On Monday, Tuya (NYSE:TUYA) discussed second-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

Tuya Inc. reported a 16% year-over-year revenue increase to US$92.9 million for Q2 2026, with the PaaS business revenue growing by 16.9% to US$67.9 million.

The company is advancing its AI-driven strategy, focusing on AI Home, AI Energy, and AI Robot applications, and launched Tuya Build for AI hardware development.

Gross margin was 46.3%, with PaaS at 46.8% and AI adoption at 72%. Despite supply chain cost fluctuations, Tuya maintained stable operating profitability with a net profit of US$18.6 million.

Tuya Co-Builder was launched to support AI developers, with over 2.09 million registered developers on the platform, enhancing product definition and development efficiency.

Management anticipates gradual demand recovery, with strong demand in Europe for energy-related solutions and promising growth in AI-native categories in China.

Full Transcript

OPERATOR

Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to Tuya Inc.'s second quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be informed that today's conference is being recorded. I now turn the call over to your first speaker today, Ms. Regina Wang, Investor Relations Associate Director of Tuya.

Please go ahead.

Regina Wang, Investor Relations Associate Director

Thank you, operator. Hello everyone. Welcome to our second quarter 2026 earnings conference call. Joining us today is our founder and CEO, Mr. Jerry Wang, and our co-founder and CFO, Mr. Alex Yang. Our results and webcast of the conference call are available at ir.twitter.com. A replay of this call will also be available on our IR website in a few hours. Before we continue, I'd like to refer you to our safe harbor statement in our earnings press release which applies to this call, as we will make forward-looking statements.

With that, I will now turn the call over to our founder and CEO, Mr. Jerry Wang.

Jerry Wang, CEO

Hello everyone, and thank you for joining Tuya's earnings conference call for the second quarter of 2026. Tuya maintained solid growth momentum during the quarter despite the continued complexity of the global operating environment. Our total revenue reached US$92.9 million, a year-over-year increase of 16%, with growth accelerating from the first quarter. Within this, revenue from our core PaaS business increased 16.9% year over year. These results reflect the ongoing rising smart product penetration, including steady demand across home appliances, increased adoption of differentiated solutions such as smart door locks, and growing demand for emerging AI-enabled product categories, and also underscore the resilience of our platform business across different regions and product categories. In terms of strategic execution, we continue to advance our AI-driven development strategy, extending our AI capabilities beyond foundation models and standalone features towards platformization, productization, and scenario-based deployment. In the second quarter, shipment volumes of AI companion product solutions continued to expand, and consumer acceptance of new forms of AI hardware began to be validated.

Meanwhile, we launched Tuya Build which applied MIME coding to AI hardware development, enabling developers to cover the core development process from product concept to physical device validation using natural language, further shortening AI hardware development segments. These developments further reinforce AI evolution from a mere conversational tool into a technology that operates in real physical environments and participates in sensing, stemming, and execution.

Looking ahead, we will deepen our focus on the following three key areas. First, we will continue to advance AI-native application and product innovation, centering on high-potential scenarios such as AI Home, AI Energy, and AI Robot. We will drive the large-scale adoption of AI across a broader range of physical devices. Second, we will continue to enhance AI development tools such as line coding, agent orchestration, and cloud–edge–device collaboration, further shortening the cycle from ideation and development to deployment on physical devices or AI hardware.

Third, we will advance the global expansion of proven solutions while further strengthening our developing ecosystem and industry partnerships to jointly explore long-term opportunities in the AI application market. Now let me turn the call over to our co-founder and CFO, Alex Yang, who will share more details about our financial performance and business progress.

Alex Yang, CFO

Hello everyone, this is Alex. I will now provide a brief overview of our second quarter results. Please note that unless otherwise stated, all figures are in US dollars and all comparisons are on a year-over-year basis. In the second quarter of 2026, we generated total revenue of approximately US$92.9 million, up 16% year over year and accelerating from the 8.3% growth recorded in the first quarter. Our PaaS business maintained strong growth, where revenue from the smart home and robot products segment also increased by double digits of our total revenue.

The PaaS business generated revenue of about US$67.9 million, a year-over-year increase of 16.9%, serving as the important growth driver for the quarter. At the end of the second quarter, the number of PaaS premium customers for the trailing 12 months reached 318, contributing approximately 89.5% of the PaaS revenue, with our core customer base remaining stable. The AI application and other segments generated revenue of about US$11.5 million, a year-over-year increase of 3.9%, primarily driven by growth in cloud-based service revenue such as video cloud storage.

We continue to advance the value-added services, including video and AI-driven energy saving, among others. We enable applications capabilities while gradually strengthening our renewal and recurring service capability. Smart home and robot products revenue was about US$13.5 million, a year-over-year increase of 23.2%, primarily driven by growing customer demand from smart security, energy, and other differentiated smart products. We will continue to increase the contribution of high value-added products and strengthen their integration with the software and value-added services.

Looking at the specific driver of PaaS, home appliances, smart door locks, electronics and energy products, and AI companion product solutions performed relatively well during the quarter. Growth in the home appliances segments was mainly driven by customers' rollout of the smart-enabled models, the expansion of their geographic reach, a higher contribution from smart-enabled products, and the migration of short-term overseas brand projects from our customers' legacy solutions into Tuya's. Growth in smart door locks was primarily driven by increased adoption of audio, video, and low-power Wi-Fi solutions. By comparison, demand recovery in categories such as traditional lighting and IP cameras has been relatively slow, reflecting continued divergence in performance across production and regions. In AI Companion product shipment volumes of the devices powered by our solutions continue to expand. During the June 18 shopping festival in China, Fazuzu built on Tuya solutions ranks first in the AI toy categories on Tmall, while a number of other ecosystem products also deliver strong ranking and sales performance across major e-commerce platforms. This provided early validation of both consumer acceptance and the commercialization potential of the new form of AI device.

Beyond basic voice interactions, we have been building out capabilities in multimodal perception, persona and memory, content services, and user engagement, helping customers accelerate the development and mass production of AI-native consumer hardware. In the energy sectors, solutions including EV chargers, smart power distribution, metering, and home energy management maintain solid growth. We are expanding our AI energy capabilities from electricity consumption analytics, abnormal alerts, and personalized recommendations towards dynamic electricity tariff management and user-authorized automated device coordination.

Within the smart home ecosystem, customers’ adoptions of Matter-based solutions continue to increase across categories such as electronic products, lighting, and climate control. In parallel, we enhanced local control, multi-protocol interoperability, and third-party ecosystem compatibilities. On the margin side, our blended gross margin for this quarter was 46.3%. By segment, gross margin for PaaS was 46.8%, gross margin for AI adoption and others was 72%, and gross margin for smart home and robot products was 21.9%.

Gross margin fluctuations were mainly driven by the volatilities in upstream semiconductors’ cost and changes in business mix, in line with expectations. Despite this, gross profit increased by 11.1% year over year to approximately US$43 million. On expenses, we maintained disciplined expense management while continuing to invest in AI R&D and platform capability. GAAP operating expenses for this quarter were approximately US$33.7 million, down 10.4% year over year, primarily due to lower share-based compensation expenses.

In terms of profitability, we recorded GAAP profit from operations of approximately US$9.3 million, with a GAAP operating margin of 10%. Non-GAAP profit from operations was approximately US$9.6 million, a year-over-year increase of 11.7%, while non-GAAP operating margin remained in the double digits at 10.3%. While delivering revenue growth, we maintained relatively stable core operating profitability. Net profit for the quarter was approximately US$18.6 million, while non-GAAP net profit was approximately US$18.9 million.

The year-over-year decline in non-GAAP net profit was primarily due to lower financial income and foreign exchange losses, while core operating profit continued to grow. On the cash flow side, net cash generated from operating activities was US$6.2 million during the quarter and remained positive at the end of the second quarter. The company’s total liquidity, including cash and cash equivalents, time deposits, and treasury securities, amounted to approximately US$976 million, continuing to provide ample resources to support the development of AI capability, global business expansion, and our ability to navigate external uncertainties and long-term strategic investment. Next, I’ll briefly walk you through our progress in the AI developer ecosystem. At the end of the second quarter of 2026, the number of registered developers on our platform exceeded 2.09 million. Launched during the second quarter, Tuya Co-Builder served as the AI developer gateway to the Tuya Developer Platform, applying natural-language coding to AI hardware development. By describing their requirements in natural language, developers can complete product definition, app user interface, embedded firmware, AI agents, and workflow development in one place, and then proceed directly to device flashing and debugging.

This covers the core development process from product concept to physical device validation and helps shorten the AI hardware development cycles. Since launch, Tuya Co-Builder’s AI-powered panel generation capabilities have expanded to cover 30 product categories, with average generation time for a single panel reduced to approximately 190 seconds. This progress demonstrates that we are advancing our developer tools beyond development assistance toward end-to-end delivery capability spanning product definition, software generation, and deployment on physical devices.

At the application layer, we continue to enhance AI device task-execution capabilities, control reliability, and response efficiency, while exploring subscription-based and value-added services across scenarios such as AI-driven energy saving, pet care, and video. Understanding certain scenarios has already begun to generate early payment and renewals. We’ll continue to focus on high-frequency use cases and long-term user value. From a broader perspective, AI capabilities are gradually expanding beyond single-model integrations and into device sensory, contextual understanding, memory, agent orchestration, and device-side execution.

We’ll continue to leverage the strength of our platform, device ecosystem, and global developer base to translate AI capability into scalable commercial value across a broader range of real-world scenarios. In summary, our revenue growth accelerated in the second quarter of 2026, with the PaaS business continuing to serve as a primary growth engine. Meanwhile, our AI capabilities are being commercialized in parallel across multiple paths including PaaS, smart products, and AI applications.

Despite the impact on gross margin from semiconductor supply-chain price fluctuations and business-mix change, we maintain stable operating profitability and ample financial resources. Looking ahead, we’ll remain focused on AI-native applications, physical AI scenarios, and developer platform capability, and continue to advance the transformation of AI technologies from tool-level capabilities into tangible and scalable commercial value. Thank you all.

Operator, right now we can begin the Q&A.

OPERATOR

We will now begin the question and answer session. To ask a question now, please press star-11 on your telephone and wait for your name to be announced. To withdraw your question, please press star-11 again. One moment for our first question. We will now take our first question from the line of Yang Liu of Morgan Stanley. Please ask your question. Yang, your line is open.

Yang Liu, Analyst at Morgan Stanley

Thanks for the opportunity and congratulations on the solid earnings. My question is about the future demand outlook. Based on your discussion with key customers in the current environment, what is the growth or demand outlook going into the second half of 2026? If you can provide a little bit more breakdown by geography, that will be even better, like what’s the demand profile in the U.S. or in Europe and ASEAN, et cetera. Thank you.

Jerry Wang, CEO

Okay, thank you. Thank you. So, right now, we see that the end demand and internal momentum is still within our expectation. As we stated in the beginning of this year, the entire customers and consumer side, they’re looking to consume more and transfer more legacy devices and solutions into the new AI ones that we provide. So this maintenance continues. What we see is that we have the accelerating type of rebounding on the demand side, so this will be the overall tier view.

We see that the recovery will not come overnight, so it’s gradually climbing. What we found here is that momentum still continues, especially based on those very positive sell-through feedbacks from the end-user side. If I break down into the geographic areas, there are different types of demand drivers. Europe still shows very strong demand, especially for all types of energy-related segments, including the new AI home management solutions we provide as a total solution, or different types of energy-efficiency improvement single devices—no matter whether we provide as a PaaS or we provide as home and robot products and the solution together—that still shows very strong demand. That’s the first one. In Southeast Asia and Latin America, the driving forces majorly come from our strong channels in the telecom carriers. We tried to establish a strategic partnership along with them around two and a half years ago, and we’re starting to commercialize that part—through their own channels to deliver some comprehensive total solutions for their users in the AIoT fields. That’s a very strong potential and very promising one, because they’re running on the B2B cycle; by the end of the time it’s B2C, but they run really strong B2B cycles rather than the retail cycles. They’re complaining on that. The Middle East is still kind of in a pause right now because of the military conflict going on in the second quarter. So right now we still kind of wait and see. The customer is still there, and the customer is still doing a lot of preparations, including product development and new concept definitions and that type of stuff.

But right now they think that overall the business is not coming back yet, and we’re looking forward to have a better scenario perhaps maybe end of Q3 or Q4. We’re looking forward to have some agreement for those conflicting countries, and then we’ll be able to catch the demand, and so that will go. In North America, the sell-through is still there, but some price-sensitive, especially low-price, types of devices show kind of fluctuations by the pricing rates coming from the supply-chain side.

So we are restructuring that type of product mix along with my customers to deliver a better sell-through in the second half of this year. For China, right now we’re seeing some really good, promising categories, including part of the home appliances. We can find out recently that the major brands right now are speeding up the transformations from the legacy type of devices into the smart ones, and from first-generation IoT-type smart devices into the AI ones.

So we are catching the transformation trend and helping a lot of China brands to do that. The second one is that in China, AI-native categories are starting to boom, like the AI Companion. Our first market we’re starting to break through for AI Companion is from China, so that’s why Fazuzu sales really in Tmall. We see that based on a large target consumer scale in China, when we find the right type of applications and combine with a very active customer base, we’ll try to find more potentials in the new type of innovations in China.

Yang Liu, Analyst at Morgan Stanley

Thank you.

OPERATOR

Thank you. We will now take our next question from Timothy Zhao of Goldman Sachs. Please ask your question. Timothy, your line is open.

Timothy Zhao, Analyst at Goldman Sachs

Great. Good morning, management. Thank you for taking my question, and congrats on the very solid results. My question is on your gross profit margin. I noticed that in the second quarter, the IoT PaaS margin declined on a year-on-year basis, although it stabilized sequentially, while your smart home and robotics margin actually declined sequentially and year on year. Just wondering if you can share more color on what were the margin drivers behind, and what is your margin outlook for these two segments for the third quarter and the rest of this year?

Thank you.

Alex Yang, CFO

Okay, yeah. So first of all, as everyone knows, the upstream cost fluctuation is starting to increase over Q2/4 on a global basis, and we are the last one to test the impact because it’s enforced. So for Q2, what we're doing is that the majority of the property has passed through the cost ratio, which means that we maintain the gross profit, but we don't stick to the gross market. Till now, we really built a very good buffer on the inventory and cost balance between now and the next two or three quarters.

Right now, we have the confidence that we'll be able to work through a more stable cost level of the major types of material that we need. We're looking forward to either stabilizing the gross margin, and we’re figuring out all the possibilities that, by offering new capabilities and new technologies, we'd like to improve the gross margins overall. So that's pretty much that. For the customer side, we really show our kindness that we best practice the cost, but in the future, anything happens, we're looking for the most positive way to help our customers and help the company continue to run the business.

So it's not sticking to the cost, but I'm going to stick to the value and the competence that we deliver to the customers to help them get through that.

OPERATOR

Right. Thank you. Thank you. We will now take our next question from Kai Xiao of CICC. Please ask your question. Kai, your line is open.

Kai Xiao, Analyst at CICC

Okay, thank you. Management, this is Kai. I have two questions. One is on Tuya Co-Builder you mentioned in the quarter. I wonder what's the current adoption status of Tuya Co-Builder and what's the company's meaning?

Jerry Wang, CEO

Okay. And so Co-Builder is something we have to do for a couple of quarters, starting from the second half of last year. Some departments in Tuya R&D centers really started to develop codings to improve our own coding efficiency and also to bring more ROI on the R&D side. So we tend to do that as a major user of coding, and while we have enough experience on how we'll be able to manage, how we'll be able to use that and deliver the right ROI, and be able to know how to manage that, we're starting to think about the way we need to duplicate our experience and open it up to our customers.

So at the beginning of this year we started to build Co-Builder, and we're happy to launch it in the second quarter. We believe that will be the new type of default gateway in the future for many developers, even not only device developers—many developers—to lower the bar, including, like right now, my financial department. Many of them don't know coding at all for their entire lifetime, but they're starting to write their own agent to improve their own workflow, to improve their own individual efficiencies.

I believe some of you did that too. So Co-Builder will be kind of showing where to lower the bar, making it easy for those ideal developers to come with some innovative ideas that they can really quickly testify, to validate whether those kind of crazy ideas make sense for some of the users, build a demo, get some pilot users, and start to run, including in the found regions, and scale it. So Co-Builder, we believe, in the hardware world should be kind of the momentum like, wow, you have the cross code maybe one year before, and we believe that will be default.

So continuing to bring that in Q2 after we launch it, we continue to do a lot of webinar trainings for those developers, even when they don't know what coding means and how they can deal with it. We're starting to train a lot of developers, and at the same time we'll use this tool to attract those not developers at this moment, but they're more considered as a product manager maybe in some hardware company. In the past, the strength or capability for those type of talents are user insight, product definition and interface design, and psychological understanding.

But right now we offer them a better tool that they can transfer that part with or without knowing any of their engineers—they'll be able to stretch that out themselves. That will be the value of Co-Builder. We're looking to use that to enlarge the entire developer base by building up a better target and also be able to improve my customers' R&D efficiencies in another one.

OPERATOR

Thank you. We will now take our next question from the line of Matt Ma of Jefferies. Please ask your question. Matt, your line is open.

Matt Ma, Analyst at Jefferies

Hey. Hello. Thank you for taking my question. I have a question on the AI application segments. So it seems like in Q2 the revenue growth has been decelerated from 17% in the first quarter. I'm just curious, what is the reason behind that? I calculated it. It seems that Q2 growth is only 3%. And what can get this line back to a double-digit growth? And then also on the segment margin, on the Q1 call you pointed that a seasonal rebound in device usage from Q2 would help you to increase the margin for this segment.

But it doesn't seem that have come through. Could you walk us through what could actually happen in this quarter or the coming quarters to help the margin recovery for this segment?

Alex Yang, CFO

Okay, sorry, I lost the second question. So is the margin for which segment? You mean the...

Matt Ma, Analyst at Jefferies

AI application?

Alex Yang, CFO

Okay, AI application, got it. So the first one is—thank you for bringing the question—so, for AI applications, right now the growth slowing majorly comes from the mix of my offering. As you might know, in that segment the covers two offers: one is B2B, especially some of the project-based customization services we provide for the key partners. And the second part of that is B2C—directly services we offer for the consumer, which are the users of the devices—so they activate my value-added services through subscription.

So the growth major is that we gradually still slow, and we don't want to handle those kind of B2B projects for a long time. So the B2B project-based revenue growth is slower, but actually the B2C grows good. So my B2C services recurring revenue growth in Q2 is 22%. We're happy to see that change because we want to have this segment, the B2C, be able to cover more and more portion of this segment because we believe that would be a better value for that.

So that's for the first question. And for the second question about the margin on the application segment, right? Yes, the margin for— Yeah. So for this one, it's the same in that the segment we want to have more is based on the cloud and based on the AI capability. That will be a higher-valued one. So 70%+ is the target margin for this segment. In the future we'd like to hit between 75 to 80. And the driver for that—first one I can explain—we don't want to have those kinds of project and customization-based services take a larger portion because that's more labor-centric and lower-margin type of services.

We try to grow the entire portion of that by increasing more and more cloud-based B2C side. And on the B2C side, not only enlarge the contribution percentage on revenue, but also at the same time, while we scale the services, be able to improve more and more efficient architecture on the technical side so we'll be able to figure out a better way to manage the cost and LLM functions in the long run. Through that we'll be able to push the cost-based services margin from 70 into 75 and 80, which may make—

Matt Ma, Analyst at Jefferies

Thank you.

OPERATOR

Thank you. There are no further questions at this time. I'll now hand back to the management team for closing remarks.

Regina Wang, Investor Relations Associate Director

Thank you, operator, and thank you all once again for joining us today. If you have any further questions, please feel free to contact the IR team of Tuya. Goodbye and see you next quarter.

OPERATOR

Your participation in today's conference. This does conclude the program. You may now disconnect your lines.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.