Alibaba Group Holding Ltd. is selling its gaming unit Lingxi Interactive Entertainment for as much as 9 billion yuan ($1.2 billion), marking the latest retreat from a non-core business as the Chinese tech giant pours resources into artificial intelligence and cloud computing.
Alibaba Group Holding Ltd. is selling its gaming unit Lingxi Interactive Entertainment for as much as 9 billion yuan ($1.2 billion), marking the latest retreat from a non-core business as the Chinese tech giant pours resources into artificial intelligence and cloud computing.
The e-commerce and cloud computing conglomerate has approached at least five potential buyers for the gaming brand, which employs about 1,200 staff and is best known for the mobile strategy title Three Kingdoms Tactics, according to mainland media reports. The deal is valued at between 7 billion yuan and 9 billion yuan.
"Alibaba's decision to exit gaming reflects a strategic clarity that was absent during the era of ecosystem expansion — every business now must justify its place against AI and cloud," said Xiaoyu Chen, a Hong Kong-based technology analyst at Arete Research. "For a buyer, Lingxi offers a proven cash-flow asset with a flagship title that has generated over 100 million users globally."
The gaming unit's portfolio includes Three Kingdoms Tactics, Three Kingdoms Fantasy Land and Ashes of the Kingdom. The flagship title has consistently ranked among China's top-grossing mobile games since its 2019 launch, generating steady revenue that makes the unit attractive to acquirers seeking established cash flows rather than speculative bets on new titles.
Potential suitors include Hong Kong-listed China Ruyi Holdings Ltd., A-share listed game developers 37 Interactive Entertainment Inc., Century Huatong Group Ltd. and Giant Network Group Co., as well as two private equity consortiums pursuing a joint acquisition, the reports showed. Alibaba declined to comment on the sale process.
The AI Pivot Reshapes Alibaba's Portfolio
The divestiture comes 21 months after Wu Yongming took over as Alibaba's chief executive officer in September 2023 and declared "user first, AI-driven" as the company's twin strategic priorities. Since then, Alibaba has consolidated its large-language model teams, established an AI research institute, repositioned its cloud business and reallocated group resources toward computing infrastructure.
Chairman Joe Tsai has publicly acknowledged that Alibaba maintained an overly complex business portfolio in prior years and needs to concentrate capital and management attention on areas with the highest strategic value. The company has already exited or reduced stakes in Sun Art Retail Group Ltd., Intime Retail Group Co. and other non-core assets.
The timing coincides with a surge in AI-related capital expenditure across China's technology sector. Alibaba, Tencent Holdings Ltd. and ByteDance Ltd. have all increased spending on data centers, computing clusters and large-model training, with industry estimates suggesting combined AI capex could exceed 200 billion yuan in 2025.
Why Buyers Want a Gaming Cash Cow
For potential acquirers, Lingxi represents something increasingly scarce in China's maturing gaming market: a proven, long-lived asset. The domestic gaming industry has shifted from an acquisition-driven growth model to one focused on high-quality, long-term operation of existing titles, as user growth slows and regulatory approvals remain constrained.
Tencent's president of games, Ma Xiaoyi, has described the industry as transitioning from rapid expansion to quality-driven development, while NetEase Inc. CEO Ding Lei has emphasized that future competition will center on premium content and extended life-cycle management. The logic mirrors the film industry, where established franchises with predictable revenue streams command premium valuations over speculative productions.
If completed at the midpoint of the reported range, the 8 billion yuan sale would free up capital that Alibaba can redirect toward AI infrastructure at a time when the company's cloud division is competing with Huawei Technologies Co. and Tencent for enterprise AI workloads. For the buyer, the acquisition would provide immediate scale in the strategy-game segment and a user base of more than 100 million players.
The deal highlights a growing divergence in China's technology sector: gaming assets are increasingly valued as cash-flow instruments, while AI and cloud infrastructure command growth premiums. Alibaba's stock has risen about 12 percent this year in Hong Kong trading, partly reflecting investor approval of its sharper strategic focus.
This article is for informational purposes only and does not constitute investment advice.
