’m told the cuts are being driven by Microsoft corporate CFO Amy Hood, who has demanded a variety of savings at Xbox to offset losses … which were also a result of her previous 30% margin demands.”
The reports suggest any potential changes could happen shortly after Microsoft’s financial year concludes on June 30, although no official timeline has been confirmed by Xbox.
The reports naturally raise questions about the future of State of Decay 3 which remains one of Xbox’s most anticipated first-party exclusives.
Earlier this year, we were given an extended look at the game and it was a great showing providing us with a deeper look at the upgraded visuals, larger open world, improved combat and deeper survival mechanics. Development appeared to be progressing well, making the latest reports particularly surprising.
At this stage there is nothing to suggest the game itself has been cancelled or delayed.
Until Microsoft issues an official statement it’s impossible to know exactly what will happen.
The company has not confirmed:
- Whether any studios are being sold
- Whether closures are planned
- How ongoing game development could be affected
As with all reports based on unnamed sources it’s worth treating the information cautiously until official confirmation arrives.
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