Alibaba Sells Gaming Unit Lingxi Games for Over $2 Billion

Alibaba Group, a leading Chinese technology conglomerate, has reached a formal agreement to sell its gaming development unit, Lingxi Games, to Asia-based private equity firm Trustar Capital. The transaction, expected to exceed $2 billion according to Reuters sources, marks a significant step in Alibaba's strategic decision to reallocate its priorities towards artificial intelligence (AI) and cloud computing. Reports from Bloomberg, however, have pegged the deal's value at a minimum of $1.5 billion.

The agreement was announced via an internal memo sent to Lingxi Games staff by CEO Zhou Bingshu, which was reviewed by Reuters. The memo stated that Alibaba would transfer its entire stake in Lingxi to Trustar Capital, though specific financial details and the timeline for closing the deal were not publicly disclosed. Trustar Capital emerged as the preferred bidder, reportedly outcompeting other Chinese gaming companies such as 37 Interactive Entertainment and Century Huatong.

This strategic move by Alibaba is part of a broader restructuring effort led by CEO Eddie Wu. Wu is systematically divesting non-core assets to channel resources into strategic priorities like AI and cloud computing. Alibaba aims to generate $100 billion in AI revenue within the next five years and plans to invest approximately $53 billion into its AI infrastructure over three years.

Lingxi Games was notably known for "Three Kingdoms: Strategy Edition," a multiplayer strategy game developed in collaboration with Japan's Koei Tecmo, which achieved considerable success in China's competitive gaming market. Alibaba initially acquired Ejoy, later known as Lingxi Games, for $1 billion in 2017. Despite the unit being profitable, it was deemed not to align with Alibaba's renewed strategic focus, and its reliance on a single flagship title presented a concentration risk.

The sale also reflects a wider trend within China's technology sector. Tech giants that once built empires across various sectors including gaming, retail, and media are now adopting a colder logic of pruning non-core assets to fund their massive investments in AI and data centers. Rival ByteDance's sale of its gaming studio Moonton earlier this year indicates a similar shift across the industry.

Markets reacted positively to Alibaba's strategic realignment. Shares of Alibaba (BABA) gained on the Hong Kong stock exchange following the news. Analysts suggest that the company's intensified focus on AI and cloud computing could enhance its long-term growth potential and lead to more efficient capital allocation. Such asset divestitures are expected to provide significant funding for Alibaba's future technological investments.

Alibaba Chairman Joe Tsai and CEO Eddie Wu had previously stated in a letter published last year that the company had divested stakes in hypermarket chain Sun Art and department store operator Intime, generating a combined $2.6 billion, as part of efforts to streamline Alibaba's portfolio. This latest sale underscores the consistent execution of the company's 'selection and concentration' strategy.