Tuya (TUYA) Q2 2026 earnings call transcript

And now turn the call over to your first speaker today, Ms. Regina Wang, Investor Relations Associate Director of Tuya. Thank you, operator. Hello, everyone. Welcome to our second quarter 2026 earnings conference call. Joining us today is our founder and CEO, Mr. Jerry Wang, and our co-founder and CFO, Mr. Alex Young. Our results and webcast of the conference call are available at IR. tsuya. 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 your earnings press release, which applies to this call as we will make forward-looking statements.

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

Hello everyone, and thank you for joining Tuya Inc. conference call for the second quarter of 2026. Tuya Inc maintained solid growth momentum during the quarter despite the continued complexity of the global operating environment. Total revenue reached 92.9 million yen dollars a year over a year increase of 16%, with growth accelerating from the first quarter. Within this, revenue from our core tax business increased 16.9% year-over-year. These results reflected in ongoing rising smart product penetration, including steady demand across home appliances, increased adoption of differentiated solutions, such as smart dollars, and growing demand for emerging AI-inabled product categories, and also underscored 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 stand-alone features towards platformization, productization, and scenario-based deployment.

In the second quarter, shipment volumes of AI-companying product solutions continued to expand, and consumer acceptance of new forms of AI hardware began to be validated. Meanwhile, we launched the Tuya computer, which applied by recording to AI hardware development, enabling developers to cover the core development process, from project concept to physical device validation, using natural language, further shortening AI hardware development techniques. This development further reinforced AI's evolution from a mere conversational tool into a technology that operates in real physical environments and participates in sensing, understanding and execution.

Looking ahead, we will deepen our focus on the following three key areas. First, we will continue to advance AI's native application and product innovation, centering on high-potential scenarios such as AI homes, AI energy, and AI robots. 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-age 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 developing ecosystem. And industry partnerships to jointly explore long-term opportunities in the AI application market. Now, let me turn the call over to our co-founder and CFO, Alexia, who will share more details about our financial performance and business progress.

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

Of our future revenue, the past business generated revenue of about $67.9 million a year-over-year increased of 16.9%, serving as the important growth of the company. At the end of the second quarter, the number of past premium customers for the training 12 months reached 318, contributing approximately 89.5% of the past revenue, with a call customer base remaining stable. The AI application and other segments generate revenue of about $11.5 million US dollars, year-over-year increased of 3.9%, primarily driven by growth in cloud-based service revenue, such as video cloud storage. We continue to advance to value-added services, including video and AI-driven energy savings, among others. We will enable applications capabilities while gradually strengthening our renew and recurring service capability.

Smart home and worldwide products revenue was about 13.5 million U. S. dollars, a year-over-year increase of 23.2 percent, 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 past growth, home appliances, smart door locks, electronics, and energy products, and AI companion product solutions performed relatively well during the quarter. Growth in the home appliances segments was mainly driven by customer service. The cost was rollout of smart enabled models, the expansion of their geographic reach, a higher contribution from smart enabled products, and the migration of short-term overseas brand projects from our customers legacy solutions into Tuyas.

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 divergences in performance across products and regions. In AI-companying products, shipment volumes of the devices powered by our solutions continue to expand. During the June 18 shopping festival in China, Fuzuzu built on Tuya solutions ranked first in the AI toy category on Timo, where a number of other ecosystem products also deliver strong ranking and sales performance across major e-commerce platforms. This provided early validation of both consumer acceptance and the commercialization potential of the new form of AI device Beyond basic voice interactions we have building out capabilities in multimodal perception personnel and memory content services and user engagement helping customers accelerate the development and mass production 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 smartphone ecosystem, customers' adaptions of the matter-based solutions continue to increase across categories such as electronic products lighting and climate control. In parallel, we enhance local control, multi-protocol interoperability and third-party ecosystem compatibility. On the margin side, our blended gross margin for this quarter was 46.3%. By segment, gross margin for past was 46.8%. Gross margin for AI adoption and others were 72%. And gross margin for smart home and mobile products was 21.9%. Gross margin fluctuations were mainly driven by the volatility in upstream semiconductor's 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 US dollars. For expenses, we maintained disciplined expense management while continuing to invest on AR&D and platform capability.

Gap 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 terms of profitability, we recorded the GAAP profit from operating of approximately $9.3 million with a GAAP operating margin of 10%. Non-GAAP profit from operating of 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 maintain 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 call operating profit continued to grow.

On cash flow side, net cash generated from operating activities was $6.2 million during the quarter and remained positive. At the end of the second quarter, the company's total liquid access, including cash and cash increment, time deposit, and treasury securities, amounted to approximately 976 million U. S. orders, continually to provide ample resources to support development of AI capability, global business expansion, and our ability to navigate external uncertainty. and a long-term strategy investment.

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 registrers, developers, our platform exceeded 2.09 million. Launched during the second quarter, Tuya co-builder served as an AI developer gateway to the Tuya developer platform, applying backcoding 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. In one place, and then proceed directly to the device flashing and debugging. This covers the core development process from product concept to physical devices validation and helps shorten the AI hardware development cycles. In just over a month since launch, 2UP core builders' AI-powered panel generation capabilities has expanded to cover 30 product categories.

With average generation time for a single 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 information, software generation, and deployment on physical devices. As an application layer, we continue to enhance T2YR 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, pack 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 the long term use value. From a broader perspective, AI capabilities are gradually expanding beyond single model integrations and in compact device sensoring.

Contextual 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 the second quarter of 2026, with the PaaS business continuing to serve as a primary growth engine. Meanwhile, our AI capabilities are being commercialized in parallel across multiple paths, including paths, smart products, and AI applications. Despite the impact on gross margin from semiconductor supply chain price fluctuation and business mix change, we maintain stable operating profitability and enable financial resources.

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

Thank you, all operators. Right now we can begin the Q&A.

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 second half of 2026 If you can provide a little bit more breakdown by geographic that will be even better like what the demand profile in US or in Europe and ASEAN etc Thank you Okay, thank you.

Thank you, Liu. So right now we see that the end demand and internal momentum is still within our expectation. So, as we're sticking at the beginning of this year, that the entire customer and consumer side, they're looking forward to consuming more and to transfer more legacy devices and solutions into the new AI that we provide. So, this momentum continues. So, what we see is that we have the accelerated type of rebounding on the demand side. So this will be the overall review. So we see that the recovery will not come overnight, so it's gradually climbing. What we found here is a momentum still continue, especially based on those kind of positive, very positive self-through feedback from the end user side.

That's the first one. If I look down into the geographic areas, there are different types of demand drivers. Europe still shows very strong on the demand side, especially for all types of energy-related segments. So including the new AI hand, so home management solutions we provide as a solution or include different type of energy efficiency improvement single device. No matter what we provide as a pass or we provide as a home and products to the solution together. That shows very strong demand still as a first one. And Southeast Asia and Latin America, the driving force is majorly come from our strong channels in the telecom period. So while starting to establish a strategic partnership along with them around one and a half years ago, and we started to skip commercialize that part.

So through their own channels to deliver some comprehensive total solutions for their users in the AI IoT fields, that's a very strong potential and very promising one because they're running on the B2B cycle. By the end of the time, it's B2C, but they run really strong B2B cycles rather than retail cycles. They're campaigning on that. That's for Southeast Asia and Latin America. And immediately, it's still kind of in the past right now because of the military conflict going on in the second quarter. So right now, it's still kind of . 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 the type of stuff.

But right now, I think that all the business is not coming back yet. We're looking forward to have a better scenarios, perhaps maybe end of Q3 or Q4. We're looking forward to have some agreement for those competing countries, and then we'll be able to catch the demand. And so that will go. And North America is that the sales rule is still there, but some price sensitive, especially no price type of the devices, not a show kind of fluctuations by the pricing rates coming from the circadian side. And so we are, we structured that type of product mix along with my customers and to deliver a better sales through in the second half of this year.

And so I think that will be overall. And for China right now we will be seeing some really good promising categories, including part of the home appliances. We can find that 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 starting to booming, like the AI companion. So our first market we're starting to break through for AI companion categories is from China. So that's why I suppose this is in Timor.

So we really see that based on a large target consumer scale in China, and what we find the right type of applications, and coming along with a very active customer base, and we'll try to find more potentials in the new type of innovations in China.

Great. Thank you for taking my question, and congrats on the very solid results. My question is on your gross profit margin. I noticed that in the second quarter, the IoT path margin declined on a young year basis, although stabilized sequentially, while your smartphone and robotics product margin actually declined sequentially on a young 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 the third quarter and the rest of this year. Thank you. Okay, yeah. So first of all, as everyone knows that the upstream cost of fluctuation is going to increase over two quarters on a global basis. And we're the last one to touch the impact because our by-enforces.

So for the in Q2, what we do need that the major of the product we We just passed through the cost rates, and so we think that we maintain the gross profit, but we don't stick to the gross market. But till now that we're really building a very good buffering on the inventory and cost balance between now and future. And in the next two quarters or three, and we'll have confidence that we'll be able to work through a more stable cost level of my major type of materials we needed. So we're going to go to either to stabilize the gross margin and we figure out whatever, all the possibilities that by offering new capabilities, new technologies, We like to improve the gross margins overall.

That's pretty much it. For the customer side, we will really show our kindness. We just pass through the cost, but in the future, anything happens. We're looking for the most positive way to help the company to continue to run the business. So it's not stick to the cost, but it will stick to the value and the competence that we deliver to the customers to help them get through that.

Okay thank you management This is Kai I have two questions One on Tuya CoBuilder you mentioned in the quarter So I wonder what the current adoption status of Tuya CoBuilder and what the company medium Okay so CoBuilder is something we have to do for a couple of quarters Starting from second half of last year, some department in Tuya R&D centers will really start to the We have to do that as a major user of that. While we have enough experiments, how we'll be able to use that and be able to know how to manage that. We start to think about the way we need to, you know, public our experience and open up to our customers.

So at the beginning of this year, we started to build a co-writer and we're happy to launch it at the second quarter. And so we believe that will be the new type of gateway in the future for many developers, even not only device developers, many developers to lower the bar. And including me right now, including my financial department, so many of them, they don't know coding at all for their entire lifetime, but they're 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. So call builder will be kind of sure how low the bar can reach and how easy those ideal developers will come with some innovative ideas that they can really quickly testify the innovations and to validate whether those kind of ideas make sense for some of the users and build a demo and get some users.

Starting to run including the fundraising and the schedule. So, CodeBuilder we believe will be kind of the in the hardware world, should be kind of the momentum. Like, wow, you will have the clock code maybe one year before. And we believe that will be default quickly. And so continue to bring that to, in Q2, well, after we launched it and then we continue to do a lot of webinar trainings for the CBA experts. Even while they don't know what coding means and how they can deal with it. We're starting to train a lot of developers. Also, in the same time, we'll use this tool to attract those not developers at this moment, but they're more considered as a product manager, maybe in some hardware companies.

In the past, the strength or capability for those type of talents are user insight, product definition, and interface design, and psychological understanding. But right now we offer them a better tool that they can transfer that part with or without knowing any of their engineers. They will be able to stretch that out to themselves. Yeah, so that will be the value of the computer. And so we can put a view that in large, the developer, entire developer base by building up a better target and also be able to improve my customers' R&D efficiencies.

Hey, hello. Thank you for taking my question. I have a question on the AI application segment. So it seems like in Q2, the revenue growth has been decelerated from 17% in the first quarter. I'm just curious, what is the reason behind that? I calculated it. It seems that Q2 growth is only 3%, and what can get this line back to a double-digit growth? And then also on the segment margin, on the Q1 call you pointed that a seasonal rebound in device usage from Q2 would help you to increase the margin for this segment, but it doesn't seem that have come through. Could you walk us through what could actually happen in this quarter or the coming quarters to help to the margin recovery for this segment?

Okay. Sorry, I lost the second question. So is the margin for which segment? You mean the home run robot? AI application. Okay, AI applications. So the first one is, thank you for bringing the question. And so for AI applications, right now the growth slowing majorly comes from the mix of my offering. So as you might know that in that segment, they covered two offers. So 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. Directed services we offer for the consumer, which are the users of the devices. They activated my services through subscription. The role measure is that we graduate still struggling and we don't want to handle this kind of B2B projects for a long time.

So the B2B project based revenue and the growth slower. But actually the CN growth group, so my CN service in recurring revenue growth in Q2 is 22%. We're happy to see that change because we want to have this segment in 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. So that's for the first question. And so the second question about the application segment, right? Yes, in the margin for. Yeah. Yeah, so for this one, the segment we want to have more is based on the count and based on the AI capability. So that will be a higher valued one.

So 7% up is the target margin for this segment. So right now we'll be hit it. So in the future, we'll have to be between 75 to 80. And the driver product, the first one, we don't want to have this kind of project and customization based services take a larger portion, That's kind of more neighbor-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. On the B2C side, not only enlarge the contribution percentage on revenue, but also in the same time, by how we scale the services and be able to improve more and more efficient architecture. on the technical side.

So we'll be able to figure out a better way to manage the cost and the L&M assumptions in the number one. So through that, we'll be able to push the cost-based services margin from 70 into 75.80. I wish my next one.

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 higher team of Tuya. Goodbye and see you next quarter.