Microsoft is preparing a sweeping round of layoffs across its gaming divisions, potentially shuttering Undead Labs, the studio behind State of Decay and State of Decay 2. Sources describe the restructuring as "the biggest single cut series for Xbox," signaling a major upheaval at the company.
Undead Labs faces potential closure as Microsoft consolidates its portfolio. The studio developed the zombie survival franchise that built a dedicated audience through two entries, with State of Decay 2 launching on Xbox Game Pass and becoming a staple of Microsoft's subscription service. Closing Undead Labs would represent a significant loss for the studio's roughly 100+ employees and remove an established IP from Microsoft's lineup.
Bethesda Game Studios and Blizzard Entertainment are also bracing for substantial workforce reductions. Bethesda, known for The Elder Scrolls series and Fallout, operates as a cornerstone of Microsoft's first-party strategy following its 2021 acquisition. Blizzard, owned by Activision Blizzard (which Microsoft acquired in 2023), creates World of Warcraft and Diablo, generating billions in revenue annually. Both studios cutting staff signals Microsoft is willing to reshape even its most profitable divisions.
The timing follows Microsoft's previous round of layoffs in 2023, when the company cut nearly 1,900 positions across its gaming division. This new wave appears even more aggressive, targeting established studios rather than isolated departments.
Industry observers view this as Microsoft's response to mounting pressure on game development costs and subscription service profitability. Game Pass growth has slowed, and major titles have faced delays. Rather than invest further in development, Microsoft appears to be consolidating operations and cutting overhead.
For players, closure of Undead Labs means future State of Decay content stops. Server support for existing titles may eventually end. Bethes