Tuya Inc. (TUYA) Q2 2026 Earnings Call Transcript

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

Please go ahead thank you operator hello everyone welcome to our second quarter 2026 earnings conference call joining us today is our founder and ceo mr jerry wong and our co-founder and cfo mr alex young our results and webcast of the conference call are available at ir.2r.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 earning 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 on year-over-year basis the second quarter of 2026 regenerated total revenue of approximately 92.9 million U.S. orders, up 16% year-over-year, and 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 it is a revenue of about sixty seven point nine million US dollars a year-over-year increased of sixteen point nine percent serving as the important growth drivers for the end of the second quarter the number of past premium customers for the training 12 months reached 318 contributing approximately 89.5 percent of the past revenue with a core customer base remain 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-safe enable applications capabilities while gradually strengthening our renew and recurring service capability. Smart home and worldwide products revenue was about $13.5 million in 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 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 smart door locks was primarily driven by increased adoption of audio, video, and no-power Wi-Fi solutions in categories such as traditional lighting and IP cameras has has been relatively slow reflecting continued divergences in performance across products and regions. Shipment volumes of the devices powered by our solutions continue to expand. During the June 18 shopping festival in China, Fazuzu, built on two-year solutions, ranked first in the AI toy categories on Timo, while a number of other ecosystem products also deliver strong ranking and sales performance across major e-commerce platforms. This provided early validation of both consumer acceptance and the commercialization potential of the new form of AI devices. 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 productions of the AI native consumer hardware. In the energy sector, solutions including EV chargers, smart power distribution, metering, and the whole 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' adoptions of matter-based solutions continue to increase across categories, such as electronic products, lighting, and climate control. In parallel, we enhanced local control, multi-protocol interoperability, and third-party ecosystem compatibility. On the margin side, our blended gross margin for this quarter was 46.3%, by segment, gross Margin for PaaS was 46.8%, gross margin for AI adaption and others were 72%, and gross margin for smart home and robot products was 21.9%. Gross margin fluctuations were mainly driven by the volatility 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 US dollars. On expenses, we maintained disciplined expense management while continuing to invest on AI and R&D, and platform capability. Gap operating 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. In a term of profitability, we recorded gap profit from operating of approximately 9.3 million US dollars, with a gap repeating margin of 10%. Non-GAAP profit from operating insurance was approximately $9.6 million US dollars, 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 cooperating 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. At the end of the second quarter, the companies took to 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 the development of AI capability, global business extension, 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 0.9 million. Launched second quarter, Tuya co-builder served as the 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, user interface, embedded firmware, AI agents, and workflow development 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. Just over a month since not, 2F Core Builder's 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 head-to-head 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, packed care, and video understanding. Certain scenarios have already begun to generate early payment and renewals. 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 incompatible device sensoring. contextually understanding, memory, creation, 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 the border range of the real-world scenarios. In summary, our revenue growth accelerated in the second quarter of 2026 with the past business continuing to serve as a primary growth engine. Meanwhile, our AI capabilities have been commercialized in parallel across multiple paths, including paths, smart products, and AI applications. Despite the impact on growth margin from semiconductor supply chain price fluctuation and business mix change, we maintain stable operating profitability and enable financial resources. Looking ahead, we'll remain focused on AI native applications, physical AI scenarios, and developer platform capability and continue to advance the transformation of AI technologies from two-level capabilities into tangible and scalable commercial value. Thank you all operators. Right now, we can begin the Q&A.

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

Please ask your question Yang your line is open thanks for the opportunity and the 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's the demand profile in US or in Europe and are the and etc and thank you

okay thank you thank you so right now we see that the end demand and each moment and still reading our expectation so as we stick in the beginning of this shares the entire customers and and transfer more legacy devices and solutions into the into the new so this momentum continues so what do we see that we have the accelerating type of rebalancing probably will not come overnight so it's gradually positive so if I look down into the Europe still show very strong on the demand side is to AI we provide other to the solution or include single device no matter is what we put that show very strong or strong to establish a strategic partnership along with them around two and a half years ago and we started to skip through their own channels to deliver some in a class right now because the second quarter so right now we're still kind of real and see the customers still there and doing a lot of is that the and for China right now we'll be seeing part of the home appliances that we can find that the reason say that the major brands right now devices into smart devices into the AI one so we are catching a transformation trend and helping a lot of China brands to do that and the second one is that in China so some AI native categories starting to booming like the AI companion so our first market we start to break through for AI companion categories is from China So we really see that based on a large target consumer scale in China, and what we found the right type of, along with a very active customer base, and we'll try to find more potentials in the new type of the.

Thank you.

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

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

Okay, yeah, so first of all that, as everyone knows that the upstream cost of fluctuation is going to increases over two quarters on a global basis. And we are the last one to tell you. For the in-Q2, what we do need that the major of the product research and switching that we maintain but we don't stick to the the gross margin and but till now that will really build a very good buffering on the inventory and cost balance between now and future and in next two quarters or three and right now we have the confidence that we'll be able to working through a more stable cost level of my major type of materials we needed. So we're looking forward to either to stabilize the gross margin and we figure out whatever, all the possibilities, that's by offering new capabilities, new technologies, we have to improve the kindness, but in the future, anything happens so we don't most continue to run the business. So it's not stick to the cost, but it will stick to the cost.

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

Okay. Thank you, management. This is Kai. I have two questions. One is on Tuiaco Builder. You mentioned it in the quarter. So I wonder what the current adoption status of Tuiaco Builder and what the companies need them to do.

In the second half of last year, some department centers will really start to the biocodings and to improve our own coding efficiency, to bring more ROIs on the R&D side. So we start to do that as a major user of biocoding. And while we have enough experiments, how we'll be able to, you know, match, how we'll be able to learn the different ROIs and be able to know how to match that. And we start to think about the way we need to, you know, At the beginning of this year, we started to build the co-builder to launch it at the second quarter. And so we believe that will be the new type of model for the entire lifetime. But they're starting to write their own agent to improve their own workflow, to improve their own individual efficiencies. I believe some of you did that too. So co-builder will be kind of sure how low the bar can reach and how easy those that they can really create it. for some of them and starting to run including the fundraisers and the schedule so co-builder we believe it'll be kind of the in hardcore after we launch it and for that part we're looking for

that thank you we will now take our next question from the line of met ma of jefferies please ask your question matt your line is open hey hello thank you for taking my question uh i have a question on the AI application segment.

So it seems like in Q2 the revenue growth has been decelerated from 17 percent 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 percent and what can get this line back to a double-digit growth? And then also 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? AI application.

Okay, AI application, got it. So the first one is the second. So as you might know that they covered two offers. So one is B2B, and especially some of the projected services we offer for the consumer, which are the user of the devices. So they selected it between 75 to 80. And the driver product, the first one I explained that is we don't want to have this kind of project and customization-based services take a larger portion because that's on the B2C side.

Thank you.

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

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

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