Just weeks after State of Decay 3 made a major appearance during the Xbox Games Showcase 2026, fresh reports suggest the highly anticipated zombie survival game could be in danger of cancellation as Microsoft reportedly looks for a buyer for its developer, Undead Labs.

According to reports from GamesBeat, later corroborated by Windows Central, Microsoft is exploring options to sell the Seattle-based studio as part of a wider restructuring of its Xbox business. If no buyer emerges, the reports claim State of Decay 3 could ultimately be cancelled, despite the game already being in active playtesting and targeting a 2027 release.

The news comes as Xbox prepares for another wave of layoffs following the end of June, with several first-party studios reportedly fighting to avoid closure.

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