Alibaba has agreed to sell its gaming unit Lingxi Games to private equity firm Trustar Capital for at least $1.5 billion, as CEO Eddie Wu sharpens the company's focus on AI and cloud computing. The deal, confirmed by Lingxi CEO Zhou Bingshu in an internal memo, marks another step in Alibaba's push to shed non-core businesses and pour resources into its technology bet.
A Strategic Pivot
Zhou Bingshu told employees in a memo that the handover lets Alibaba concentrate on its strategic priorities. That's a polite way of saying gaming no longer fits the plan. Wu, who took over as CEO in late 2023, has repeatedly signaled that AI and cloud are the future. Alibaba wants to pass $100 billion in combined AI and cloud revenue within five years, and it's put 380 billion yuan (roughly $53 billion) on the table for AI infrastructure over the next three years.
The gaming unit's sale frees up capital and management attention. It also removes a distraction as Alibaba races to catch up in the AI arms race, where it's already shipping models at a rapid clip.
The Buyer and the Price
Trustar Capital emerged as the preferred bidder, beating out strategic buyers from the gaming industry. The reported price tops the roughly 9 billion yuan Alibaba was earlier expected to fetch for the business. At $1.5 billion, that's a solid premium — a sign that Trustar sees value in Lingxi's portfolio and its position in the Chinese gaming market.
The deal is structured as a sale of the entire unit, though the exact breakdown of assets and liabilities wasn't disclosed. Lingxi Games operates a number of titles across mobile and PC, and its management team is expected to stay on under Trustar's ownership.
Divestment Streak
This isn't Alibaba's first big exit this year. In January, it sold its controlling stake in Sun Art Retail Group to DCP Capital for roughly $1.6 billion. That move, like the Lingxi sale, fits the same pattern: sell off bricks-and-mortar and entertainment assets, double down on cloud and AI.
The two deals together bring in over $3 billion in cash, giving Alibaba more firepower to fund its AI ambitions. The company has been investing heavily in data centers, chip development, and large language models — spending that doesn't come cheap.
AI Momentum
Alibaba's AI push is starting to show results. This month it shipped its largest model to date, Qwen3.8-Max, which ranked fourth on Arena's frontend coding leaderboard. That's a strong showing for a Chinese model, and it's not alone. Chinese AI models as a whole now process more monthly tokens than their US rivals, a sign that domestic adoption is surging.
The Lingxi sale doesn't directly affect that momentum, but it does free up resources. And with earnings due Thursday, August 20, investors will be watching to see whether the AI and cloud bet is paying off in the numbers.
The June quarter results will be the first real test of Wu's strategy since the divestment spree began. Analysts will look for cloud revenue growth, AI-related bookings, and any commentary on how the Lingxi sale affects the bottom line. The deal is expected to close later this year, pending regulatory approvals.
