HANGZHOU, China, August 17, 2026, 20:30 CST — With Hong Kong markets shut, Alibaba’s U.S. stock traded ahead of the 09:30 EDT open.
Alibaba Group Holding Limited NYSE:BABA has reached a deal to sell Lingxi Games to Trustar Capital for upwards of $2 billion, a source with knowledge of the situation told Reuters. The transaction is expected to offset around 80% of Alibaba’s most recent quarterly free-cash-flow shortfall.
The sale represents just around 2.6% of Alibaba’s $75.5 billion in cash and liquid assets. It would cover under 4% of the group’s scheduled three-year investment in AI and cloud, making it beneficial but not game-changing.
The main takeaway is strategic. Alibaba is divesting another non-essential unit while cloud revenues increase and AI investments weigh on margins. U.S. shares advanced in premarket trading following the announcement.
| Proceeds from sale compared to Alibaba’s size | Confirmed figure | Share of total |
|---|---|---|
| Lingxi Games deal | Over $2.0 billion | Reference point |
| Most recent quarterly free-cash-flow deficit | $2.508 billion | No less than 79.7% |
| Holdings in cash and liquid assets | $75.504 billion | No less than 2.6% |
| AI and cloud budget for next three years | Above $52 billion | Below 3.9% |
Lingxi CEO Zhou Bingshu announced in an internal memo to staff that Alibaba had transferred its entire stake. The memo did not reveal details on the final price or the timeline for completion. The company expects leadership and daily operations will continue unchanged.
Lingxi collaborated with Japan’s Koei Tecmo to create “Three Kingdoms: Strategy Edition.” A fundraising initiative in 2023 was put on hold after China suggested stricter gaming regulations. The company additionally experienced management changes in 2024.
The sale comes after Alibaba divested its stakes in retailer Sun Art and department-store operator Intime, with those previous deals amounting to roughly $2.6 billion. The value of Lingxi on its own may come close to that total.
The timing targets a notable funding issue. Revenue for the March quarter increased by 3% to $35.3 billion, while adjusted EBITA declined 84% to $740 million. Free cash flow shifted to a $2.5 billion outflow as Alibaba invested in quick commerce, Qwen users, and cloud infrastructure.
| March-quarter indicator | Reported result | Year-on-year signal |
|---|---|---|
| Group revenue | $35.283 billion | Up 3%; up 11% on a like-for-like basis |
| Cloud Intelligence revenue | $6.035 billion | Increased 38% |
| External cloud revenue | Not separately disclosed | Grew 40% |
| AI-related product revenue | RMB8.971 billion | Growth in triple digits |
| Adjusted EBITA | $740 million | Dropped 84% |
| Free cash flow | -$2.508 billion | Shifted from positive to negative |
Cloud highlights the trend toward concentration. Revenue increased by 38%, with sales to external customers rising 40%. Revenue from AI-related products hit RMB8.97 billion, marking the eleventh consecutive quarter of triple-digit growth.
Alibaba Chief Executive Eddie Wu stated that the company’s “full-stack AI investments have progressed from incubation to commercialization at scale.” Alibaba has added e-commerce features into Qwen and broadened the range of enterprise agents for office and coding functions.
Analysts maintain a positive outlook on the transition. While all recently published recommendations are favorable, price targets range between $170 and $192. This range highlights doubts about the pace at which cloud expansion will balance out declining cash flow.
| Alibaba analyst | Recommendation | Price target | Date |
|---|---|---|---|
| Macquarie | Buy | $172.50 | July 10, 2026 |
| Bank of America | Buy | $172 | July 9, 2026 |
| HSBC | Buy | $170 | July 9, 2026 |
| Morgan Stanley | Buy | $180 | July 8, 2026 |
| Citi | Buy | $192 | July 8, 2026 |
The effect of the sale on accounting is still unclear. Reuters cited a valuation of more than $2 billion, but separate reports suggested a minimum of $1.5 billion. Alibaba and Trustar have yet to disclose finalized terms.
Risks: The deal price could be altered or closing postponed due to regulatory scrutiny, funding challenges, or ongoing talks. Rapid AI investment, sluggish consumer demand in China, and losses in quick-commerce may use up proceeds ahead of cloud profit growth.
Lingxi should be viewed by investors as a test of market interest rather than a solution for the balance sheet. The upcoming earnings release needs to demonstrate that accelerated cloud growth helps reduce the cash shortfall.
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