Q1 2026 Tuya Inc Earnings Call

May 12, 2026

Speaker #1: Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Tuya Inc.'s first quarter 2026 earnings conference call. At this time, all participants are in listen-only mode.

Operator: Good morning, good evening, ladies and gentlemen. Thank you for standing by, and welcome to Tuya Inc.'s Q1 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question and answer session. Briefly informed that today's conference is being recorded. I'll now turn the call over to the first speaker today, Ms. Regina Wang, Investor Relations Associate Director of Tuya. Please go ahead.

Speaker #1: After the speakers' presentation, there will be a question-and-answer session. Please be informed that today's conference is being recorded. I'll now turn the call over to the first speaker today, Ms. Regina Wang, Investor Relations Associate Director of Tuya.

Speaker #1: Please go ahead.

Speaker #2: Thank you all for your time.

Regina Wang: Thank you, operator. Hello, everyone. Welcome to our Q1 2026 Earnings Conference Call. Joining us today are 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.tuya.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 will give his remarks in Chinese and English translation follows. Jerry, please. Hello, everyone. Thank you for joining Tuya's earnings conference call for Q1 2026.

Speaker #3: Hello, everyone. Welcome to our first quarter 2026 earnings conference call. Joining us today are our founder and CEO, Mr. Xueji Wang, and our co-founder and CFO, Mr. Yi Yang.

Speaker #3: Our results and webcast of the conference call are available at iar.tuya.com. A replay of this call will also be available on our IR website in a few hours.

Speaker #3: Before we continue, I'd like to refer you to our safe harbor statements in our earnings press release, which apply to this call, as we will make forward-looking statements.

Speaker #3: With that, I will now turn the call over to our founder and CEO, Mr. Jerry Wang. Jerry will give his remarks in Chinese, and the English translation will follow.

Speaker #3: Jerry, please.

Speaker #4: 感谢大家参加涂鸦智能2026年第一。季度的会。

Speaker #3: Hello everyone, and thank you for joining Tuya's earnings conference call for the first quarter of 2026.

Regina Wang: Hello, everyone. Thank you for joining Tuya's earnings conference call for Q1 2026.

Jerry Wang: [Foreign language]

Speaker #4: 本季度尽管外部环境持续存在不确定性，并受到区域性的因素的扰动，公司依然展现出了稳健的增长动能和执行力。自第四季度以来，受于下游需求的持续回暖，公司业务规模延续扩张的态势，总收入同比增长8.3%，增速较上一季度进一步的改善，并保持连续多个季度的正向增长。毛利率维持在健康的水平，体现了产品价值的主张以及平台竞争力的持续提升。

Speaker #3: During the quarter, despite ongoing uncertainties in the external environment and disturbances from certain regional factors, the company delivered solid growth momentum and strong execution capability.

Regina Wang: During the quarter, despite ongoing uncertainties in the external environment and disturbances from certain regional factors, the company delivered solid growth momentum and a strong execution capability. Benefiting from a continued recovery in downstream demand, our business scale has been expanding modestly since Q4. Total revenue increased by 8.3% year-over-year, with growth momentum improving quarter-on-quarter and posting positive growth for multiple consecutive quarters. Gross margin remains at a healthy level, reflecting the continued enhancement of our product value proposition and platform competitiveness.

Speaker #3: Since 2015, from a continued recovery in downstream demand, our business scale has been expanding modestly since the fourth quarter. Total revenue increased by 8.3% year over year, with growth momentum improving quarter on quarter and posting positive growth for multiple consecutive quarters.

Speaker #3: Growth margin remained at a healthy level, reflecting the continued enhancement of our product value proposition and platform competitiveness.

Speaker #4: 战略的执行层面，我们持续推进了以AI驱动的发展路径。我们此前提出AI正在从功能叠加走向以设备形态和行业场景的深度融合，并逐步从对话工具演进为参与真实世界运行的智能体。进入2026年第一季度，这一判断正在通过更多的应用形态和客户场景得到进一步的验证。

Jerry Wang: 在战略的执行层面，我们持续推进了以AI驱动的发展路径。我们此前提出AI正在从功能叠加走向以设备形态和行业场景的深度融合，并逐步从对话工具演进为参与真实世界运行的智能体。进入2026年第一季度，这一判断正在通过更多的应用形态和客户场景得到进一步的验证。

Jerry Wang: [Foreign language]

Regina Wang: In terms of exception of our key strategies, we continue to advance our AI-driven development strategy. As we have mentioned earlier, AI is shifting from simple feature stacking towards deep integration with hardware devices and vertical industry scenarios. It's gradually evolving from a mere conversational tool into an intelligent agent that interacts and operates in the physical world. This trend has been further validated by a richer portfolio of application offerings and customer scenarios in Q1 2026.

Speaker #3: In terms of the execution of our key strategies, we continue to advance our AI-driven development strategy. As we have mentioned earlier, AI is shifting from simple feature stacking towards deep integration with hardware devices and vertical industry scenarios.

Speaker #3: It is gradually evolving from a mere conversational tool into an intelligent agent that interacts and operates in the physical world. This trend has been further validated by a richer portfolio of application offerings and customer scenarios in Q1 2026.

Speaker #4: 与此同时，我们也在加快AI能力从平台层面让应用层及场景化的产品的转化，并在多个实际场景中实现落地。公司持续迭代开发者工具与平台能力，使全球开发者能够以更低成本、更高效的接入并应用前沿的一些AI技术。AI相关的业务收入的持续增长也反映出了商业化进程的稳步推进。

Jerry Wang: 与此同时，我们也在加快AI能力从平台层面向应用层及场景化产品的转化，并在多个实际场景中实现落地。公司持续迭代开发者工具与平台能力，使全球开发者能够以更低成本、更高效地接入并应用前沿的一些AI技术。AI相关的业务收入的持续增长也反映出了商业化进程的稳步推进。

Jerry Wang: [Foreign language]

Speaker #3: At the same time, we are accelerating the transition of AI capabilities from the platform layer to the application layer and scenario-based products. With successful deployment across multiple real-world use cases, we keep upgrading our developer tools and platform capabilities.

Regina Wang: At the same time, we are accelerating the transition of AI capabilities from the platform layer to application layer and the scenario-based products. With successful deployment across multiple real-world use cases, we keep upgrading our developer tools and platform capabilities, empowering growth global developers to access and apply cutting-edge AI technologies at lower cost and higher efficiency. The sustained growth in AI-related revenue also reflects steady progress across our commercialization efforts.

Speaker #3: Empowering growth, global developers to access and apply cutting-edge AI technologies at lower cost and higher efficiency. The sustained growth in AI-related revenue also reflects steady progress across our commercialization efforts.

Speaker #4: 本季度，我们围绕这一方向推出了包括AI生活助手A涂鸦以及AI安全守护等应用形态。这些探索的核心意义并不在于单一产品本身，而在于验证AI agent从数字任务走向物理场景执行与设备协同的能力。我们看到AI正在逐步具备跨数字世界与物理世界协同的运行的能力。这也标志着Physical AI在实际场景中的落地迈出了关键一步。

Jerry Wang: 本季度我们围绕这一方向推出了包括AI生活助手Hey Tuya以及AI安全守护等应用形态。这些探索的核心意义并不在于单一产品本身，而在于验证AI agent从数字任务走向物理场景执行与设备协同的能力。我们看到AI正在逐步具备跨数字世界与物理世界协同运行的能力，这也标志着physical AI在实际场景中的落地迈出了关键一步。

Jerry Wang: [Foreign language]

Speaker #3: During the quarter, we introduced a range of applications aligned with this direction, including the AI-powered smart life assistant Hey Tuya and the AI security guardian.

Regina Wang: During the quarter, we introduced a range of applications aligned with this direction, including the AI-powered Smart Life Assist, Hey Tuya, and AI Security Guardian. The significance of these initiatives lies not only in single products, but in validating the capabilities of AI agents to move beyond handling digital tasks into physical world execution and device coordination. We are seeing AI gradually develop the ability to operate across both digital and physical worlds, marking a critical step forward in the real-world deployment of physical AI.

Speaker #3: The significance of these initiatives lies not only in single products, but in validating the capabilities of AI agents to move beyond handling digital tasks into physical world execution and device coordination.

Speaker #3: We are seeing AI gradually develop the ability to operate across both digital and physical worlds, marking a critical step forward in the real-world deployment of physical AI.

Speaker #4: 当未来我们将重点围绕以下方向深化布局。第一，持续推进AI原生的应用创新，围绕智能潮玩陪伴机器人等高活跃的品类加速AI能力在消费场景中的渗透及规模化的应用，推动Physical AI在更多日常场景中的落地。第二，推进已验证的AI解决方案的全球化的拓展，特别是在能源与绿色科技领域。第三，我们持续强化开发者生态建设，通过开发开放平台与工具的能力，降低AI应用的开发门槛与行业伙伴共同推进AI技术的深入探索和商业化落地。

Jerry Wang: 当然，未来我们将重点围绕以下方向深化布局。第一，持续推进AI原生的应用创新，围绕智能朝晚陪伴机器人等高活跃的品类，加速AI能力在消费场景中的渗透及规模化的应用，推动physical AI在更多日常场景中的落地。第二，推进已验证的AI解决方案的全球化的拓展，特别是在能源与绿色科技领域。第三，我们持续强化开发者生态建设，通过开发开放平台与工具的能力，降低AI应用的开发门槛，与行业伙伴共同推进AI技术的深入探索和商业化落地。

Jerry Wang: [Foreign language]

Speaker #3: Looking ahead, we will further deepen our strategic focus on the following key areas. First, we will continue to advance AI-native application innovation, centering on high-engagement categories such as smart toys.

Regina Wang: Looking ahead, we will further deepen our strategic focus on the following key areas. First, we will continue to advance AI-native application innovation. Centering on high engagement categories such as smart toy. We will accelerate the penetration and large-scale adoption of AI capabilities in consumer scenarios, extending physical AI into a wider range of everyday use cases. Second, we will scale the global rollout of proven AI solutions, particularly in the energy and green technology sectors. By bringing mature solutions to international markets, we aim to enhance our industry recognitions globally. Third, we will continue to strengthen our developer ecosystem. Through open platforms and enhanced tool capabilities, we will lower the barriers to AI application development and work closely with industry partners to drive deeper exploration and commercialization of AI technologies.

Speaker #3: We will accelerate the penetration and large-scale adoption of AI capabilities in consumer scenarios, extending physical AI into a wider range of everyday use cases.

Speaker #3: Second, we will scale the global rollout of proven AI solutions, particularly in the energy and green technology sectors. By bringing mature solutions to international markets, we aim to enhance our industry recognition globally.

Speaker #3: Third, we will continue to strengthen our developer ecosystem. Through open platforms and enhanced tool capabilities, we will lower the barriers to AI application development and work closely with industry partners to drive deeper exploration and commercialization of AI technologies.

Speaker #4: 接下来，我们请我们的CFO为大家带来更多的财务表现和经营进展的介绍。

Jerry Wang: 接下来我们请我们的CFO为大家带来更多的财务表现和经营进展的介绍。

Jerry Wang: [Foreign language]

Speaker #3: Now, let me turn the call over to our Co-Founder and CFO, Alex Yang, for a closer look at our financial performance and business progress.

Regina Wang: Now let me turn the call over to our Co-founder and CFO, Alex Yang, for a closer look at our financial performance and business progress.

Speaker #5: Hello everyone, this is Alex. I will provide a brief overview of our first quarter results. Please note that, unless otherwise stated, all figures are in US dollars and all comparisons are on a year-over-year basis.

Alex Yang: Hello everyone, this is Alex. I will provide a brief overview of our Q1 results. Please note that unless otherwise stated, all figures are in US dollars and all comparisons are on year-over-year basis. In Q1 2026, we generated total revenue of approximately $80.9 million, representing a year-over-year increase of around 8.3%. Despite ongoing uncertainties in external environment, the company maintained its steady growth trajectory. Our core platform business remained stable, while AI-related business continued to demonstrate a strong growth trend. Our operating margin continued to improve. GAAP operating margin reached 9.2%, representing a significant year-over-year increase, while non-GAAP operating margin was 10%. Net margin further improved to 19.5%, reflecting continued optimization in operating efficiency and cost structure.

Speaker #5: In the first quarter of 2026, we generated total revenue of approximately $80.9 million, representing a year-over-year increase of around 8.3%. Despite ongoing uncertainties in the external environment, the company maintained its steady growth transactionally.

Speaker #5: Our core platform business remained stable. While AI-related business continued to demonstrate strong growth, our profitability and operating margin continue to improve. GAAP operating margin reached 9.2%, representing a significant year-over-year increase.

Speaker #5: While non-GAAP operating margin was 10%. Net margins further improved to 19.5%, reflecting continued optimization in operating efficiency and cost structure. Overall, the combination of improvements in revenue mix and disciplined expense management has driven sustained profitability gains.

Alex Yang: Overall, the combination of improvements in revenue mix and disciplined expense management has driven sustained profitability gains. Before going to segment details, we would like to note that we have adjusted the names of certain business segments this quarter. The former SaaS and other segments has been renamed to AI application and others, reflecting our continued push forward AI-enabled software services to and more applications, accurately capturing the transition from traditional cloud services to AI application services. Meanwhile, the former Smart Solution segments has been renamed to smart home and robot products, highlighting our increased focus on AI-powered home products, household robotics, and scenario-driven AI initial devices on hardware side. We would like to emphasize that these changes are purely presentational and do not affect the revenue composition, recognition methods, or historical comparabilities of each segment.

Speaker #5: Before going into segment details, we would like to note that we have adjusted the length of short-term business segments this quarter. So, the former SaaS and other segments have been renamed to AI Application and Others.

Speaker #5: Reflecting our continued push forward, AI-enabled software services and more applications are accurately capturing the transition from traditional cloud services to AI application services. Meanwhile, the formal smart solution segments have been renamed to smart home and robot products.

Speaker #5: Highlighting our increased focus on AI-powered home products, household robotics, and scenario-driven AI initial devices on the hardware side. We would like to emphasize that these changes are purely presentational and do not affect the revenue composition, recognition methods, or historical comparability of each segment.

Speaker #5: Within our segments, the past business generates revenue of $59 million US dollars this quarter, representing our year-over-year increase of approximately 9.8%. As customer demand gradually recovered, we continue to drive steady growth in our core business through ongoing optimization of our customer mix and capabilities.

Alex Yang: Within our segments, the PaaS business generates revenue of $59 million this quarter, representing a year-over-year increase of approximately 9.8%. As customer demand gradually recovered, we continued to drive steady growth in our core business through ongoing optimization of our customer mix and capabilities. At the end of this Q1, the number of PaaS premium customers reached 306, reflecting the stability of our core customer base and the structural resilience of the platform business. The AI application and others segments generated revenue of $11.6 million in this quarter, representing a year-over-year increase of approximately 16.9%, continuing to outpace overall company growth.

Speaker #5: At the end of this first quarter, the number of past premium customers reached 306, reflecting the ability of our core customer base and the structural resilience of the platform business.

Speaker #5: The AI application and other segments generated revenue of $11.6 million in this quarter, representing a year-over-year increase of approximately 16.9%. Continuing to outpace overall.

Speaker #5: Company growth this quarter was primarily driven by increased revenue from the cloud software services and the AI application services, including AI cloud storage, energy management and serving, value-added services like SMS and voice services, as well as app OEM and SDK offerings.

Alex Yang: This growth was primarily driven by increased revenue from the cloud software services and AI application services, including AI cloud storage, energy management, and serving value-added services like SMS and voice services, as well as app OEM and SDK offerings. This reflects the continuous progress in commercialization of our AI applications. As more software products completed their AI-driven upgrades, this segment has gradually become a more growth-oriented and software services-centric component of our revenue mix. The smart home and robot products segment generated revenue of $10.2 million, representing a year-over-year decrease of approximately 6.9%. The fluctuation in this segment primarily reflects our proactive effort to phase out relatively low value hardware products and optimize the product mix and reallocate resources towards higher value-added, especially AI-native hardware terminals.

Speaker #5: This reflects the continuous progress in commercialization of our AI applications. As more software products complete their AI-driven upgrades, this segment is gradually becoming a more growth-oriented and software services-centric component of our revenue mix.

Speaker #5: The smart home and robot products segment generated revenue of $10.2 million, representing a year-over-year decrease of approximately 6.9%. The fluctuation in this segment primarily reflects our proactive effort to phase out relatively low-value hardware products and optimize the production mix.

Speaker #5: And reallocate resources towards higher-value-added, especially AI initial hardware terminals. As the segments undergo structural adjustments, we expect its long-term profitability and scalability to gradually improve with a higher mix of higher-value products.

Alex Yang: As the segment undergoes structural adjustments, we expect its long-term profitabilities and scalabilities to gradually improve within a higher mix of a higher value production. From an operational perspective, several verticals this quarter have demonstrated structural opportunities driven by the integration of AI and smart hardware. In the security segment, our smart door lock business achieved 73% year-over-year growth, driven by upgrades in the multi-modal Wi-Fi solutions, video intercoms, as well as AI voices and vision capabilities. PaaS revenue from Wi-Fi-enabled smart door locks increased 65% year-over-year growth. At the same time, the AI app revenues from the video-enabled locks increased substantially 500% year-over-year. This demonstrates that AI and multi-modal capabilities are driving the traditional smart lock vertical to evolve from a standalone hardware model into a higher value business model of hardware plus software service plus AI capability combined.

Speaker #5: From an operational perspective, several verticals this quarter have demonstrated structural opportunities driven by the integration of AI and smart hardware. In the inner security segment, our smart door lock business achieved 73% year-over-year growth, driven by upgrades in multi-model Wi-Fi solutions, video intercoms, as well as AI voice and vision capabilities.

Speaker #5: Past revenue from Wi-Fi-enabled smart door locks increased 75% year-over-year. At the same time, the AI revenues from the video-enabled locks increased substantially, up 500% year-over-year.

Speaker #5: This demonstrates that AI and multi-modeling capabilities are driving the traditional smart lock vertical to evolve from a standalone hardware model into a higher-valuation model of hardware plus software services plus AI capability combined.

Speaker #5: In the energy sector, related past products, including the EV chargers, metering products, and professional metering solutions, are emerging as new growth drivers. We are also continuing to advance in higher-value solutions such as AI-enabled display gateway and voice capabilities, providing a strong foundation for our customers' product upgrades and future growth.

Alex Yang: In the energy sector, related PaaS products, including the EV chargers, metering products, and professional metering solutions, are emerging as new growth drivers. We are also continuing to advancing the higher value solutions such as AI-enabled display, gateway, and voice capabilities, providing a strong foundation for our customers' products upgrades and the future growth. In the AI energy, demand in the European market for home energy management, energy storage, and AI-driven energy saving solutions continue to grow. During this quarter, we made solid progress in advancing AI energy-related initiatives with key milestones achieved in the commercialization of energy storage and ecosystem accessories. Our customers received a very positive feedback and secured multiple channel partnerships and orders as at the exhibition such as Light + Building in Frankfurt and the Solar Solutions in the Netherlands.

Speaker #5: AI energy demand in the European market for home energy management, energy storage, and AI-driven energy-saving solutions continues to grow during this quarter.

Speaker #5: We made solid progress in advancing AI energy-related initiatives, with key milestones achieved in the commercialization of energy storage and ecosystem accessories. Our customers received very positive feedback and secured multiple-channel partnerships and orders at exhibitions such as Light + Building in Frankfurt and Solar Solutions in the Netherlands.

Speaker #5: In Singapore's HTV project, new capabilities app panels and the delivery are progressing on schedule. AI energy is gradually evolving towards a comprehensive solutions model, integrating hardware bundles, software, and AI orchestration, plus channel operations.

Alex Yang: In the Singapore's HDB project, new capabilities, app panels, and deliveries are progressing on schedule. AI energy is gradually involved towards a comprehensive solutions model, integrating hardware bundles, software, and AI orchestration, plus channel operations. From a regional and scenario perspective, Europe remain a key deployment market for energy and green technology solutions. With growing demand for AI energy, smart electrical systems, spatial intelligence applications, AI smartphone appliances, and AI safety and security products. In Asia Pacific region, the Singapore HDB projects continue to moving through implementation and validation. While Southeast Asia and other emerging markets are beginning to generate opportunities in energy management, spatial intelligence, and SME scenarios as well. In China, AI-enabled smart door locks, AI toy, and AI home products, including AI companion, continue to attractive strong customer interest, with some customers already advancing project upgrades and solution integrations.

Speaker #5: From a regional and scenario perspective, Europe remains a key deployment market for energy and green technology solutions, with growing demand for AI energy smart electrical systems, spatial intelligence applications, AI smart home appliances, and AI safety and security productions.

Speaker #5: In the Asia Pacific region, the Singapore HTV projects continue to move through implementation and validation. Meanwhile, Southeast Asia and other emerging markets are beginning to generate opportunities in energy management, spatial intelligence, and SME scenarios as well.

Speaker #5: In China, AI-enabled smart door locks, AI toys, and AI home products, including AI companions, continue to attract strong customer interest. Some customers are already advancing project upgrades and solution integration.

Alex Yang: On margins, our blended gross margin for this quarter was 46.9%, with a slightly year-over-year fluctuation, primarily due to the change in the product mix and certain upstream cost of, you know, variations. By segment, gross margin for PaaS was 46.1%. Gross margin for AI application and others was 71.7%, remain stable and reflecting the structural advantage of software and AI-driven business. The gross margin for smart home and robot products was 23%, maintaining a level of above 20%. While advancing AI applications and high value, we continue to focus on the cost efficiency and product value. Our expenses, we maintain disciplined cost management during the quarter with total operating expenses, OPEX of approximately $30.4 million.

Speaker #5: On margins, our branded growth margin for this quarter was 46.9%, with slight year-over-year fluctuation primarily due to the change in the product mix and certain upstream cost variations.

Speaker #5: By segment, gross margin for the past was 46.1%. Gross margin for AI application and others was 71.7%. We remain stable and are reflecting the structural advantage of our software and AI-driven business.

Speaker #5: And the growth margin for smart home and robot products was 23%, maintaining a level above 20%. While advancing AI applications and high-value, we continue to focus on cost efficiency and product value.

Speaker #5: Our expenses—we maintained disciplined cost management during the quarter, with total operating expenses of approximately $30.4 million US dollars. While continuing to invest in core AI development and platform capability, improvements driven by AI and digitization of operations enable further operating leverage.

Alex Yang: We are continually investing in core AI development and platform capability, improvements driven by AI and digitalization, and digitalizing operations enable further operating leverage. In terms of profitability, we recorded profit from operations of about $7.5 million for this quarter. Non-GAAP profit from operations was approximately $8.1 million. Net profit reached $15.8 million. The improvement was primarily driven by positive contribution from gross profit growth, as well as lower share-based compensation expenses. Our cash flow, net operating cash flow remained positive during this quarter. At the end of this quarter, the company's total cash equivalent, time deposits, and the treasury securities amount to approximately $1 billion plus.

Speaker #5: In terms of profitability, we recorded profit from operations of about $7.5 million US dollars for this quarter. Non-GAAP profit from operations was approximately $8.1 million US dollars.

Speaker #5: Net profit reached $15.8 million. The improvement was primarily driven by positive contribution from gross profit growth as well as lower share-based compensation expenses.

Speaker #5: Our net operating cash flow remained positive during this quarter. At the end of this quarter, the company's total cash equivalents, time deposits, and treasury securities amounted to approximately $1 billion.

Speaker #5: The strong cash positions provide solid support for our continued investment in long-term AI capability development. Our ability to navigate external uncertainties and opportunities, and our capacities to enhance shareholders' returns.

Alex Yang: The strong cash positions provide solid support for our continuing investment in long-term AI capability development, our ability to navigate external uncertainties and opportunities, and our competitors to enhance shareholders' returns. We will also prudently evaluate and pursue higher quality strategic investment opportunities. Overall, the company continued to deliver revenue growth and improved profitabilities amid a complex environment. While the accelerated development of AI application business is driven the ongoing evaluation of our revenue mix towards a higher value segment. Next, I will briefly walk you through our progress in our AI development ecosystem. Within our development ecosystem, during Q1, we continued to advance to the open source capabilities of TuyaOpen and further development on our AI agents.

Speaker #5: We will also presently evaluate and pursue higher-quality strategic investment opportunities. Overall, the company continued to deliver revenue growth and improved profitability amid a complex environment.

Speaker #5: While the accelerated development of AI application business is driving the ongoing evaluation of our revenue mix towards a higher value segment. And next, I will briefly walk you through our progress in an AI development ecosystem.

Speaker #5: Within our development ecosystem during the first quarter, we continue to advance the open source capabilities of Tuya Open, and further development on our AI agents.

Speaker #5: So, to better address the diverse needs of AI-native developers, we also launched our new offerings, including the Archer lightweight agent kit for hardware developers and the Vibe coding based on the 'Powered by Tuya' hardware applications.

Alex Yang: To better address the diversity needs of AI-native developers, we also launched our new offerings, including the ultra-lightweight agent kit for the hardware developers and the Vibe Coding powered by Tuya hardware applications. The Vibe Coding will be able to help lower the bar for many new developers as well. Those tools enable developers to build a wide range of AI-native hardware products in a more flexible and agile manner. We remain committed to lower the bar for AI hardware and application developments while enhancing flexibility and openness, allowing developers, brands, solution providers to accelerate the process from ideation and prototyping to product commercialization. At the end of Q1 2026, the number of registered AI developers on our platform exceeded 1.96 million, maintaining steady growth.

Speaker #5: So, the Vibe coding will be able to help lower the bar for many new developers as well. Those tools enable developers to build a wide range of AI-native hardware products in a more flexible and agile manner.

Speaker #5: We remain committed to lowering the bar for AI hardware and application developments, while enhancing flexibility and openness—allowing developers, brands, and solution providers to accelerate the process from idealization and prototyping to product commercialization.

Speaker #5: At the end of the first quarter of 2026, the number of registered AI developers on our platform exceeded 1.96 million, maintaining steady growth. At the same time, engagement within the Tuya Open Community continues to increase.

Alex Yang: At the same time, engagement within the TuyaOpen community continued to increase. Based on our current acquisition data, the TuyaOpen documentation platform has been accumulated over 340,000 views. With more than 16,000 community members, it has accumulated abundant open-source projects, resources, and launched a standardized demo cases library covering mainstream application scenarios and development needs. TuyaOpen is gradually evolving from an open-source framework into a open ecosystem infrastructures for the AI hardware innovation. For our deployment perspective, AI capabilities are increasingly extending from the platform layer into a broader range of end devices formats. Whether in AI-enabled door locks, energy management solutions, sensors, AI companion toys, or AI robots, they all reflect the same underlying trend. AI is evolving from isolated functions towards deep integration with the devices, scenarios, and user needs.

Speaker #5: Based on our current ecosystem data, Tuya Open has accumulated over 340,000 views. With more than 16,000 community members, it has accumulated abundant open source project resources and launched a standardized demo case library covering mainstream application scenarios and development needs.

Speaker #5: Tuya Open is gradually evolving from an open-source framework into an open ecosystem infrastructure for AI hardware innovation. From our deployment perspective, AI application capabilities are increasingly extending from the platform layer into a broader range of end device formats.

Speaker #5: Whether in AI-enabled door locks, energy management solutions, sensors, AI companion toys, or AI robots, they all reflect the same underlying trend: AI is evolving from isolated functions toward deep integration with devices, scenarios, and user needs.

Speaker #5: This is fully aligned with our previously actuated vision of physical AI, enabling AI to engage in real-world environments and actively participate in sensory decision-making and execution in real life.

Alex Yang: This is fully aligned with our previously articulated vision of physical AI, enabling AI to engage in real-world environments and actively participate in sensory decision-making and execution in real life. In summary, our Q1 performance further validate the commercial viability of our AI strategy. Our core PaaS business continue to provide a solid growth foundation, while the deep integration of AI application services with physical hardwares is emerging as a new driver for the value creation. At the same time, we have achieved meaningful progress in deploying AI solutions across high-value scenarios such as energy, entertainment, and security. Looking ahead, we will remain focused on 2 key priorities: physical AI scenarios and higher value-added AI products. While maintaining financial discipline, we will accelerate the transition of AI technologies from a 2-level capability to products with tangible commercial value, creating sustainable long-term returns to our shareholders.

Speaker #5: In summary, our first quarter performance further validated the commercial visibility and viability of our AI strategy. Our core past business continues to provide a solid growth foundation.

Speaker #5: While the deep integration of AI application services with physical hardware is emerging as a new driver for validation, at the same time, we have achieved meaningful progress in deploying AI solutions across high-value scenarios such as energy, entertainment, and security.

Speaker #5: Looking ahead, we will remain focused on two key priorities: physical AI scenarios and higher value-added AI products. While maintaining financial discipline, we will accelerate the transition of AI technologies from a two-level capability to products with tangible commercial value, creating sustainable long-term returns to our shareholders.

Speaker #5: Thank you, all operators. We can begin the Q&A right now.

Alex Yang: Thank you, all operators. We can begin the Q&A right now.

Speaker #2: Thank you. We will now begin the question-and-answer session. To ask questions on the phone, please press star, one, and one, and wait for a name to be announced.

Operator: Thank you. We will now begin the question and answer session. To ask questions on the phone, please press star 1 and 1 and wait for your name to be announced. To cancel your request, please press star 1 and 1 again. One moment for the first question. As a reminder, to ask question, please press star 1 and 1 on your telephone.

Speaker #2: Who can say your request? Please press star one and then one again. One moment for the first question. As a reminder, to ask questions, please press star one and then one on your telephone.

Speaker #3: First question, we have Yiang Liu from Morgan Stanley. Please go ahead.

Operator 2: First question, we have Yang Liu from Morgan Stanley. Please go ahead.

Operator: First question, we have Yang Liu from Morgan Stanley. Please go ahead.

Speaker #4: Thank you for the opportunity to ask questions, and congratulations on the solid results. I would like to ask about the value chain, because a lot of the sectors are suffering from the chipset shortage globally.

Yang Liu: Thank you for the opportunity to ask questions and congratulations on the solid result. I would like to ask about the value chain, because a lot of the factors are suffering from the chip shortage globally. Could management update us in term of Tuya's situation in value chain, especially the chip sourcing? Also update us the pricing strategy, if there's any shortage or constraint from the value chain, how to pass through the inflationary cost to the downstream? Thank you.

Speaker #4: So could management update us in terms of the Tuya's situation in value chain? Especially the chipset sourcing. And also update us the pricing strategy if there's any shortage or constraint from the value chain and how to pass through the inflationary cost to the downstream?

Speaker #4: Thank you.

Speaker #5: Yeah, thank you, Liu. Yes, we really noticed those kinds of fluctuations around one and a half quarters ago. So that's why we gave a heads up about that type of trend around the end of last year.

Alex Yang: Yeah. Thank you, Yang Liu. Yes, we're really notice those kind of fluctuations around 1.5 quarters ago. That's why we give a heads up of that type of trends around the end of last year. The things we're doing is, the first one is that, considering of a large buyers of some of the major chips that's in the industry, we are. The fluctuations we maintain as a limit, as we could, because of the bargaining power. At the same time that for those costs that inevitably will have to increase, we'll pass through those costs to the downstream side. That would be the basic idea and how we've been doing.

Speaker #5: And so the things we're doing is, the first one is that, considering of a large buyers of some of the major chips that's in the industry, we are.

Speaker #5: And so, the fluctuations we maintain as an eminent aspect to it, because of the buying power. At the same time, for those costs that inevitably we have to increase, so we'll pass through those costs to the downstream side.

Speaker #5: So that would be the basic idea, and how we've been doing. And so, you can notice that there are several reactions we've really been doing. The first one is that in Q1, we really do some strategic purchasing before any cost change.

Alex Yang: You can notice that there are several reactions we've already been doing. The first one is that in Q1, we're really do some strategic purchasing before any cost change. You can notice that in our balance sheet that our inventory improves slightly. That majorly is that is kind of the procurement. We do that before the cost increased. That reflected to my inventory level and in including my net cash as well. That's the first one. We try to use a larger inventories to buying more times to working through the fluctuations.

Speaker #5: So you can notice that in our balance sheet that our inventory increased slightly. So that's majorly is that it's kind of the procurement we do that before the cost increased.

Speaker #5: And so that reflected to my inventory level, and including my net cash as well. So that's the first one. So we're trying to use larger inventories to buy more time to work through the fluctuations.

Speaker #5: The second one is that you already noticed that, especially on the past side, so the change or those kinds of differences of the gross margin of the past reflects that we're really starting to pass through the cost.

Alex Yang: The second one is that you already noticed that, especially on the PaaS side, the change or those kind of difference of the gross margin of PaaS with facts that we're really starting to pass through the cost. We didn't add the margin on the cost change because we don't want to bring more burden for my downstream side. That reduced slightly on my gross margin on the PaaS as well. We'll continue to keep focused on that and to working along with my customers and through those fluctuations. No matter using our capabilities to manage the cost difference at the least level as we could, in the same time that, we're using our inventories to try to bring more balance coming through with the time.

Speaker #5: But we didn't add the margin on the cost change, because we don't want to bring more burden for my downstream side. So that reduced slightly on my gross margin in the past as well.

Speaker #5: We'll continue to keep focus on that, and to working along with my customers and through those fluctuations, so no matter using our scalabilities to manage the cost difference as a least level as we could.

Speaker #5: In the same time that we were using our inventories to try to bring more balance coming through with the time. So that would be the basic idea there.

Alex Yang: That would be the basic idea there. We found that the shortage and the density of the momentum continued to increase in Q2, in the beginning of Q2.

Speaker #5: But we found that the shortage and the density of the momentum continue to increase in Q2, in the beginning of Q2.

Speaker #2: Okay, thank you.

Yang Liu: Thank you.

Speaker #4: Thank you for the question. Our next questions will come from the line of Goldman Sachs' Ms. Timothy Chow. Please go ahead.

Operator 2: Thank you for the question. Our next questions will come from the line of Goldman Sachs. Mr. Timothy Zhao, please go ahead.

Operator: Thank you for the question. Our next questions will come from the line of Goldman Sachs. Mr. Timothy Zhao, please go ahead.

Speaker #2: Thank you, management, for taking my question, and congrats on the solid results. I think my question is on the revenue front. I noticed that this quarter, you achieved a pretty solid sequential acceleration in revenue growth.

Timothy Zhao: Thank you, management, for taking my question, and congrats on the solid results. I think my question is on the revenue front. I noticed that this quarter you achieved a pretty solid sequential acceleration on the revenue growth. However, given the very dynamic geopolitical and macro environment globally right now, I was wondering what is your latest thoughts on the demand outlook and revenue growth outlook for the rest of this year? What measures have you taken to stabilize or further boost the demand? My second question is I noticed, as you mentioned, you changed the reporting line or changed the reporting name of the 2 of the segments that you report.

Speaker #2: However, given the very dynamic geopolitical and macro environment globally right now, I'm just wondering what your latest thoughts are on the demand outlook and revenue growth outlook for the rest of this year?

Speaker #2: And what measures have you taken to stabilize or further boost the demand? And my second question is that I noticed, as you mentioned, you changed the reporting line or changed the reporting name of two of the segments.

Speaker #2: Thank you for your report. Just could you further elaborate on the rationale behind—and specifically on—AI applications and on robotic products? Just wondering if you can share more color on your plan regarding these two specific subsegments.

Timothy Zhao: Just, could you further elaborate on the rationale behind and the specificity, AI applications and robotic products? Just wondering if you can share more color on your plan regarding these two specific sub-segments. Thank you.

Speaker #2: Thank you.

Speaker #5: Okay, yeah. Thank you for that. So the first one on the market environment, we already noticed that as we shared the colors when we released our Q4 result, we found that while the international trading environment becomes stable after November of last year, so the momentum is starting to recover.

Alex Yang: Okay. Yeah. Thank you for that. The first one, on the market environment, we already noticed that, as we share the colors when we released our Q4 results, we found that while the international trading environment becomes stable after the November of last year. The momentum is starting to recover and the customer is trying to return to a growing plan on the business side. It's not that conservative. Starting from December, we already see that they're starting to recover. It's not overnight. They're doing that gradually. Even though in March we'll know that there will be a new fluctuation coming home. Overall speaking, the downstream side is recovering.

Speaker #5: And the customers are starting to return to a growing plan on the business side, so it's not that concerning. So, starting from December, we already see that they're starting to recover.

Speaker #5: It's not overnight, so they're doing that gradually. And even though in March we'll know that there will be a new fluctuation coming through, overall speaking, the downstream side is recovering.

Speaker #5: But we have to break down into different sectors. So what we see here is that, like the appliances, like the energy, like the innovative devices including the securities or the locks, we found that the growth momentum is more positive.

Alex Yang: We have to break down into different sectors. What we see here is that, like the appliances, like the energy, like the innovative devices, including the securities or the locks, we found that the growth momentums and are more positive and almost for sure. Because no matter is that we found a more solid in mind or pinpoint on the user side and or is and those sectors, those companies are doing a better. In some other sectors, like the lightings, we don't see significant recovery. It's kind of the still doing in what we call is into evaluating stage. On the lighting side. Some sectors that those chipset cost variations, not from our side, but from their own side, like the cameras.

Speaker #5: And are more for sure. So because no matter is that we found a more solid demand or pinpoint on the user side. And all is those sectors, those companies are doing better.

Speaker #5: But in some other sectors like the lighting, we don't see significant recovery. So it's kind of still doing what we call is in an evaluating stage.

Speaker #5: So, on the lighting side, and in some sectors, those chipset cost variations are not from our side, but from their own side, like the cameras.

Speaker #5: So, all like the, some control panels with the screen, so the memory chip cost variations will bring a more significant cost difference for the finished product for the device side.

Alex Yang: Or like some control panels with the screen. The memory chip cost variations will bring a more significant cost difference for the finished product, for the device side. The factories and the brands, they can do less to change that directions. That price increase might be significant for them. Like the camera for business, the entry-level cameras, usually the FOB price or the retail price will be like $20, and FOB will be below $10. During those kind of memory chip and the amount chip increase, we noticed that the FOB price might be able to hit above $15. Which means that the retail price have to increase around to $30 to $35.

Speaker #5: And the factories and the brands, they can do less to change that direction. So, that price increase might be significant for them. Like the camera for business, the entry-level cameras, usually the FOB price or the retail price will be—like, the retail price will be around $20.

Speaker #5: And FOB will be below $10. But during those kinds of memory chip and non-chip increases, we noticed that the FOB price might be able to hit above $15.

Speaker #5: So which means that the retail price has to increase around 35. So that’s a significant increase on the retail price side and might influence the consumers’ buying decision.

Alex Yang: That significant increase on the retail price side might influence the consumer's buying decision. We already notice some sectors might be more sensitive or be more impacted more on the cost increase. Some will be more resilient. That will be on the product sector side. On the region side, combined with that is that still for the energy that Europe and Southeast Asia is a strong demand, including Australia, is a very strong demand for the energy management solution. Especially in this year, what people trying to notice that energy become more and more, how can I say? Energy become more and more crucial on the cost sustainability side. They have to pre-invest.

Speaker #5: So we really noticed some sectors might be more sensitive, or be more—will be impacted more—on the cost increase. Some will be more resilient.

Speaker #5: So that will be on the product sector side. And on the region side, so combined with that is that still for the energy that the Europe and the Southeast Asia is a strong demand for the including Australia is a very strong demand for the energy management solution.

Speaker #5: Especially in this year, while people are starting to notice that energy is becoming more and more—how can I say?—energy is becoming more and more crucial.

Speaker #5: And on the cost sustainability side, so they have to pre-invest, they are more willing to pre-invest in any energy efficiency. So for that part.

Alex Yang: They have more willing to pre-invest on any energy efficiency. For that part. For some other regions like Latin America, they are more price sensitive. Like I mentioned, that some sectors like the cameras for this market consider that they are lower buying power based on the macroeconomy in that sector, in that region. For them, that's so some sectors will meet some challenge out there. For us is that still that we're trying to use our very comprehensive hardware category mixed and combined with a multi-region mix to go in against different type of fluctuations. We're always looking for opportunity in some regions that to balance the seesaw on the other side. That's overall for the macro environment.

Speaker #5: But for some other regions, like Latin America, they're more price sensitive. So, like I mentioned, some sectors like cameras for this market considered that they...

Speaker #5: Of a lower buying power for the based on the macro economy in that sector in that region. So for them that's a so some sectors will meet some challenge out there.

Speaker #5: So for us, it's still that we're trying to use our very comprehensive hardware category mix, and combine that with the multi-region mix to go against different types of fluctuations.

Speaker #5: We're always looking for opportunity in some regions, that to balance the CISO on the other side. So that's overall for the macro environment. And the second one is for the AI transition.

Alex Yang: The second one is for the AI transition. No matter is the AI application or the home robot products. Both sides that we're looking forward to give the market the signal is that we're doing so hard to reallocate our resources since 2023 that to transit our previous, we'll call the 1st version of smart devices offering into the AI initial offering. Starting from the end of the 2023, we're really upgrade our entire platform architectures into large language model optics, which mean that since end of 2023 and all those decision-making on the platform side for the device and the software applications can be based on the different large language model or the mainstream one.

Speaker #5: Yeah. The minor is the AI application or the home robot products. So both sides that we're looking forward to give the market the signal is that we're doing so hard to reallocate our resources since 2023, that to transit our previous—we'll call the first version of smart devices offering—into the AI initial offering.

Speaker #5: So, starting from the end of 2023, we're really upgrading our entire platform architectures into large language model acoustics. Which means that since the end of 2023, all those decision-making on the platform side for the device and the software applications can be based on the different natural language model.

Speaker #5: All the mainstream ones. And in 2024, in May of 2024, we really launched our hardware agent platform. That enables our customers to design an agent on top of the devices.

Alex Yang: In 2024, May of 2024, we already launched our hardware agent platform that enable our customer to design an agent on top of the devices to make the devices be more smart and run, doing something autonomously. Even no customers understand what it is, what is the agent. Last year, we launched our new AI platform as a new AI foundation that including the multi-modal offerings, including the open source projects to open some new doors for the new innovative ideas for those customers give them a bridge, giving a path that how they can combine technology into innovative ideas and make it come true.

Speaker #5: So, make the devices be more smart and run, doing some things autonomously. But even now, customers don't understand what it is. What is the agent? And in the last year, we launched our new AI platform as a new offering from the AI foundation.

Speaker #5: That including the multi-modeling offerings, including the open source projects, to open some new doors for new, innovative ideas for those customers. And then give them a bridge.

Speaker #5: Giving a path, that's how they can combine technology into innovative ideas and make it come true. And in April, at our new developer summit, we launched our new offerings, including the Agent Kit.

Alex Yang: In April that in our new developer summit, we launched our new offerings, including the agent kit that allow the hardware designers to do things more freely, and including our Vibe Coding and tools that right now they can design any softwares, including the apps, including the firmware on the hardware side, including the cloud services. They can do that all through Vibe Coding. All the things we're doing is that we to show that we are kind of initial AI user and AI enabler. For that things, we're trying to upgrade our offering in those two segments. Take the AI application for example. We're really trying to provide that for all the cloud storage on the camera side that right now comes in with AI capability.

Speaker #5: That allows the hardware designers to do things more freely, and including our Vibe coding tools. Right now, they can design any softwares, including apps, including the former, on the hardware side, including the cloud services.

Speaker #5: They can do that all through vibe coding. So all the things we're doing is that we to show that we are, we are in, we are kind of initial in AI user and AI enabler.

Speaker #5: And so for that, we're starting to upgrade our offering in those two segments. So, take the AI application for example. We're really starting to provide that for all the cloud storage on the camera side that right now contains AI capability.

Speaker #5: So, customers will be able to customize the event. So it's not just dummy—detect any movement on the picture and give you the unknown.

Alex Yang: Customer will be able to customize the event. It's not just, dummy detect any movement on the picture and give you the alarm. You can find that you got so many false alarm, and then you have to turn down the notification, right? Because the camera cannot tell whether it's something you should pay attention to or not. Any, like, the delivery boys come by that, anyone come from your the door that you get alarm. Starting from there that you can build an event that, if it's a package, don't give me notification. If someone stay at my front door, like, over 10 minutes a day and notice. If someone showed up every day and seems like very suspicious, give me a notice.

Speaker #5: And you can find that you've got so many false alarms, and then you have to turn down the notifications, right? Because the camera cannot tell whether it's something you should pay attention to or not.

Speaker #5: Any like the deliverables combined that anyone come from your door that you get alarm. And starting from there, you can build an event, so if it's a package, don't give me notification.

Speaker #5: And if someone is staying at my front door for over 10 minutes a day, notify me. If someone shows up every day and seems very suspicious, give me a notice.

Speaker #5: So, people are starting to be able to create their own event, and then have the camera to watch over them. So that things will provide significantly more value and get more anonymous pain points from the end user side.

Alex Yang: People tend to be able to create their own event and then have the camera to watch out for them. That things will be provide significant more values and killing more annoying pain point for the end user side. That kind of seamless upgrade on those kind of offerings is it's a natural upgrade for our previous success offering. We think that right now we're starting to provide more and more AI capabilities seamlessly to the previous sets. We show that the normal users trying to subscribe that services because of the AI offering, then we're doing the upgrades at AI applications. That's no matter if it's a scale, it's a agent or it's a purely services on the recurring model. For the smart home and robot products.

Speaker #5: So, that kind of thing is an upgrade. On those kinds of offerings, it's a natural upgrade for our previous success offering. So, we think that right now we're starting to provide more and more AI capabilities seamlessly to the previous sets.

Speaker #5: And then we'll show that more and more users are starting to subscribe to those services because of the AI offering. And then we're doing the upgrade to other AI applications.

Speaker #5: And that's the merit to the scale. It's an agent, or it's purely services on the recurring model. And for the home products and robotics.

Speaker #5: So some scenarios is including, like the companion—that's when we're offering the two, that toy, when AI toy. For some customers, some customers, they have their own brands.

Alex Yang: Some scenarios is including, like, the companion. That's when we're offering the AI toy. For some customers, they have their own brands. They have their own very good toy design and capabilities and channel distributions, but they don't have the capability to design things from scratch. Especially if they don't know anything about coding, they don't know anything about the circuit boards, about the microphone array design. For some of that part, we're starting to offer an entire solution. Through that, we'll put more focus not on some what we call is the first generation of smart devices. We're trying to focus more on the AI, what we call AI initial devices. Like the toy. They need the multi-modal capability. They need the very good noise-canceling and the microphone array design engine.

Speaker #5: They have their own very good toy design capabilities and channel distributions, but they don't have the capability to design things from scratch. Especially, they don't know anything about coding.

Speaker #5: They don't know anything about the circle boards, about the microphone array design. So for some of that part, we're starting to offer the entire solution.

Speaker #5: And so, through that, we'll put more focus not on some what we call is the first innovation of smart devices. We're starting to focus more on the AI, what we call AI initial devices.

Speaker #5: So, like the toy, they need the multi-modeling capability. They need very good noise canceling and the microphone array designation. And they need the string projection technologies.

Alex Yang: They need the screen projection and technologies to reflect different type of reactions from the toy side. For that part, that's how we allocated the resources since last year. Right now for the segment that the directions is that we guide the entire department to put focus on all those kind of AI-enabled and AI-native devices. Usually those devices will come naturally with AI, not only the AI feature, but combined with larger opportunity for the AI application business. That's how we driving force to that. Not a kind of connected devices segment anymore. It's become a more AI-native offering for those customers helping to do that. Yeah. That would be the typical use cases.

Speaker #5: To refract different type of reactions from the toy side. So for that part that's how we allocated the resources since last year. And so right now for the for this segment that the directions is that we guide the entire department to put focus on all those kind of AI enabled and AI initial devices.

Speaker #5: And usually those devices will come naturally with not only the AI feature, but combined with larger opportunity for the AI application business. So that's how we're driving forward to do that.

Speaker #5: So it's not kind of connected devices segment anymore. It's become more of an AI initial offering for those customers by helping through that. Yeah. So that'll be the typical use cases.

Timothy Zhao: Thank you very much.

Speaker #5: Thank you very much. Thank you for the very detailed answer. It's been an agent. Thank you. Now, the next questions will come from the line of Kai Xiao of CICC.

Alex Yang: Thank you for the question.

Timothy Zhao: Very detailed explanation.

Operator: Thank you. Next questions will come from the line of Kai Xiao of CICC. Please go ahead.

Speaker #5: Please go ahead. Thank you, my goodness. This is Kai, and I have two questions. First one is on computation. So, following the emergence of agents, on-device agent deployment has become an industry trend.

Kai Xiao: Thank you, management. This is Kai, and I have two questions. First one is on computation. Following the emergence of agents, on-device agent deployment has become an industry trend. Could you share how has the competitive landscape evolved in Q1, and how do you view Tuya's advantage in this field? My second question is on R&D. Could you share how is the company applying AI tool like Vibe Coding in internal R&D, and what's the potential impact on margin and profitability? Thank you.

Speaker #5: So could you share how the competitive landscape has evolved in Q1, and how you view Tuya's advantage in this field? And my second question is on R&D—could you share how the company is applying AI tools, like agent coding tools, in internal R&D, and what's the potential impact on margins and profitability?

Speaker #5: Thank you. Yeah. So the first one, I already covered some of the parts in the market environment side. So as we see here, there are two things.

Alex Yang: The first one, I already covered some of the parts in the market environment side. As we see here is that two things. The first one is since the customer is trying to escape from over conservative, I mean, momentum in PaaS. They're trying to get back into the growth path. What we're doing is that we just identify the right roadmap along with them and to fulfill that and help them to providing a better product, better offerings on their shelf, on their own channels, and to catch the customers, catch their own end users, what I mean. In the same time, we really see that end user's thickness on AI are growing very, very healthily.

Speaker #5: The first one, since the customer is trying to kind of escape from over-conservative, I mean momentum in assurance. They're starting to get back into the growth path.

Speaker #5: So what we're doing is that we just identify the right roadmap along with them and fulfill that, and help them to provide better products, better offerings on their shelf, on their own channels.

Speaker #5: And to catch the customers. Catch their own end users, is what I mean. And at the same time, we already see that the end users' thickness on AI.

Speaker #5: Agree, very, very healthy. Healthily. So, which means that more and more users are using features and AI offerings. And I believe that it's not that significant right now, but in the near future, when consumers are sourcing smart devices, AI features or what type of AI features will be kind of the key differentiators or key factors for them to make the decision.

Alex Yang: Which mean that more and more users are trying whatever AI features and AI offerings. I believe that it's not that significant right now, but in the near futures, the consumers, when they source in the smart devices, AI features or what type of AI features will be kind of the key differentiations or key factors for them to make the decision. We are very happy to see that since H2 of last year's, our penetration among my ecosystem to integrate AI capabilities we offer to their new products design and become significant and proved. That will help us to capture the trend. That's for this part.

Speaker #5: And so, we are very happy to see that, since the second half of last year, our penetration among my ecosystem to integrate the AI capabilities we offer to their new product design has become significant and proven.

Speaker #5: So that will help us to capture the trend. So that's for this part. So what we see is that we'll always be kind of the early adopter and can notice the trend for the industry maybe two or three quarters ahead. That's because I can see what type of technology my customer is trying to pre-study, starting to try, and when they are starting to implement that into their new product roadmap and the products that.

Alex Yang: What do we see that will always be kind of the early adapter and to notice the trend for the industry maybe 2 or 3 quarters ahead, is that because I can see what type of technology my customer is trying to pre-study, is trying to try, and when they trying to implement that into the new product roadmap and produce that. What we see is that in Asia consider as early education for the entire industry or in most of the sectors we cover, that to give them type of the right educational coach, that AI will be considered as the next generation of key differentiations for any new things they build and to the market. They need to try that or need to try to understand or to learn that.

Speaker #5: So what we see is that in last year, considered as an early education for the entire industry or in most of the sectors we covered, that to give them the type of the right education or coach, that AI will be considered as the next generation of key differentiations for any new things they build.

Speaker #5: And to the market. And so they need to try that or need to try to understand or to learn that. Starting from the second half of last year, the customers, majority of the new products or the new projects that they kicked off, they try that.

Alex Yang: Starting from the second half of last year, the customers, majority of the new products or the new projects that they kicked off, they try that. The new products they start to offer maybe at the end of last year or at the second half of this year, bring that into market, going through a long procedure into the development, manufacturing, logistics, and to the end-user design. That what we see here. It will be a very positive trend. On the second part is for the AI usage, I'd like to share some things. First one is that at the end of last year, the front end, which means that those ones design the UI, user interface, and the UX, user experience, using most of our R&D set overall.

Speaker #5: And so, then the new products they start to offer, maybe at the end of last year or at the second of this year.

Speaker #5: Bring that into market going through a long procedure, into the development, manufacturing, logistics, and to the end of the design. So that's what we see here.

Speaker #5: And so it will be a very positive trend. And on the second part, for the AI usage, I'd like to share some things.

Speaker #5: First one is that at the end of last year, the front end, which means that those one design—that is, the user interface and the UX, user experience—are using most of our R&D side overall.

Speaker #5: And so at the end of last year, around 40% of the codes we designed for the UI side are done through AI. So that's the first one.

Alex Yang: At the end of last year's, around 40% of the codes we design for UI side are doing through AI. That's the first one. We're improving that as well, considering that in this year, in this Q1, the AI coding capability improved a lot. We found that we can use more AI to do more terminals, including the agent kit I mentioned for the hardware designers. The agent kit, a significant part of that is doing by AI. While we offer that kit, we also combine with the Vibe Coding tool for that kit as well.

Speaker #5: And we're improving that as well. Considering that in this year, in this Q1, the AI coding capability improved a lot. So we found that we can use more AI to do more terminals, including the agent key that I mentioned for the hardware designers, and the agent key—a significant part of that is being done by AI.

Speaker #5: And while we're offering that kit, we're also combined with the Vibe coding tool for that kit as well. And so, which means that not us design the kit for AI, the customer will be do that through the AI coding more freely as well.

Alex Yang: Which mean that not us design the kit for AI, the customer will be do that through the AI coding more freely as well, and very quickly to turn that into a hardware prototype. In the same time, the AI usage is not only used for the R&D. All our departments, including the financial, including the human resources, including the legal department, we're using heavily through AI. No matter it's improving our efficiencies on some office processing, office work processing, but also including the data analytics, the BI, and decision makings, et cetera. We consider that AI to improve the efficiency in two parts. The first one is that to release some of my labors to focus more on higher value works. That's the first one.

Speaker #5: And very quickly to turn that into a hardware prototype. And also, at the same time, the AI usage is not only used for the R&D.

Speaker #5: So all our departments, including the financial, including the human resources, including the legal department, we're using heavily through AI. So no matter, it's improving our efficiencies on some office processing, office work processing, and also including the data analytics, BI, and decision makings, etc.

Speaker #5: So we consider that AI can improve efficiency in two parts. The first one is to release some of my labels to focus more on higher-value work.

Speaker #5: That's the first one. And the second one is that even on the coding side, on the development side, that is to enlarge our competitive— that is, to meet the future demand growth.

Alex Yang: The second one is that for the even on the coding side, on the development side, that is to enlarge our capacity, that to meet the future demand growth. We already noticed that, while more and more AI-native developer coming in, that trend is very good one, is that, in this year we noticed more and more new developers that not come from the hardware industry.

Speaker #5: Because we already noticed that while more and more AI initial developers are coming in, that trend is a very good one. One thing is that, in this year, we noticed more and more new developers, they're not coming from the hardware industry.

Speaker #5: So, which means that people are starting to identify that the AI capability might be a new opportunity for new teams to engage in the new smart devices business sectors that only come in with new ideas.

Alex Yang: Which mean that people trying to identify that the AI capability might be a new opportunity for new team to engage in the new smart devices business sectors that only come in a new idea, and something that didn't happen in the hardware world before. A special one is like the toy companion ones that many of my very fast-growing customers in the toy sectors, they are not toy players out there. We'll see including some of the, what they call, the youth market, like they do the badge, is a animation badge, is the focus on the cartoon. Those badge players, they don't have that business before.

Speaker #5: And something that didn't happen in the hardware world before. So especially one is like the toy companion ones that many of my very fast growing customers in the toy sectors, they are not toy players out there.

Speaker #5: And right now, we'll see, including some of the, what do you call, the youth market. Like, do the batch—animation batch is the focus on the cartoon.

Speaker #5: And those batch players, they don't have that business before. So that type of industry breakthrough occurs over players, and they require more on the—they rely more on—the AI capability usage themselves, and also they come more with the AI initial ideas or native ideas.

Alex Yang: That type of industry breakthrough or crossover players, and they rely more on the AI capability usage themselves, and also they are more come with the AI initial ideas or native ideas. Not only to reduce the cost, but also use the same level of cost to improve the competitiveness to capture those demands. That's where we'll have more priority to check out too. Like I mentioned that, the net cash flow considered as a strategic strategy for the company, not only for the future competition, but also for the future opportunity. I think that's even more important is that while the industry are growing faster and, some breakthrough happen, especially like the crossover happened, that we're not hesitate to increase the investment to capture those demands.

Speaker #5: So not only to reduce the cost, but also to use the same level of cost to improve the capacities to capture those demands, and that's where we'll have more priority to check out too.

Speaker #5: So, like I mentioned, the net cash flow is considered as a strategic strength for the company, not only for the future competition, but also for future opportunity.

Speaker #5: I think what's even more important is that while the industry is growing faster and some breakthroughs happen, especially like the crash over happened, that we're not hesitant to increase the investment to capture those demands.

Speaker #5: So, I think that will be the overall momentum, and so how we use the AI and we empower customers with AI. What we see is that we need to be a very powerful AI user, and until then, we'll be able to empower customers.

Alex Yang: I think that will be the overall momentum and so how we use the AI, and we empower customer with AI. What we see that we need to be a very powerful AI user, and until then, we'll be able to empower customers.

Speaker #5: Thank you. Thank you. Thank you for the questions. Our last questions will now come from the line of Matt Ma of Jefferies. Please go ahead.

Operator: Thank you.

Alex Yang: That's all. Thank you.

Operator: Thank you for the questions. Our last questions will now come from the line of Matt Ma of Jefferies. Please go ahead.

Speaker #5: Hey. Good morning, Benjamin. Thank you for taking my question. I have two questions. So, the number one is on the Smart Home and Robot product segment.

Matt Ma: Hey, good morning, management. Thank you for taking my question. I have two questions. The number one is on the Smart Home and Robot Product segment. I would like to know how do we think about the growth trajectory of this segment in 2026? Should we expect a growth recovery in the coming quarters? My second question is on the AI Application segment. We are seeing that the growth margin of this segment has declined by 2.7 percentage point year-on-year in Q1. Are there any specific reasons behind that? That's all. Thank you.

Speaker #5: I would like to know, how do we think about the growth trajectory of this segment in 2026? Should we expect a growth recovery in the coming quarters?

Speaker #5: And my second question is on the AI application segment. We are seeing that the gross margin of this segment has declined by 2.7 percentage points year over year in the first quarter.

Speaker #5: Are there any specific reasons behind that? That's all. Thank you. Yeah. So the first one is the full—the AI home and the robot products that we're looking for—to have the recovery in the coming quarter or in the coming two quarters.

Alex Yang: The first one is the Smart Home and Robot Products that we're looking for to have the recovery in the coming quarter or in the coming two quarters. Because it's a structural change, so we have to make the hard decisions. You know, you can see that even to maintain the revenue and the gross profit growth, but in the same time, we cut off some of the production. Even we got the orders, we decided we're not to do that anymore because we don't like the model out there for the long term. There is a structural hard decisions, even we'll miss some not that good numbers, but we're looking to speed up to catch it up.

Speaker #5: And because it's a structural change, so we have to make the hard decisions. You can see that even to maintain the revenue and the gross profit growth, but at the same time we cut off some of the production.

Speaker #5: Even when we got the orders, we decided we're not to do— we're not to do that anymore, because we don't like the model out there for the long term.

Speaker #5: So and so there is a structural hard decisions even we'll miss some not that good numbers and but we're looking to to speed up to catch it up.

Speaker #5: So we have the new offering starting to take in places. And in Q2, we're looking forward to capturing orders and to deliver that to make it up.

Alex Yang: We have the new offerings starting to take places and in Q2, and we're looking for to capture on orders and to deliver that to make it up. Either it's end of the Q2 or it's Q3, we're looking for to get that recovery. That's the first one for the smart home and robot products. For the AI application and others, yes, we found a seasonal difference. It's very interesting that we found that the key part is that the AI application and others is relying on the usage of the end users based on the devices that are running. The typical things that we found that maybe is that in the Q1, the UI usage is always kind of the lower seasons for the entire year.

Speaker #5: So either it's the end of Q2 or it's Q3 we're looking for to get that recovery. So that's the first one for the home and the robot production.

Speaker #5: And for the AI applications yes we found that we found the seasonal seasonal difference. It's very interesting. That's a we found that the key part is that the AI applications is rely on the usage of the end users based on the devices that are running.

Speaker #5: And the typical thing that we found that maybe is that in the in the Q1 the usage is always kind of the lower seasons for the entire for the entire year.

Speaker #5: So that's, that's, that's why that while the usage is kind of low, so the service space revenue has become lower for us.

Alex Yang: That's why that, why the usage is kind of low, so the service-based revenue is become lower for us. Maybe one of the reason is that, the Q1, many of the users, kind of the new users and will have the new devices for the Christmas, for the holiday season promotions. While they start to try the products, usually the combined with some of the vacations, the usage start to dropped. We're looking for to see that the natural recovery and on the usage side will start to taking places on Q2. That will be the stuff. It's kind of very interesting one.

Speaker #5: Maybe one of the reasons is that in Q1, many of the users are kind of new users and will have new devices from Christmas.

Speaker #5: For the for the for the holiday season promotions. And while they start to try the products usually the the combined with some of the vacations the usage is starting to drop.

Speaker #5: What we're looking for is to see that the natural recovery and, on the usage side, we're starting to take place in Q2.

Speaker #5: So that will be the stuff. So it's kind of a very interesting one. Got it. Thank you. Thank you for the questions. I'll now hand the call back to the management team for closing remarks.

Matt Ma: Got it. Thank you.

Operator: Thank you for the question. I'll now hand the call back to management team for closing remarks. From the line, allow me to turn the call back. Thank you.

Speaker #5: Allow me to hand the call back. Thank you. All right, thank you all for hearing. Thank you all once again for joining us today.

Regina Wang: All right. Thank you, operator, and thank you all once again for joining us today. If you have any further questions, please feel free to contact through IR team. Goodbye, and see you next quarter.

Speaker #5: If you have any further questions, please feel free to contact Tuya IoT. Goodbye, and see you next quarter. That does conclude today's conference call.

Operator: That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.