Summary of Key Points
Lingxi Huyu, a gaming company under Alibaba, has been acquired by Xincheng Capital, which is part of CITIC Capital, for 10.1 billion yuan. This transaction represents a divestiture of Alibaba's business as it focuses on its AI strategy. Lingxi Huyu has always been in a peripheral position within the Alibaba ecosystem. Although it has produced hit games such as "Romance of the Three Kingdoms: Strategic Edition," its revenue scale does not match Alibaba's ambitions for the gaming industry, which are on par with Tencent and NetEase. With Alibaba now investing 380 billion yuan in AI, it no longer has the capacity to sustain non-core gaming businesses. Following this deal, Lingxi will retain its existing management team and receive resource support from CITIC Capital, allowing for independent development—a “respectable separation” for both parties.
I. CITIC Takes Over: Lingxi Gets a Ticket to Independent Development
The buyer of the acquisition, Xincheng Capital, is a private investment platform under CITIC Capital, meaning it has substantial financial resources and specializes in investing in businesses, not gaming companies itself. This is crucial because if the buyer were a competitor (such as Tencent or NetEase), they might integrate Lingxi’s team or products into their own systems. However, since CITIC is not in the gaming sector, it is likely that Lingxi will continue to operate independently.
Internal communications have confirmed that Lingxi’s management and operational teams will remain unchanged, and CITIC will provide “industry resources and expertise.” The valuation of 10.1 billion yuan exceeds previous market estimates, indicating that investors recognize Lingxi’s value: the company has the ability to generate consistent profits (annual net profit of 1.5-2 billion yuan) and owns a long-selling hit like "Romance of the Three Kingdoms: Strategic Edition,” making it a “high-quality asset.” For Lingxi, this means it no longer needs to struggle for a place within a larger company’s ecosystem and can focus solely on gaming.
II. From a Peripheral Player in Alibaba’s Ecosystem to a Strategic Disposal
Lingxi’s trajectory within Alibaba has not been smooth. Alibaba began to seriously pursue its “big entertainment” strategy in 2016, when BAT (Baidu, Alibaba, Tencent) were all competing in the broader entertainment industry (film, music, gaming, etc.). In 2019, Alibaba acquired Jianyue Technology, formerly owned by NetEase’s COO Zhan Zhonghui, and rebranded it as Lingxi Huyu.
However, Alibaba’s big entertainment strategy has evolved. In 2025, the division was renamed “Hujing Entertainment,” shifting its focus from a diversified approach to specialization, with an emphasis on Youku and Dama platforms. Gaming was never a strong area for Alibaba, so Lingxi’s presence within the company became even more insignificant. With Alibaba’s current focus on AI, gaming has become a less desirable but still profitable business. Its annual revenue of 3-4 billion yuan is too small to support Alibaba’s ambitions of competing with Tencent and NetEase, whose gaming revenues exceed hundreds of billions.
III. The Real Reason Behind Alibaba’s Sale of Lingxi: AI Is the Priority
Why did Alibaba decide to sell Lingxi? The core reason is its strategic shift towards AI. In 2025, Alibaba announced plans to invest 380 billion yuan in AI and cloud infrastructure over the next three years, a significant increase from the total investment in the past decade—essentially dedicating all resources to this area.
Alibaba’s recent moves are all centered around AI: for example, it merged Ele.me with Taobao’s “Hourly Delivery” service to create Taobao Flash Shopping, which aims to connect AI with offline services (such as ordering tea or shopping). Its AI platform, Qianwen AI (formerly Tongyi), has expanded from the business sector to the consumer market, reaching over 300 million monthly active users. Even Hujing Entertainment is working on large-scale AI models like Wan2.7-Image for content creation.
In this context, gaming has become a non-core business that requires little attention; selling it allows Alibaba to reallocate resources to focus on AI development.
IV. New Opportunities for Lingxi: Breaking Free from the Big Company to Focus on Gaming
For Lingxi, leaving Alibaba could be a positive move. Previously, it had to adapt to changes in Alibaba’s broader entertainment strategy and coordinate with other businesses (such as using e-commerce traffic to promote games, with mixed results). With CITIC Capital as its new partner, Lingxi no longer needs to consider ecosystem integration and can focus solely on gaming development.
Lingxi has a strong foundation, with hit games like “Romance of the Three Kingdoms: Strategic Edition” consistently ranking in the top 20 on the iOS sales charts, and its casual game “Travel Frog” was once very popular. CITIC Capital’s extensive industry resources (such as helping Lingxi find partnerships and expand into overseas markets) will enable the company to focus more on developing new games and maintaining existing products.
In summary, this acquisition is a natural outcome of Alibaba’s AI strategy and marks a new beginning for Lingxi to break free from the constraints of a large corporation. For Alibaba, selling non-core businesses allows it to concentrate resources on AI; for Lingxi, independent development with CITIC Capital’s support could lead to greater success in the gaming industry. It’s a mutually beneficial “win-win” situation that represents a respectable separation for both parties.