Microsoft has announced the most significant restructuring in Xbox history, a move that will see over 3,200 employees laid off throughout 2027. The company’s Xbox division is currently operating at margins significantly lower than its competitors, a reality CEO Asha Sharma attributed to an all-in strategy on Game Pass that failed to deliver the expected financial results.
As part of this shift, four gaming studios are being transitioned out of the Xbox family. Compulsion Games and Double Fine Productions will return to private ownership as independent studios. Meanwhile, Ninja Theory and Undead Labs have entered terms to join new owners, bringing their respective projects—Senua and State of Decay 3—with them.
The Future of State of Decay 3
While the news of widespread layoffs and studio divestments has created uncertainty across the industry, fans of State of Decay 3 have received confirmation that the title remains in active development. According to Sharma, the transition includes funding specifically earmarked to complete and expand the zombie survival sequel. The game is currently slated for a 2027 release.
However, the move away from Xbox ownership may change how players access the game. A report from GameFile indicates that while the title is still set for release, the new deal does not obligate the game to Xbox-specific requirements. This includes the potential exclusion of State of Decay 3 from the Game Pass subscription service, as the studio is no longer bound by those internal terms.
A Flatter Xbox Organization
The restructuring is designed to address internal inefficiencies, specifically an excessive number of management layers. Sharma noted that some departments currently operate with up to 14 layers of management, leading to blurred accountability and slow decision-making. The company plans to reduce this to no more than five layers, and in many cases, three.
These changes are accompanied by leadership shifts. Helen Chiang, an Xbox veteran of nearly two decades, has been appointed as the company's first Chief Operating Officer. Her role will focus on centralizing investment decisions and implementing a singular operating model to stabilize the division's margins. These reductions will impact various sectors, including Bethesda/ZeniMax, Activision, Blizzard, King, and Mojang, though Sharma maintained that no publicly announced first-party titles are being canceled.
For the State of Decay community, the focus remains on the upcoming title's core features. The third installment is set to introduce highly requested shared-world multiplayer, allowing for four-player co-op, shared progress, and the ability to manage multiple settlements across a community network.