Alibaba Sells Lingxi Games to Trustar in $2B+ Deal

Alibaba Group has agreed to sell its video-game developer Lingxi Games to Asian private-equity firm Trustar Capital, extending a sweeping effort to shed non-core assets while directing considerably more money toward artificial intelligence and cloud computing.

The transaction is expected to bring Alibaba more than $2 billion, according to a person familiar with the matter cited by Reuters. An internal memo sent to Lingxi employees on Monday, August 17, confirmed that Alibaba and Trustar had reached a formal agreement after several rounds of negotiations.

Alibaba will transfer its entire stake in Lingxi Games to Trustar. The internal memo, however, did not disclose the transaction price, expected closing date, regulatory requirements or other conditions. That distinction matters: the $2 billion-plus figure remains source-reported rather than an officially disclosed purchase price. Bloomberg had earlier put the value at at least $1.5 billion, while The Wall Street Journal separately reported a valuation above $1.5 billion.

Lingxi's management is staying in place

Lingxi chief executive Zhou Bingshu told employees that he and the existing management team would continue running the company following the ownership change, suggesting Trustar is buying the studio as an operating gaming business rather than planning an immediate restructuring.

Zhou described Trustar, formerly known as CITIC Capital, as having the industry resources and operational experience needed for Lingxi's next stage of development. Trustar has a sizeable investment platform of its own: its private-equity business says it currently manages roughly $10.5 billion of committed capital, with operations spanning China, Japan and the United States.

Lingxi has already been through a major leadership transition. In March 2024, founder Zhan Zhonghui and other senior executives stepped aside as Alibaba pushed younger managers into leadership roles. Zhou, who had led development of Lingxi's biggest hit, took over the business.

The studio produced one of Alibaba's biggest gaming hits

Lingxi traces its roots to Guangzhou Ejoy, founded by former NetEase executive Zhan Zhonghui. Alibaba acquired Ejoy in 2017 at a valuation of about $1 billion, and the operation later became Lingxi Games.

Its breakthrough title was Three Kingdoms: Strategy Edition, also known internationally as Three Kingdoms Tactics, a strategy game based on China's Three Kingdoms period and developed in collaboration with Japan's Koei Tecmo.

Sensor Tower estimated that the game had generated approximately $1.2 billion in lifetime player spending by March 2021, less than two years after its September 2019 launch. China accounted for about $1.1 billion, or 96.2%, of that spending in Sensor Tower's tracked data. Its best month at the time was May 2020, when estimated revenue reached $91.7 million.

The title is still producing revenue years later. Sensor Tower's current listing estimates roughly 20,000 downloads and $4 million in revenue during the latest month for the game, although such figures do not capture all third-party Android spending in China and therefore should not be treated as Lingxi's complete financial performance.

A sale above $2 billion would therefore put the business at more than twice the roughly $1 billion valuation attached to Ejoy when Alibaba bought it in 2017. That is not the same as saying Alibaba doubled its investment return, since Lingxi has changed substantially over nine years and the acquisition and sale structures are not directly comparable.

Alibaba is trading peripheral businesses for AI firepower

The larger story is where Alibaba wants its capital to go next.

Alibaba announced in February 2025 that it intended to invest at least RMB380 billion, roughly $53 billion at the time, over three years in AI and cloud infrastructure. The company said the planned investment exceeded its total spending on AI and cloud infrastructure during the previous decade.

By May 2026, Alibaba was already signalling that even RMB380 billion might not be enough. CEO Eddie Wu said the company expected its AI investment to exceed the original plan, citing increasingly visible returns from cloud and AI demand.

The numbers help explain that conviction. Alibaba's Cloud Intelligence Group generated RMB41.63 billion, about $6 billion, in revenue during the March 2026 quarter, up 38% year over year. Revenue from external cloud customers increased 40%, while AI-related products had continued recording triple-digit growth.

Alibaba has said AI-related products already account for about 30% of external cloud revenue, with management expecting that share to exceed 50% within roughly a year.

That growth is coming at a cost. Alibaba reported March-quarter revenue of RMB243.4 billion, up just 3% year over year, while posting an operating loss of RMB848 million as investment in AI infrastructure and other strategic businesses intensified.

Selling a gaming operation for more than $2 billion therefore provides Alibaba with additional capital at precisely the time its core technology ambitions are becoming considerably more expensive.

Lingxi follows a much larger Alibaba asset clean-up

Lingxi is not an isolated divestment.

Alibaba has spent the past several years simplifying an empire that once spread across retail, entertainment, logistics, local services and other sectors. Its disposals of hypermarket operator Sun Art and department-store business Intime were worth as much as approximately $2.6 billion combined, with Alibaba explicitly describing the moves as part of its strategy of exiting non-core assets.

The Lingxi deal extends that approach into gaming.

There had already been signs that the studio's place inside Alibaba was being reconsidered. Reuters reported that Lingxi previously explored external fundraising, but a planned process in late 2023 stalled after Chinese authorities proposed tighter regulations for the online gaming industry. Alibaba had also been looking for a buyer for the company for some time.

For Trustar, meanwhile, Lingxi offers an established gaming studio with a valuable flagship franchise, experienced management and a substantial Chinese player base. Trustar also has experience managing large consumer-facing investments in China, including its involvement in McDonald's China business.

Alibaba's priorities are becoming increasingly clear

Alibaba is not abandoning every business outside cloud computing. E-commerce remains central to the group, and management increasingly describes Alibaba around two large opportunities: AI + Cloud and consumption. The company itself now characterizes Alibaba as a technology group focused on those areas.

The Lingxi sale fits cleanly into that strategy.

A successful $2 billion-plus transaction would convert a profitable but strategically peripheral gaming asset into capital Alibaba can deploy while scaling data centres, AI chips, Qwen models, cloud infrastructure and AI applications.

The timing is also notable. Alibaba is scheduled to release its June-quarter 2026 financial results on August 20, just three days after news of the Lingxi agreement emerged. Investors will therefore soon get another look at the financial cost, and potential payoff, of the company's increasingly aggressive AI investment cycle.

For Lingxi, the deal creates a new life outside Alibaba under a private-equity owner willing to continue backing its existing management. For Alibaba, it marks another step toward becoming a more concentrated company: fewer peripheral assets, and a much larger bet on AI.