If confirmed, this move could become another symbolic step in Alibaba's recent years of business contraction and strategic refocusing.
On June 23rd, reports emerged that Alibaba is planning to sell its gaming business brand, Lingxi Interactive, and has already engaged with several potential buyers. These include game companies such as 37 Interactive Entertainment, China Ruyi, Century Huatong, and Giant Network, as well as a consortium of private equity firms. The market estimates a transaction price range between 7 and 9 billion yuan. Alibaba Group has declined to comment on the matter.
In fact, compared to the frequent capital operation rumors surrounding businesses like Youku, Freshippo, and Intime, Lingxi Interactive has maintained a relatively low profile. However, within Alibaba, it was once one of the content businesses held in the highest regard.
Over a decade ago, the Chinese internet was still in a golden age of "ecosystem expansion." Tencent extended from social networking into gaming, Baidu moved from search towards content, and Alibaba aimed to build a super ecosystem around e-commerce covering consumption, entertainment, finance, and services. Alibaba ventured into nearly every domain capable of capturing user time: film and television, music, sports, literature, and games.
Alibaba's gaming dream can be traced back to around 2014. It was an era where "ecosystem" became a keyword in the internet industry, with major tech giants attempting to extend their boundaries infinitely. Alibaba ventured into film and TV, music, sports, literature, and also games.
The logic was straightforward. From an industry perspective, if users were already shopping on Taobao and paying with Alipay, they could theoretically also seek entertainment, consumption, and social interaction within Alibaba's ecosystem.
However, the gaming industry later proved it is not a business that can succeed simply by importing traffic.
Historically, Tencent and NetEase have consistently held top positions in the industry, not because they had more users, but because they established mature R&D systems, publishing frameworks, and hit-making mechanisms. Gaming is inherently closer to a content industry, requiring creativity, development, operations, community building, and long-term investment—capabilities difficult to rapidly replicate through capital or traffic alone.
Alibaba once poured significant resources into this endeavor. From agency and publishing to self-development, from acquisitions to investments, it tried almost every path.
Lingxi Interactive was one of the few businesses that managed to break through. The success of "Three Kingdoms: Strategic Edition" in particular once made Lingxi one of the most important players in China's SLG gaming segment. According to public data, this product has long ranked at the top of China's mobile game revenue charts and became the core cash cow for Alibaba's gaming operations.
For an established game company, the success of one product signifies a starting point; for Lingxi, it somewhat became an endpoint.
Over the years, Lingxi has never shaken its dependence on "Three Kingdoms: Strategic Edition." While new products have been launched continuously, replicating the hit formula has proven difficult. The team's revenue structure, profit model, and even organizational resources have increasingly revolved around this single product. When a company relies primarily on one product, its valuation logic gradually shifts from a "growth company" to a "cash flow asset."
And cash flow assets are precisely the type of business most easily sold.
Pulling the timeline back to after 2023, Alibaba's choices have become increasingly clear.
In September of that year, Eddie Yongming Wu officially took over as CEO of Alibaba Group. Shortly thereafter, he internally proposed two strategic priorities: "User First" and "AI-driven." Over the following year-plus, Alibaba initiated a continuous series of organizational adjustments: consolidation of large model teams, establishment of an AI research institute, repositioning of cloud business, and reallocation of group resources.
On multiple public occasions, Eddie Wu has emphasized a viewpoint: the next three to five years will be the most critical window for AI infrastructure construction, and Alibaba will invest in AI and cloud computing with unprecedented intensity.
Looking back today, this statement essentially delineated Alibaba's strategic boundaries. AI is the future, cloud computing is the infrastructure, and e-commerce is the cash flow source. These three constitute the core growth logic for Alibaba's next phase.
Lingxi Interactive fits increasingly poorly into this framework. The synergy between the gaming business and Alibaba's future strategy is weakening. In fact, Alibaba's management has signaled this to the capital market more than once.
Joe Tsai previously stated publicly when discussing the group's businesses that Alibaba had an overly complex portfolio in the past and needs to focus more on core businesses in the future, concentrating capital and management resources on the most strategically valuable directions.
Viewed today, this statement can be seen as a footnote to all of Alibaba's asset adjustment actions over the past few years. From Intime and Sun Art Retail to the now-rumored Lingxi Interactive, the underlying logic is essentially the same: concentrating finite resources on the most critical battlefields. Especially against the backdrop of increasing AI investment, such trade-offs have become more pragmatic.
Over the past year, whether Alibaba, Tencent, or ByteDance, all have been continuously increasing capital expenditures related to AI. Data centers, computing clusters, and the costs of large model training and inference all represent substantial financial commitments.
The capital market is willing to pay a premium for Alibaba's AI story but would not reprice the company based on selling a few more games. From this perspective, if Lingxi is ultimately sold for around 8 billion yuan, it would resemble a resource recovery operation for Alibaba.
On the other side, why are buyers willing to take on the business? The answer also stems from changes within the gaming industry itself.
In recent years, China's gaming industry has gradually shifted from an incremental market to a stock market. User growth has slowed, overall industry expansion has decelerated, new players are fewer, and the competitive focus has begun shifting from acquiring users to operating and retaining them.
Tencent Games' head, Steven Ma, has publicly stated that China's gaming industry is transitioning from a high-speed growth phase to a high-quality development phase. NetEase CEO William Ding has also mentioned multiple times that future industry competition will revolve more around producing premium content and long-term operations.
In other words, the gaming industry is becoming more like the film and television industry. In the past, the fight was for the next blockbuster hit; today, the competition is for content assets that can generate revenue consistently for a decade. Consequently, the logic of industry mergers and acquisitions is changing. Compared to betting tens of billions on an unknown potential hit, more companies are willing to directly acquire mature, already-proven successful products.
For potential buyers like 37 Interactive Entertainment, Century Huatong, and China Ruyi, what they truly value may not be the "Alibaba Games" brand itself, but rather the stable revenue stream, mature operational system, and established user base behind it.
From this angle, the sale of Lingxi precisely illustrates that China's gaming industry is entering a new stage, and its separation from Alibaba is not necessarily a bad thing.
In recent years, one of the key reasons companies like miHoYo and Papergames have been able to consistently launch products is their intense organizational focus on gaming itself. For Lingxi, operating within the Alibaba system, it has always been just one business unit in a vast commercial empire.
After the group's strategy pivoted comprehensively towards AI, this marginalization trend has only intensified. Therefore, selling Lingxi does not necessarily signify failure. In a sense, it is a belated strategic realignment. Alibaba returns to its areas of greatest expertise—e-commerce, cloud computing, and AI—while Lingxi gets an opportunity to re-enter the competitive logic of the gaming industry proper.
Eddie Wu once said, "Alibaba must start over with an entrepreneurial mindset."
One of the most important capabilities of an entrepreneur has never been constantly adding more, but having the courage to subtract at critical moments.
A decade ago, Alibaba believed in infinite ecosystem expansion, thinking all user time should remain within its own system; a decade later, Alibaba is rethinking its boundaries, concentrating resources on the directions most likely to define the future.
As AI becomes the new main battlefield, those businesses that once carried boundless imagination also need to answer a renewed question: do they belong to the past, or to the future?
For Alibaba, the answer seems to be becoming increasingly clear.
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