Cohere is taking over Aleph Alpha with €500 million in structured financing from Schwarz Group, the German retail conglomerate that owns Lidl, in a deal announced Friday that pitches a Canadian-German alternative to US-led AI providers. Schwarz Group is also anchoring Cohere's Series E at a valuation of roughly $20 billion, according to Handelsblatt, up from the $6.8 billion mark Cohere last carried.
The €500 million package translates to about $600 million, and Schwarz Group is expected to put its money to work inside its own stack by routing usage through STACKIT, the sovereign cloud run by its IT arm Schwarz Digits. Cohere will lead the combined entity, subject to regulatory and shareholder approval, with Aleph Alpha folded in.
The valuation jump is the eye-catching number. Cohere reported $240 million in annual recurring revenue in 2025, while Aleph Alpha has generated little revenue and significant losses. Tripling Cohere's last private price to $20 billion is a bet on the merged company's positioning, not its current P&L.
Key facts
- 01Cohere is taking over Germany's Aleph Alpha with Schwarz Group, owner of Lidl, providing €500M (about $600M) in structured financing.
- 02Schwarz Group is leading Cohere's Series E at a roughly $20B valuation, up from Cohere's prior $6.8B mark.
- 03Cohere reported $240M in annual recurring revenue in 2025; Aleph Alpha had little revenue and significant losses.
- 04Aleph Alpha brings a 250-person team focused on small language models, European languages and its PhariaAI suite.
- 05The deal was announced Friday, April 25, 2026, with German and Canadian digital ministers on stage.
That positioning is sovereign AI. The new entity plans to target defense, energy, finance, healthcare, manufacturing, telecommunications and the public sector — buyers in regulated industries that have reasons, contractual or political, to avoid OpenAI and other US incumbents. Cohere CEO Aidan Gomez said on the announcement call that "Cohere will become a Canadian-German company."
“Schwarz Group is anchoring Cohere's Series E at a $20B valuation, a leap from Cohere's prior $6.8B mark that combined revenue alone cannot justify.”— Jaeden Schafer
Aleph Alpha brings a 250-person team and a body of work in European languages, tokenizers and small language models, including its PhariaAI suite for enterprises and public institutions. "Their focus on small language models, European languages and tokenizers is a really complementary one to our own, which is more of a general focus on large language models," Gomez said.
The optics on stage matched the politics. It was Aleph Alpha co-founder Samuel Weinbach who appeared with Gomez and Schwarz Group chief digital officer Rolf Schumann, not Aleph Alpha's co-CEOs. German digital minister Karsten Wildberger and Canadian counterpart Evan Solomon turned up as well, weeks after Berlin and Ottawa launched a Sovereign Technology Alliance aimed at reducing strategic dependencies on the United States.
Aleph Alpha's path to this point has been bumpy. The company pivoted away from frontier-scale model training, and co-founder and CEO Jonas Andrulis departed, leaving its strategy and leadership less defined heading into the deal. Schwarz Group, already one of Aleph Alpha's main shareholders, is effectively underwriting a soft landing into a larger, better-capitalised partner.
The merger lands as other non-US labs flirt with consolidation. Elon Musk's xAI has reportedly discussed a three-way partnership with France's Mistral AI and Cursor, the coding startup SpaceX recently secured an option to buy. Whether Mistral plays along is another matter — its revenue growth has been built on being the European alternative, and pairing with xAI risks undercutting that pitch.
Cohere's pitch has been more enterprise than ideological, but the Schwarz Group deal pulls it firmly into the sovereignty conversation. The retail giant is the kind of anchor customer that justifies the headline valuation: a buyer with the volume to make STACKIT-hosted Cohere deployments meaningful, and the political weight to bring other German enterprises along.
The open question is whether European buyers will accept a Canadian-led entity as European enough. The Sovereign Technology Alliance frames Canada and Germany as natural partners on privacy and security, but procurement officers in Paris or Madrid may read "Canadian-German" differently than Berlin does. Gomez also did not rule out an eventual IPO, which would muddy the ownership story further.
There is also a math problem. A $20 billion valuation on $240 million in ARR implies a multiple north of 80x, before accounting for Aleph Alpha's losses. Investors are pricing in the strategic narrative — sovereign AI for regulated industries, a Schwarz Group anchor tenant, government tailwinds — rather than the trailing financials.
For Cohere, the deal converts a hometown rivalry into a hometown roll-up and locks in a deep-pocketed European customer-investor in one move. For Aleph Alpha, it is the most graceful exit available after a difficult year. The harder test starts when regulated European buyers have to choose between a Canadian-German champion and the American models their developers already know.
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