Q2 2026 Tuya Inc Earnings Call

August 25, 2026

Speaker #2: 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.

Operator: Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to Tuya Inc.'s Q2 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. 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.

Speaker #2: After the speakers' presentations, there will be a question-and-answer session. Please be informed that today's conference is being recorded. And now, I will turn the call over to your first speaker today, Ms. Regina Wang, Investor Relations Associate Director of Tuya.

Speaker #2: Please go ahead.

Speaker #3: Thank you all for your time. Hello, everyone. Welcome to our second 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.

Regina Wang: Thank you, operator. Hello, everyone. Welcome to our Q2 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.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, please.

Regina Wang: Thank you, operator. Hello, everyone. Welcome to our Q2 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.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, please.

Speaker #3: Our results and a 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.

Speaker #3: Before we continue, I'd like to refer you to our safe harbor statements in our earnings press release, which applies 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, please.

Jerry Wang: Hello, everyone, and thank you for joining Tuya's earnings conference call for the Q2 of 2026. Tuya maintained solid growth momentum during the quarter, a year-over-year increase of 16%, with growth accelerating from the Q1. 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.

Jerry Wang: Hello, everyone, and thank you for joining Tuya's earnings conference call for the Q2 of 2026. Tuya maintained solid growth momentum during the quarter, despite the continued complexing of the global operating environment a year-over-year increase of 16%, with growth accelerating from the Q1. Within this, revenue from our core PaaS business increased 16.9% year-over-year.

Speaker #4: 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.

Speaker #4: 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 SaaS business increased 16.9% year over year.

Jerry Wang: 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.

Speaker #4: 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 the growing demand for emerging AI-enabled product categories, also underscore the resilience of our platform business across different regions and product categories.

Speaker #4: In terms of strategic execution, we continue to advance our AI-driven development strategy, extending our AI capabilities beyond foundation models and standalone features toward platformization, productization, and scenario-based deployment.

Jerry Wang: 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.

Speaker #4: 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.

Jerry Wang: In the Q2, 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 Cobuilder, which applied low-code development 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-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.

Speaker #4: Meanwhile, we launched Tuya Compute, which applies live coding to AI hardware development, enabling developers to cover the core development process from product concept to physical device validation.

Speaker #4: Using natural language, we are further shortening AI hardware development cycles. This development further reinforces 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-native applications and product innovation, centering on high-potential scenarios such as AI homes, AI energy, and AI robots.

Jerry Wang: 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-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.

Speaker #4: 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.

Jerry Wang: Second, we will continue to enhance AI development tools such as low-code development, 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.

Jerry Wang: 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.

Speaker #4: Third, we will advance the global expansion of proven solutions while further strengthening our development ecosystem and industry partnerships to jointly explore long-term opportunities in the AI application market.

Speaker #4: 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.

Speaker #5: 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.

Alex Yang: Hello, everyone. This is Alex. I will now provide a brief overview of our Q2 results. Please note that unless otherwise stated, all figures are in USD and all comparisons are on year-over-year basis. In the Q2 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 Q1. Our PaaS business maintained strong growth, where revenue from the smart home and robot product segment is also increased by double digits. Of our total revenue, the PaaS business generated a revenue of about $67.9 million, a year-over-year increase of 16.9%, serving as the important growth drivers for the quarter. At the end of the Q2, the number of PaaS premium customers for the trailing 12 months reached 318, contributing approximately 89.5% of the PaaS revenue, with the core customer base remaining stable.

Speaker #5: 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.

Speaker #5: Our past business maintains strong growth, with revenue from the smart home and robot products segment also increasing by double digits. Of our total revenue, the past business generated revenue of about $67.9 million year over year, an increase of 16.9%, serving as important growth drivers for the quarter.

Alex Yang: Of our total revenue, the PaaS business generated a revenue of about $67.9 million, a year-over-year increase of 16.9%, serving as the important growth drivers for the quarter. At the end of the Q2, the number of PaaS premium customers for the trailing 12 months reached 318, contributing approximately 89.5% of the PaaS revenue, with the core customer base remaining stable.

Speaker #5: As of the end of the second quarter, the number of past premium customers for the trailing 12 months reached 318, contributing approximately 89.5% of past revenue, with our core customer base remaining stable.

Speaker #5: The AI application and other segments generated revenue of about $11.5 million year over year, an increase of 3.9%, primarily driven by growth in cloud-based service revenue such as video call storage, which continued to advance to value-added services, including video and AI-driven energy saving, among others.

Alex Yang: 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 continued to advance the value-added services, including video and AI Energy saving, among others, with AI-enabled applications capabilities, while gradually strengthening our renew and recurring service capability. Smart home and robot product 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.

Speaker #5: With AI-enabled application capabilities, we are gradually strengthening our renew and recurring service capability. Smart home and robot products revenue was about $13.5 million year over year, an increase of 23.2%, primarily driven by growing customer demand from smart security, energy, and other differentiated smart products.

Alex Yang: Smart home and robot product 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.

Speaker #5: We will continue to increase the contribution of high-value-added products and strengthen their integration with software and value-added services. Looking at the specific drivers of past growth—home appliances, smart door locks, electronics, energy products, and AI companion product solutions—these performed relatively well during the quarter. Growth in the home appliances segment was mainly driven by customers’ rollout of smart-enabled models, the extension 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.

Alex Yang: 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 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 no 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 18th Shopping Festival in China, Fuzuzu, built on Tuya solutions, ranked first in the AI toy categories on Tmall, where a number of other ecosystem products also deliver strong ranking and sales performance across major e-commerce platforms.

Speaker #5: Growth in smart door locks was primarily driven by increased adoption of audio-video and no-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.

Alex Yang: 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 18th Shopping Festival in China, Fuzuzu, built on Tuya solutions, ranked first in the AI toy categories on Tmall, where a number of other ecosystem products also deliver strong ranking and sales performance across major e-commerce platforms.

Speaker #5: And regions. In AI companion products, shipment volumes of the devices powered by our solutions continued to expand. During the June 18 shopping festival in China, Fuzuzu, built by Tuya Solutions, ranked first in the AI toy categories on Temu.

Speaker #5: 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.

Alex Yang: 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 building out capabilities in multi-model perception, personal and memory content services, and user engagement, helping customers accelerate the development and mass productions of the AI-native consumer hardware. In the energy sector, 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%.

Speaker #5: 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 production of AI-native consumer hardware.

Speaker #5: In the energy sector, solutions including EV chargers, smart power distribution, metering, and home energy management maintain solid growth, while expanding our AI energy capabilities from electricity consumption analytics, anomaly alerts, and personalized recommendations towards dynamic electricity tariff management and user-authorized automated device coordination.

Alex Yang: 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%.

Speaker #5: Within the smart home ecosystem, customers' adoption of Matter-based solutions continued to increase across categories such as electronic products, lighting, and climate control. In parallel, we enhanced local control, multi-protocol interoperabilities, and third-party ecosystem compatibilities.

Speaker #5: On the margin side, our blended gross margin for this quarter was 46.3%. By segment, gross margin for PAS 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 semiconductor costs and changes in business mix, in line with expectations.

Alex Yang: By segment, gross margin for PaaS was 46.8%, gross margin for AI adoption and others was 72%, and gross margin from 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 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 $33.7 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%.

Speaker #5: Despite this, gross profit increased by 11.1% year over year to approximately 43 million US dollars. On expenses, we maintained disciplined expense management while continuing to invest on AI and R&D and platform capability, gap-occluding expenses for this quarter were approximately 33.7 million US dollars, down 10.4% year over year, primarily due to the lower share-based compensation expenses.

Alex Yang: GAAP operating expenses for this quarter were approximately $33.7 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%.

Speaker #5: In the term of profitability, we recorded gap profit from operating of approximately 9.3 million US dollars, with a gap repeating margin of 10%. Non-gap profit from operatings was approximately 9.6 million US dollars year over year increased by 11.7%, while non-gap operating margin remained in the double digit at 10.3%, while delivering revenue growth we maintained relatively stable core operating profitability.

Alex Yang: Non-GAAP profit from operations was 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.

Speaker #5: Net profit for the quarter was approximately 18.6 million dollars, while non-gap net profit was approximately 18.9 million dollars, the year over year decline in non-gap net profit was primarily due to the lower financial income and foreign exchange losses.

Alex Yang: 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.

Speaker #5: While core operating profit continued to grow, on the cash flow side, net cash generated from operating activities was $6.2 million during the quarter and remained positive.

Speaker #5: At the end of the second quarter, the company's total liquid assets, including cash and cash equivalents, time deposits, and treasury securities, amounted to approximately $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.

Alex Yang: At the end of the second quarter, the company's total liquid asset, including cash and cash equivalent, time deposit, and treasury securities amounted to approximately $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 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 Cobuilder served as an AI developer gateway to the Tuya developer platform, applying back 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.

Speaker #5: Next, I will 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 back coding to AI hardware development.

Alex Yang: Launched during the second quarter, Tuya Cobuilder served as an AI developer gateway to the Tuya developer platform, applying back 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.

Speaker #5: 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.

Speaker #5: And then proceed directly to the device flashing and debugging. This covered the core development process from product concept to physical device validation and helped shorten the AI hardware development cycles.

Alex Yang: This covers the whole development process from product concept to physical devices validation and help shorten the AI hardware development cycles. In just over a month since launch, Tuya Cobuilder's AI-powered panel generations capabilities have expanded to cover 30 product categories, with average generation time for a simple panel reduced to approximately 190 seconds only. This progress demonstrates that we are advancing our developer tools beyond development assistance towards end-to-end delivery capability, spanning product definition, software generation, and deployment on physical devices. As an application layer, we continue to enhance T2 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 have already begun to generate early payment and renewals. We will continue to focus on high-frequency use cases and long-term use value.

Speaker #5: In just over a month since launch, Tuya co-builders' AI-powered panel generation capabilities have expanded to cover 30 product categories, with the average generation time for a single panel reduced to approximately 190 seconds.

Alex Yang: This progress demonstrates that we are advancing our developer tools beyond development assistance towards end-to-end delivery capability, spanning product definition, software generation, and deployment on physical devices. As an application layer, we continue to enhance T2 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.

Speaker #5: 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.

Speaker #5: As the application layer, we continue to enhance Hey Tuya's 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 have already begun to generate early payments and renewals.

Alex Yang: Certain scenarios have already begun to generate early payment and renewals. We will continue to focus on high-frequency use cases and long-term use value. From a broader perspective, AI capabilities are gradually expanding beyond single model integrations and in compact device sensoring, and contextually understanding memory, agent orchestration, and device-side execution. We will continue to leverage the strength of our platform, device ecosystem, and global developer base to translate AI capability into a scalable commercial value across a broader range of the real-world scenarios.

Speaker #5: We'll continue to focus on high-frequency use cases and long-term use value. From a broader perspective, AI capabilities are gradually expanding beyond single-model integrations and into compact device sensoring.

Alex Yang: From a broader perspective, AI capabilities are gradually expanding beyond single model integrations and in compact device sensoring, and contextually understanding memory, agent orchestration, and device-side execution. We will continue to leverage the strength of our platform, device ecosystem, and global developer base to translate AI capability into a scalable commercial value across a broader range of the real-world scenarios. In summary, our revenue growth accelerated in Q2 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 fluctuation and business mix change, we have maintained stable operating profitability and ample financial resources.

Speaker #5: Contextually, 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.

Speaker #5: In summary, our revenue growth accelerated in the second quarter of 2026, with our past business continuing to serve as a primary growth engine. Meanwhile, our AI capabilities are being commercialized in parallel across multiple paths, including smart products and AI applications.

Alex Yang: In summary, our revenue growth accelerated in Q2 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 fluctuation and business mix change, we have maintained stable operating profitability and ample financial resources.

Speaker #5: Despite the impact on gross margin from semiconductor supply chain price fluctuations and business mix changes, we maintain stable operating profitability and ample financial resources.

Speaker #5: Looking ahead, we'll remain focused on AI-native applications, physical AI scenarios, and developer platform capability, and will continue to advance the transformation of AI technologies from two-level capabilities into tangible and scalable commercial value.

Alex Yang: Looking ahead, we will 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, operators. Right now, we can begin the Q&A.

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

Speaker #1: We will now begin the question-and-answer session. To ask a question, please press star one one (*)11 on your telephone and wait for your name to be announced.

Operator: We will now begin the question and answer session. To ask a question now, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *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.

Speaker #1: To withdraw your question, please press star one one again. One moment for our first question. We will now take our first question from the line of Yang Liu of Morgan Stanley.

Speaker #1: Please ask your question, Yang. Your line is open.

Yang Liu: 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 current environment, what is the growth or demand outlook going into the H2 2026? If you can provide a little bit more breakdown by geographic, that will be even better, like what is the demand profile in US or in Europe and ASEAN, et cetera? Thank you.

Speaker #2: Thank you for the opportunity, and congratulations on the strong earnings. My question is about the future demand outlook. Based on your discussions with key customers in the current environment, what is the growth or demand outlook going into the second half of 2026?

Speaker #2: If you can provide a little bit more breakdown by geography, that would be even better—like what's the demand profile in the U.S., or in Europe and ASEAN, etc.

Speaker #2: Thank you.

Speaker #3: Okay, thank you. Thank you, Liu. So right now what we see that the end demand and internal momentum is still within our expectation. So as we speak in the beginning of this year, that the entire customers and the consumer side, they're looking forward to still to consuming more and the transfer more legacy devices and solutions into the new AI one.

Alex Yang: Okay. Thank you. Thank you, Liu. Right now, we see that the end demand and internal momentum still within our expectation. As we stated in the beginning of this year, the entire customers and the consumer side, they are looking forward to still consuming more and transfer more legacy devices and solutions into the new AI one that we provide. This momentum continues. What we see that we have the accelerating type of rebalancing on the demand side. This will be the overall view. We see that the recovery will not come overnight. It is gradually climbing. What we found here is that momentum is still continuing, and especially based on those kind of very positive sell-through feedback from the end user side. That is the first one.

Speaker #3: That we provide. So this momentum continues. What we see is that we have an accelerated type of rebound on the demand side. So this will be the overall takeaway.

Speaker #3: So, we see that the recovery will not come overnight, so it's gradually climbing. What we found here is that momentum is still continuing, especially based on those kinds of very positive, sales-through feedback from the end-user side.

Alex Yang: We see that the recovery will not come overnight. It is gradually climbing. What we found here is that momentum is still continuing, and especially based on those kind of very positive sell-through feedback from the end user side. That is the first one.

Speaker #3: That's the first one. If I break it 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.

Alex Yang: If I break down into the geographic areas, there are different type of demand drivers. Europe still show very strong on the demand side, especially for all type of energy-related segments. Including the new AI Home, so home management solutions, we provide as a total solution or include different type of energy efficiency improvement, single device. No matter is what we provide as a PaaS or we provide as a smart home and robot products to the solution together. That show very strong demand still as the first one. On Southeast Asia and Latin America, the driving force is majorly come from our strong channels in the telecom carriers. While trying to establish a strategic partnership along with them around 2 and a half years ago, and we are starting to scale, commercialize that part.

Speaker #3: So, including the new AI hub, home energy solutions we provide as a total solution include different types of energy efficiency improvements, or single devices.

Speaker #3: No matter if it's what we provide as a path or what we provide as a home and robot products to the solution together. That shows very strong demand still.

Speaker #3: That's the first one. And in Southeast Asia and Latin America, the driving force mainly comes from our strong channels with the telecom carriers.

Alex Yang: On Southeast Asia and Latin America, the driving force is majorly come from our strong channels in the telecom carriers. While trying to establish a strategic partnership along with them around 2 and a half years ago, and we are starting to scale, commercialize that part. Through their own channels to deliver some comprehensive total solutions for their users in the AIoT fields. That is a very strong potential and very promising one, because they are running as a B2B cycle.

Speaker #3: So while trying to establish a strategic partnership with them around two and a half years ago, we're starting to scale and commercialize that part.

Speaker #3: So, through their own channels, they are able to deliver some comprehensive total solutions for their users in the AIoT fields. That's a very strong potential, and a very promising one, because they're running as a B2B cycle.

Alex Yang: Through their own channels to deliver some comprehensive total solutions for their users in the AIoT fields. That is a very strong potential and very promising one, because they are running as a B2B cycle. By the end of the time, it is a B2C, but they run a really strong B2B cycles rather than a retail side. They are campaigning on that. That is for Southeast Asia and Latin America. Middle East is still currently in a pause right now because of the military conflict going on in the Q2. Right now, we are still kind of wait and see. The customer is still there, and the customer is still doing a lot of preparations, including the product development and the new concept definitions and type of stuff. But right now, I think that all the business is not coming back yet.

Speaker #3: By the end of the time, it's a B2C, but they're running really strong B2B cycles rather than the retail side. They can plan on that.

Alex Yang: By the end of the time, it is a B2C, but they run a really strong B2B cycles rather than a retail side. They are campaigning on that. That is for Southeast Asia and Latin America. Middle East is still currently in a pause right now because of the military conflict going on in the Q2. Right now, we are still kind of wait and see. The customer is still there, and the customer is still doing a lot of preparations, including the product development and the new concept definitions and type of stuff. But right now, I think that all the business is not coming back yet.

Speaker #3: That's for Southeast Asia and Latin America. The Middle East is still kind of in a pause right now because of the military conflict going on in the second quarter.

Speaker #3: So right now, we're still kind of wait and see. The customer's still there, and the customer's still doing a lot of preparations, including product development and new concept definitions and that type of stuff.

Speaker #3: But right now, I think that overall the business is not coming back yet. And we're looking forward to having better scenarios, perhaps maybe at the end of Q3 or Q4.

Alex Yang: We are looking forward to have better scenarios, perhaps maybe end of Q3 or Q4. We are looking forward to have some agreement for those conflicting countries, then we will be able to catch the demand. North America is that the sales team is still there, but some price sensitive, especially low price type of the devices, that show fluctuations by the pricing bridge coming from the supply chain side. We structured that type of product mix along with my customers to deliver a better sale, too, in the H2 of this year. I think that we overall. For China right now, we will be seeing some really good promising categories, including part of the home appliances.

Speaker #3: We're looking forward to having some agreement for those conflicting countries, and then we'll be able to catch the demand, and so that way overall.

Speaker #3: And North America, as the sales rule is still there, but some price-sensitive, especially low-price types of devices, are not showing kind of fluctuations due to the pricing risk coming from the supply chain side.

Alex Yang: North America is that the sales team is still there, but some price sensitive, especially low price type of the devices, that show fluctuations by the pricing bridge coming from the supply chain side. We structured that type of product mix along with my customers to deliver a better sale, too, in the H2 of this year. I think that we overall. For China right now, we will be seeing some really good promising categories, including part of the home appliances.

Speaker #3: And so we structured that type of product mix along with my customers, and to deliver a better sales tool in the second half of this year.

Speaker #3: And so I think that way overall. And for China right now, we already see some really good promising categories. Including part of the home appliances that we can find that the recently that's a major brand right now, the speeding up the transformations from the legacy type of devices into the smart one.

Alex Yang: But we can find that recently the major brands right now, they are speeding up the transformations from the legacy type of devices into the smart one, and from first generation IoT type of smart devices into the AI one. So we are catching the transformation trend and helping a lot of China brands to do that. The second one is that in China, some AI native categories start to boom, like the AI companion. Our first market we are starting to break through for AI companion categories is from China. So that is why I said this is really in team. So really see that based on a large target consumer scale in China and where we find the right type of applications and coming on with a very active customer base.

Speaker #3: And from first-generation IoT-type smart devices into AI ones. So we are catching the transformation trend and helping a lot of Chinese brands to do that.

Speaker #3: And the second one is that in China, some AI-native categories are starting to boom, like the AI companion. So our first market where we started to break through in the AI companion category is China.

Alex Yang: The second one is that in China, some AI native categories start to boom, like the AI companion. Our first market we are starting to break through for AI companion categories is from China. So that is why I said this is really in team. So really see that based on a large target consumer scale in China and where we find the right type of applications and coming on with a very active customer base. As we will try to find more potentials in the new type of the innovations in China.

Speaker #3: So that's my foreclosed sales rate in Timor. So we already see that, based on a large target consumer scale in China and what we found—the right type of the applications and coming on with the very active customer base—and that's what we'll try to find: more potential in new types of innovations in China.

Alex Yang: As we will try to find more potentials in the new type of the innovations in China.

Speaker #2: Okay, thank you.

Yang Liu: Okay. Thank you.

Speaker #1: Thank you. We will now take our next question from Timothy Zhao of Goldman Sachs. Please ask your question, Timothy. Your line is open.

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.

Speaker #2: Great. Good morning, management. Thank you for taking my question, and congratulations on the very solid results. My question is on your gross profit margin.

Timothy Zhao: Great. Good morning, management. Thank you for taking my question. Congrats on the very solid results. My question is on your gross profit margin. I noticed that in Q2, the IoT PaaS margin declined on a year-on-year basis, although stabilized sequentially, while your smart home and robot products margin actually declined sequentially on a year-on-year. Just wondering if you can share more color on what was the margin drivers behind, and what is your margin outlook for these two segments for Q3 and rest of this year. Thank you.

Speaker #2: I noticed that in the second quarter, the IoT path margin declined on a year-over-year basis, although it stabilized sequentially. Meanwhile, your smartphone and robotics products' margin actually declined sequentially on a year-over-year basis.

Speaker #2: Just wondering if you can share more color on what were the margin drivers behind this, and what is your margin outlook for these two segments for the third quarter and the rest of this year.

Speaker #2: Thank you.

Speaker #3: Okay. Yeah. So, first of all, as everyone knows, the upstream cost fluctuations have started to increase over the past two quarters—I mean, on a global basis.

Alex Yang: Okay. First of all, as everyone knows that the upstream cost fluctuations started to take place over two quarters on a global basis. We are the last one to catch the impact because of our buying process. For in Q2, what we are doing is that the major of the product we just passed through the cost rate. It has been that we maintain the gross profit, but we do not stick to the gross margin. Till now that we really build a very good buffering on the inventory and cost balance between now and future. In next two quarter or three, we have the confidence that we will be able to working through a more stable cost level of my major type of materials we needed.

Speaker #3: And we are the last ones to feel the impact because of our buying force. So for Q2, what we do is that for the majority of the properties, we just pass through the cost rate.

Speaker #3: And so, we think that we maintain the—we maintain the gross profit, but we don't stick to the gross margin. But still, now we've really built a very good buffer on the inventory and cost balance between now and the future.

Alex Yang: Till now that we really build a very good buffering on the inventory and cost balance between now and future. In next two quarter or three, we have the confidence that we will be able to working through a more stable cost level of my major type of materials we needed.

Speaker #3: And in the next two or three quarters, right now we have the confidence that we'll be able to work through at a more stable cost level.

Speaker #3: Of my major type of materials we needed. So, we're looking forward to either stabilizing the gross margin, and we are figuring out all the possibilities. By offering new capabilities and new technologies, we'd like to improve the gross margins overall.

Alex Yang: We are looking for to either to stabilize the gross margin, and we figure out whatever or all the possibilities that by offering new capabilities, new technologies, would like to improve the gross margins overall. That is pretty much of that. For the customer side, we really show our kindness that we just pass through the cost. In the future, anything happens, we are looking for the most positive way to help the company to continue to run the business. It is not stick to the cost, but more stick to the value and the competence that we deliver to the customers to help them get through that.

Speaker #3: So that's pretty much it. So for the customer side, we're really showing our kindness, so we just pass through the cost. But in the future, well, anything can happen, so we're looking for the most positive way to help our customer, to help the company continue to run the business.

Speaker #3: So it's not about sticking to the cost, but more about focusing on the value and the competence that we deliver to customers to help them get through that.

Speaker #1: Right. Thank you.

Operator: Right. Thank you.

Timothy Zhao: All right. Thank you.

Speaker #2: All right. Thank you.

Speaker #1: Thank you. We will now take our next question from Kai Xiao of CICC. Please ask your question, Kai. Your line is open.

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

Speaker #4: Okay, thank you, management. This is Kai. I have two questions. One is about Tuya Compute. You mentioned it in the quarter, so I wonder what's the current adoption status of Tuya Compute and what's the company's minimum?

Kai Xiao: Okay. Thank you, management. This is Kai. I have two questions. One is on Tuya Cobuilder you mentioned in the quarter. I wonder what the current adoption status of Tuya Cobuilder, and what is the company's million-

Speaker #3: Okay. 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 our R&D centers really started to provide coding and to improve our own coding efficiency.

Alex Yang: CoBuilder is something we have to do for a couple of quarters. Starting from H2 of last year, some department in Tuya R&D centers were really starting to write codings to improve our own coding efficiency, and also to bring more ROIs on R&D side. We start to do that as a major users of that coding. While we have enough experience, how we will be able to use that and the different right ROI and be able to know how to manage that. We start to think about the way we need to duplicate our experience and open that to our customers. At the beginning of this year, we start to build the CoBuilder. We are happy to launch it at Q2.

Speaker #3: And also to bring more ROIs on R&D side. So we start to do that as a major users of that coding. And while we have enough experience, how we'll be able to how we'll be able to use that and deliver the right ROI and be able to know how to manage that.

Alex Yang: While we have enough experience, how we will be able to use that and the different right ROI and be able to know how to manage that. We start to think about the way we need to duplicate our experience and open that to our customers. At the beginning of this year, we start to build the CoBuilder. We are happy to launch it at Q2.

Speaker #3: And we started to think about the way we need to duplicate our experience and open that to our customers. So at the beginning of this year, we started to build the computer.

Speaker #3: And we're happy to launch it in the second quarter. So we believe that will be the new type of default gateway in the future for many developers.

Alex Yang: 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 go to the bottom. Including me, like right now, including my financial department. Many of them, they don't know coding at all for their entire lifetime, but they are trying to write their own agent to improve their own workflow, to improve their own individual efficiencies. I believe some of you did that, too. CoBuilder will be a kind of show where, how low the bar can reach and how easy those ideal developers will come with some innovative ideas.

Speaker #3: It's not only device developers. Many developers are trying to lower the bar, including me right now, and including my financial department. Many of them have never done any coding at all in their entire lifetimes.

Speaker #3: 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.

Speaker #3: So co-builder will be kind of the showcase where how—I mean, how low the bar can reach and how easy those ideal developers will come up with some innovative ideas that they can really quickly testify, the innovations, and to validate whether those kinds of ideas make sense for some of them.

Alex Yang: They can really quickly to testify the innovations and to validate whether those kind of creative ideas make sense for some of the users, and build a demo, and get some pilot users, and starting to run, including the front regions, and scale it. CoBuilder, we believe to be in the hardware world, should be the momentum, like, you have the Cursor maybe 1 year ago. We believe that will be default quickly. We continue to bring that to, in Q2, after we launch it, and then we continue to do a lot of webinar trainings for those developers, even while they don't know what does coding mean, and how they can deal with it. We are starting to train a lot of developers.

Speaker #3: Users, and build the demo, and get some pilot users, and start to run, including the fund regions and the scaling. So, co-builder, we believe it'll be kind of— in a hardware world, should be kind of the momentum, like, wow, you have the cloud code maybe one year before.

Speaker #3: And we believe that will be the default gateway. And so we continue to bring that in Q2, well, after we launch it, and then we continue to do a lot of webinar trainings for those developers even while they don't know what it is.

Alex Yang: We continue to bring that to, in Q2, after we launch it, and then we continue to do a lot of webinar trainings for those developers, even while they don't know what does coding mean, and how they can deal with it. We are starting to train a lot of developers.

Speaker #3: What does coding mean, and how can they deal with it? We're starting to train a lot of developers. At the same time, we'll use this tool to attract those who are not developers at this moment, but who are more considered as product managers, maybe in some hardware company.

Alex Yang: Also in the same time, we will use this tool to attract those not developer at this moment, but they are 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 interfacing design, and psychological understanding. Right now, we offer them a better tool that they can transfer that part with or without annoying any of their engineers. They will be able to stretch that out themselves. That will be the value of the CoBuilder. We are looking for 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 the long run.

Speaker #3: And in the past, the strengths or capabilities for those types of talents are user insight, product definition, and interface design, as well as psychological understanding. But right now, we offer them a better tool that allows them to transfer that part with or without our knowing any of their engineers.

Speaker #3: They'll be able to grab that, stretch that out in themselves. Yeah. So I think that will be the value of the co-builder.

Alex Yang: That will be the value of the CoBuilder. We are looking for 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 the long run.

Speaker #3: And so we can put use that and enlarge the entire developer base by building up a better target, and also be able to improve my customers' R&D efficiencies.

Speaker #1: 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.

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: Hey. Hello. Thank you for taking my question. I have a question on the AI application segment. It seems like in Q2, the revenue growth has been decelerated from 17% in the first quarter. I am just curious, what is the reason behind that? I calculated it. It seems that Q2 growth is only 3%. What can get this line back to a double-digit growth? 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 does not seem that have come through. Could you walk us through what could actually happen in this quarter or the coming quarters to help to the margin recovery for this segment?

Speaker #5: Hey, hello. Thank you for taking my question. I have a question on the AI application segments. It seems like in Q2, the revenue growth decelerated from 17% in the first quarter.

Speaker #5: 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 double-digit growth?

Speaker #5: And then also on the second segment margin, on the Q1 call, you pointed out that a seasonal rebound in device usage from Q2 would help you increase the margin for this segment.

Matt Ma: 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 does not seem that have come through. Could you walk us through what could actually happen in this quarter or the coming quarters to help to the margin recovery for this segment?

Speaker #5: But it doesn't seem that has come through. Could you walk us through what could actually happen in this quarter, or the coming quarters, to help with the margin recovery for this segment?

Speaker #3: Okay. I'm not sorry. I lost the second question. So, is the margin for which segment? You mean the home run robot?

Alex Yang: Okay. Matt, sorry, I lost the second question. Is the margin for which segment? You mean the home robot?

Speaker #5: AI application.

Matt Ma: AI application.

Speaker #3: Okay. AI application. Got it. So the first one is, thank you for bringing the question. And so, for AI applications, right now, the growth slowing is mainly coming from the mix of my offering.

Alex Yang: Okay. AI application. Got it. The first one is, thank you for bringing the question. For AI applications, right now the growth slowing majorly come from the mix of my offering. As you might know that in that segment, they cover two offers. One is B2B, and especially some of the project-based customization services we provide for the key customers. The second part of that is the B2C, so directly services we offer for the consumer. Which are the user of the devices. They activated my value-added services through subscription. The growth major is that we gradually see it's growing, and we don't want to handle this kind of B2B projects for a long time. The B2B project-based, the revenue and the growth is lower. But actually, the CN grows good.

Speaker #3: So, as you might know, in that segment, the carbon two offers—one is B2B, and especially some of the project-based customization services we provide for the key customers.

Speaker #3: And the second part of that is B2C, so directly services we offer for the consumer, who are the users of the devices. So they activated my value-added services through such subscriptions.

Speaker #3: So the growth major is that we are gradually still slowing, and we don't want to handle those kinds of B2B projects for a long time.

Alex Yang: The growth major is that we gradually see it's growing, and we don't want to handle this kind of B2B projects for a long time. The B2B project-based, the revenue and the growth is lower. But actually, the CN grows good.

Speaker #3: So the B2B project-based revenue and the growth are slower. But actually, the CN growth is good. So my CN services recurring revenue growth in Q2 is 22%.

Alex Yang: My CN services recurring revenue growth in Q2 is 22%. We're happy to see that change because we want to have this segment being the B2C will be able to cover more and more portion of this segment because we believe that would be a better value for that. That's for the first question. The second question about the margin is on the application segment, right? You're asking the margin for?

Speaker #3: We're happy to see that change because we want to have this segment, and the B2C will be able to cover more and more portion of this segment, because we believe that will be a better value for that.

Speaker #3: So that's for the first question. And for the second question, you mentioned it in the application segment, right? You're asking about the margin for it.

Matt Ma: Yep.

Speaker #3: Yes. So, for this one, it's the same in that the segment we want to focus on more is based on the cloud and based on the AI capability.

Alex Yang: Yeah. For this one is the same, is 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. 70% up is the target margin for this segment. Right now we'll be hit it. In the future, it should be between 75% to 80%. The driver for that, the first one I explained that, we don't want to have those kind of project and customization-based services take a larger portion because that's kind of more labor-centric and lower margin type of services. We try to lower the entire portion of that. By increasing more and more cloud-based one, B2C side.

Speaker #3: So that will be a higher-valued one. So, same percent up is the target margin for this segment. So, right now, we'll be hitting it.

Speaker #3: So in the future, so we'll have to hit between 75 to 80. And the driver for that, the first one I can explain that so we don't want to have those kind of projects and customization-based services take a larger portion because that's kind of more neighbor-centric and lower margin type of services.

Speaker #3: We're trying to lower the entire portion of that. So by increasing more and more cloud-based on the B2C side. And on the B2C side, not only enlarge the contribution percentage on revenue, but also at the same time, we scale the services and are able to improve a more and more efficient architecture on the technical side.

Alex Yang: On the B2C side, not only enlarge the contribution percentage on revenue, but also in the same time, by we scale the services and be able to improve more and more efficient architecture on the technique side. We'll be able to figure out a better way to manage the cost and the NN of functions in the model. Through that, we'll be able to push the cloud-based services margin from 70% into 75% and 80%. Where is my next slide? Please.

Speaker #3: So we'll be able to figure out a better way to manage the cloud and the LLM assumptions in the long run. Through that, we'll be able to push the cloud-based services margin from 70% to 75% and 80%.

Speaker #3: Which might make sense?

Speaker #5: Thank you.

Matt Ma: Thank you.

Speaker #1: Thank you. There are no further questions at this time. I'll now hand back to the management team for closing remarks.

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

Speaker #2: 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 at Tuya Inc. Goodbye, and see you next quarter.

Regina Wang: Thank you, Peter, 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.