Tuya Inc. American Depositary Shares, each representing one Class A Ordinary Share 2026 Q2 Earnings Call

Please go ahead. 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 the webcast of the conference call are available at ir.tuya.com. A replay of this call will also be available on our IR website in a few hours. Before we continue, I would 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, please. 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 $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 rise in 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 the Tuya CodeBuilder, which applies live 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 cycles. These developments further reinforce AI's evolution from a mere conversational tool into a technology that operates in real physical environments and participates in sensing, understanding, and execution. Looking ahead, we will deepen our focus on the following three key areas. First, we will continue to advance AI's 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 live coding, agent orchestration, and cloud-edge device collaboration, further shortening the cycle from ideation and development to deployment on physical devices for AI hardware. Third, we will advance the global expansion of proven solutions while further strengthening our developer 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.

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 USD and all comparisons are on year-over-year basis. In the second quarter of 2026, we generated total revenue of approximately $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 is also increased by double digits. Of our total revenue, the PaaS business generated revenue of about $67.9 million, a year-over-year increase of 16.9%, serving as important growth drivers 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 $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 value-added services including video and AI-driven energy saving, among others, with AI-enabled applications capabilities, while gradually strengthening our new and recurring service capability. Smart home and robot products revenue was about $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 growth, 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 were 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 certain 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 divergency in performance across products and regions. In AI companion products, shipment volumes of the devices powered by our solutions continue to expand.

During the June 18 Shopping Festival in China, Xuzu, built on Tuya solutions, ranked first in the AI toy categories on Tmall, while a number of other ecosystem products also delivered 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 multi-modal perception, personalization and memory, content services, and user engagement, helping customers accelerate the development and mass productions of the 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 enhance the local control, multi-protocol interoperabilities and third-party ecosystem compatibilities. On 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 adaptation and others were 72%, and gross margin from smart home and robot products were 21.9%. Gross margin fluctuations were mainly driven by the volatilities in upstream semiconductors cost and changes in business mix in line of the expectation. Despite this, gross profit increased by 11.1% year-over-year to approximately $43 million. On expenses, we maintained a disciplined expense management while continuing to invest on AI and R&D, and platform capability.

GAAP operating expenses for this quarter were approximately $63.7 million, down 10.4% year-over-year, primarily due to the lower share-based compensation expenses. In the term of profitability, we recorded GAAP profit from operations of approximately $9.3 million, with a GAAP operating margin of 10%. Non-GAAP profit from operations were approximately $9.6 million, a year-over-year increase by 11.7%, while non-GAAP operating margin remained in the double digit at 10.3%. While delivering revenue growth, we maintained relatively stable core operating profitability. Net profit for the quarter was approximately $18.6 million, while non-GAAP net profit was approximately $18.9 million. The year-over-year decline in non-GAAP net profit was primarily due to the lower financial income and foreign exchange losses, while core operating profit continued to grow. On cash flow side, net cash generated from operating activities was $6.2 million during the quarter and remained positive.

At the end of the second quarter, the company's total liquid assets, including cash and cash equivalent, time deposit, and treasury securities, amounted to approximately $976 million, continually to provide ample resources to support the development of AI capability, global business expansion, and our ability to navigate external uncertainties in a long-term strategy 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 CodeBuilder served as an AI developer gateway to the Tuya developer platform, applying live coding to AI hardware development. By describing their requirements in natural language, developers can complete product definition, add user interface, embedded firmware, AI agents, and workflow development in one place, and then proceed directly to the device flashing and debugging.