Microsoft's Xbox division may conduct significant layoffs that could put Undead Labs, the developer of State of Decay, at risk of closure. Reports from GamesBeat and Windows Central indicate that Undead Labs is among the first‑party studios targeted after the fiscal year ending June 30. The company's upcoming State of Decay 3 has received a promotional push, including a trailer released earlier this month, and is expected to launch on Xbox Series X|S, PlayStation 5 and PC in 2027. Bloomberg's Jason Schreier said it is possible that some studios slated for closure could be spun out and become independent, but layoffs are likely to occur. Developers from other Xbox first‑party studios have asked Microsoft to provide layoff protections before any summer cuts. Rumors also suggest that the entire Xbox division might be spun out as a separate company. Microsoft has raised Xbox console prices and indicated that the division must improve its financial performance, which could lead to further restructuring. The fate of Undead Labs and State of Decay 3 remains uncertain as Microsoft evaluates financial pressures.