Alibaba sells Lingxi Games to Trustar in $2 billion-plus deal

Alibaba Group agreed to sell game developer Lingxi Games to private equity firm Trustar Capital for more than $2 billion, a person familiar with the matter said, as the tech giant redirects capital toward AI and cloud.

The deal was confirmed in an internal memo sent to Lingxi staff on Monday by CEO Zhou Bingshu, who said he and the management team would continue to lead the company. Alibaba will transfer its entire stake to Trustar, formerly known as CITIC Capital, the memo said.

The transaction values Lingxi at over $2 billion, according to the source, while Bloomberg News earlier reported the deal at at least $1.5 billion. The memo did not disclose the value, closing timeline, or regulatory conditions. Lingxi, Alibaba, and Trustar did not respond to requests for comment.

The sale extends Alibaba's divestiture program as it concentrates on AI and cloud, where CEO Eddie Wu pledged 380 billion yuan ($56.4 billion) in infrastructure spending over three years. The company has already sold Intime Department Store and Sun Art Retail this year, and shifted Lingxi's reporting line from the digital media group to Group CFO Xu Hong in August 2025 — a move widely read as preparation for a sale.

A studio built on one hit

Guangzhou-based Lingxi is best known for "Three Kingdoms: Strategy Edition," a multiplayer strategy title developed with Japan's Koei Tecmo Holdings. The game launched in 2019 and has remained a fixture atop iOS bestseller charts, generating the bulk of Lingxi's estimated 3 billion to 4 billion yuan ($445 million to $593 million) in annual revenue. The studio employs roughly 1,200 people.

But Lingxi has struggled to replicate that success. Titles released after "Three Kingdoms: Strategy Edition" — including "Three Kingdoms Fantasy Land" and "Ru Yuan" — failed to produce a comparable breakout, and a fundraising process planned in late 2023 stalled after China proposed tighter rules for the online gaming sector. The studio also underwent a management reshuffle in 2024, when Zhou, who had led the team behind the flagship title, replaced founder Zhan Zhonghui as CEO.

The bidding process drew multiple strategic buyers, including listed gaming companies 37 Interactive Entertainment, China Ruyi, Century Huatong, and Giant Network. Trustar ultimately prevailed by using its financial strength to raise its offer, according to people familiar with the process.

Private equity takes the lead in gaming consolidation

The deal reflects a broader shift in China's gaming M&A market. In March 2026, ByteDance sold game developer Moonton Technology to Savvy Games Group, a subsidiary of Saudi Arabia's sovereign wealth fund, for more than $6 billion. Tencent has also been scaling back its overseas gaming studio footprint.

For Trustar, the acquisition logic centers on Lingxi's stable cash flow as a mature asset rather than a bet on gaming industry upside. The studio's flagship title provides a solid revenue base, and the PE firm's path to exit likely runs through an independent IPO or secondary sale, industry analysts said.

For Alibaba shareholders, the $2 billion-plus price tag is a business-mix story. By exiting a hit-driven, regulation-sensitive gaming unit, Alibaba reduces a source of earnings volatility and policy overhang that can weigh on how investors value the conglomerate. The proceeds, while not transformative for a company of Alibaba's size, support the narrative that management is recycling non-core assets into its AI and cloud bet.

Whether Alibaba retains any commercial ties with Lingxi — including publishing, cloud services, or technology partnerships — was not immediately clear. The company's next earnings report will show how the divestiture program is reshaping its balance sheet.

This article is for informational purposes only and does not constitute investment advice.