Thank you, operator. Hello, everyone.

Welcome to our second quarter 2026 earnings conference call. Joining us today is our Founder and CEO, Mr.

Jerry Wang, and our Co-Founder and CFO, Mr. Alex Yang.

Our results and 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.

Hello, everyone, and thank you for joining Tuya's earnings conference call for the second quarter of 2026. Tuya maintained solid growth momentum during the quarter, despite the continued complexity of the global operating environment.

Our total revenue reached $92.9 million, a year-over-year increase of 16%, with growth accelerating from the first quarter. Within this, revenue from our core PaaS business increased 16.9% year-over-year.

These results reflect the ongoing rise in smart product penetration, including steady demand across home appliances, increased adoption of differentiated solutions such as smart door locks, and growing demand for emerging AI-native 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 stand-alone features toward platformization, productization, and scenario-based deployment.

In the second quarter, shipment volumes of AI companion product solutions continued to expand, and consumer acceptance of new forms of AI hardware began to be validated. Meanwhile, we launched the Tuya Co-Builder, which applies vibe coding to AI hardware development, enabling developers to cover the core development process from product concept to physical device validation using natural language, further shortening AI hardware development cycles.

These developments further reinforce AI's evolution from a mere conversational tool into a technology that operates in real physical environments and participates in sensing, understanding, and execution. Looking ahead, we will deepen our focus on the following three key areas.

First, we will continue to advance AI-native applications and product innovation, centering on high-potential scenarios such as AI home, AI energy, and AI robot, to 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 vibe coding, agent orchestration, and cloud-edge-device collaboration, further shortening the cycle from ideation and development to deployment on physical devices for AI hardware.

Third, we will advance the global expansion of proven solutions while further strengthening our developer ecosystem and industry partnerships to jointly explore long-term opportunities in the AI application market. Now, let me turn the call over to our Co-Founder and CFO, Alex Yang, who will share more details about our financial performance and business progress.

Hello, everyone. This is Alex.

I will now provide a brief overview of our second quarter results. Please note that, unless otherwise stated, all figures are in U.S.

dollars, and all comparisons are on a year-over-year basis. In the second quarter of 2026, we generated total revenue of approximately $92.9 million, up 16% year-over-year, and accelerating from the 8.3% growth recorded in the first quarter.

Our PaaS business maintained strong growth, where revenue from the smart home and robot product segments is also increased by double digits. Of our total revenue, the PaaS business generated revenue of about $67.9 million, a year-over-year increase of 16.9%, serving as the important growth drivers for the quarter.

At the end of the second quarter, the number of PaaS premium customers for the trailing 12 months reached 318, contributing approximately 89.5% of the PaaS revenue, with our core customer base remaining stable. The AI application and other segments generated revenue of about $11.5 million, a year-over-year increase of 3.9%, primarily driven by growth in cloud-based service revenue, such as video cloud storage.

We continue to advance value-added services including video and AI-driven energy saving, among others, with AI-enabled application 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 for 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 software and value-added services. Looking at the specific driver of PaaS growth, home appliances, smart door locks, electronics, and energy products, and AI companion product solutions performed relatively well during the quarter.

Growth in the home appliances segments were mainly driven by customers' rollouts of the smart-enabled models, the extension of their geographic reach, a higher contribution from smart-enabled products, and the migration of certain overseas brands' product projects from customers' legacy solutions into Tuya's. Growth in smart door locks was primarily driven by increased adoption of audio, video, and low-power Wi-Fi solutions.

By comparison, demand recovery in categories such as traditional lighting and IP cameras has been relatively slow, reflecting continued divergency in performance across products and regions. In AI companion products, shipment volumes of the devices powered by our solutions continue to expand.

During the June 18th shopping festival in China, Fuzuzu, build on Tuya solutions, ranked first in the AI toy categories on Tmall, while a number of other ecosystem products also delivered strong ranking and sales performance across major e-commerce platforms. This provided early validation of both consumer acceptance and the commercialization potential of the new form of AI devices.

Beyond basic voice interactions, we have built out capabilities in multimodal perception, persona and memory, content services, and user engagement, helping customers accelerate the development and mass production of the AI-native consumer hardware. In the energy sectors, solutions including EV chargers, smart power distribution, metering, and home energy management maintained solid growth.

We are 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. 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 enhanced local control, multiprotocol interoperability, and third-party ecosystem compatibility. On margins side, our blended gross margin for this quarter was 46.3%.

By segment, gross margin for PaaS 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 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 disciplined expense management while continually to invest on AI R&D and platform capabilities.

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%.

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. As 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, continually to provide ample resources to support development of AI capability, global business extension, and our ability to navigate external uncertainties and 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 Co-Builder served as the AI developer gateway to the Tuya developer platform, applying vibe coding to AI hardware development. By describing their requirements in natural language, developers can complete product definition, app user interface, embedded firmware, AI agents, and workflow development in one place, 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. In just over a month since launch, Tuya Co-Builder's AI-powered panel generation capabilities has expanded to cover 30 product categories, with the 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 assistants towards end-to-end delivery capability, spanning product definition, software generation, and deployment on physical devices. At the application layer, we continued 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 has 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 in-compact device sensing, 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 the real-world scenarios.

In summary, our revenue growth accelerated in the second quarter of 2026, with the PaaS business continuing to serve as the 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 maintained stable operating profitability and ample financial resources. Looking ahead, we'll remain focus 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. Operator, 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's the demand profile in US or in Europe and ASEAN, etc.?

Thank you.

Thank you. Thank you, Liu.

Right now, we see that the end demand and the momentum still within our expectation. As we speak in the beginning of this year, that the entire customers and consumer side, they're looking forward to still to consuming more and transform more legacy devices and solutions into the new AI one that we provide.

This momentum continues. What we see that we have a accelerated type of rebounding on the demand side.

This will be the overall trend. We see that the recovery will not come overnight.

It's gradually climbing. What we found here is that the momentum still continue, especially based on this kind of positive, very positive sell-through feedback from the end-user side.

That's the first one. 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 HEMS, home energy management solutions, we provide as a total solution, or include different type of energy efficiency improvement single device, no matter it's what we provide as the PaaS or we provide as the home and robot products total solution together, that show very strong demand still.

That's the first one. Southeast Asia and Latin America, the driving forces majorly come from our strong channels in the telecom carriers.

While starting to establish a strategic partnership along with them around 1.5 years ago, and we're starting to scale commercialize that part, through their own channels to deliver some comprehensive total solutions for their users in the AIoT fields. That's a very strong potential and very promising one, because they're running as a B2B cycle.

The end of the thing is a B2C, but they run really strong B2B cycles rather than the retail side. They campaigning on that.

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

Right now we're still kind of wait and see. The customers still there, and the customers still doing a lot of preparations, including the product development and the new concept definitions and type of stuff.

Right now I think that overall the businesses is not coming back yet. We're looking forward to have a better scenarios perhaps maybe end of the Q3 or Q4.

We believe we're looking forward to have some agreement for those conflicting countries. Then we'll be able to catch the demand.

That be overall. North America is that the sell-through is still there, but some price-sensitive, especially low-price type of the devices that show kind of fluctuations by the pricing race coming from the supply chain side.

We are restructured that type of product mix along with the customers and to deliver a better sell-through in the second half of this year. I think that be overall.

For China, right now what we see some really good promising categories, including part of the home appliances, that we can find that recently that the major brands right now they are speeding up the transformations from the legacy type of devices into the smart one, and from a first-generation IoT type of smart devices into the AI one. We are catching that 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. Our first market with starting to break through for AI companion categories is from China.

That's why for the Fuzuzu sales rate in Tmall. We do see that based on a large target consumer scale in China, and well, we'll find the right type of the applications and coming on with a very active customer base, and as well we'll try to find more potentials in the new type of the innovations in China.

Hey, thank you.

Great. 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 PaaS margin declined on a year-on-year basis, although stabilized sequentially, while your smart device and robotics product margin actually declined sequentially and 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 the third quarter and the rest of this year?

Thank you.

Okay. That as everyone knows that the upstream cost fluctuations started to influence over two quarters, on the global basis.

We are the last one to touch the impact because our buying forces. In Q2, what we're doing is that the major of the practice has we just passed through the cost raise.

Which mean that we maintained the gross profit and but we don't stick to the gross margin. Till now that we already built a very good buffering on the inventory and cost balance between now and future.

In next two quarter or three, and right now we have the confidence that we'll be able to working for a more stable cost level on of my major type of materials we needed. We're looking forward to either to stabilize the gross margin, and we figure out whatever all the possibilities that by offering new capabilities, new technologies, would like to improve the gross margins overall.

That's pretty much of that. For the customer side, we already show our kindness that so we just passed through the cost.

In the future, while anything happens, we're looking for the most positive way to help our customer to help the company to continue to run the business. It's 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.

All right. Thank you.

Okay. Thank you, management.

This is Kai. I have two questions.

One is on Tuya Co-Builder you mentioned in the quarter. I wonder what's the current adoption status of Tuya Co-Builder, and what's the company's [unclear]?

Okay.

Co-Builder 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 were really starting to vibe coding and to improve our own coding efficiency and also to bring more ROIs on R&D side.

We starting to do that as a major users of vibe coding. While we have enough experience, how we'll be able to use that and to deliver the right ROI, and to be able to know how to manage that.

We start thinking about that we need to duplicate our experience and open that to our customers. Start at the beginning of this year, we started to build the Co-Builder.

Very happy to launch it at the second quarter. We believe that will be the new type of default gateway in the futures for many developers, even not only device developers, many developers to lower the bar.

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 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.

Co-Builder will be kind of a shower how low the bar can reach and how easy those ideal developers come with some innovative ideas that they can really quickly to testify the innovations and to validate whether those kind of crazy ideas make senses for some of their users, and build the demo, and get some pilot users, and starting to run, including the fundraisings, and to scale it. Co-Builder, we believe, in hardware world should be kind of the momentum that while you have the cloud code maybe one year before.

We believe that will be default gateway. Continue to bring that to in Q2, while after we launched it, and then we continue to do a lot of webinar trainings for those developers, even while they don't know what does vibe coding mean and how they can deal with it, and we're starting to train a lot of developers.

Also, in the same time, we'll use this tool to attract those not developer at this moment, but they're more considered as the 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 interfacing design, and psychological understanding.

Right now, we offer them a better tool that they can transport that part with or without annoying any of their engineers, they'll be able to sketch that out in itself. Yeah.

We believe that will be the value of the Co-Builder. We're looking forward 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 a long run.

Thank you.

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 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?

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 seems 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. Hi, Matt.

Sorry, I lost the second question. Is the margin for which segment?

You mean the home and robot?

AI application.

AI application, got it. The first one is that 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, that cover two offers.

One is B2B, and especially some of the project-based customization services we provides for the key customers. The second part of that is the B2C, directly services we offer for the consumers, which are the user of the devices.

They activated my value-added services through such subscription. The growth major is that we gradually still slowing, and we don't want to handle those kind of B2B projects for a long time.

The B2B project-based the revenue and the growth slower. Actually, the C-end grows good.

My C-end services 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.

That's for the first question. The second question, your margin is on the application segment, right?

You're asking the margin for...

Yeah.

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. So 70% up is the target margin for this segment.

Right now we'll be hit it. In the futures, we would like to hit between 75% to 80%.

The driver for that, the first one like I explained, that so we don't want to have those kind of projects and customization-based services take large 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. On the B2C side, not only enlarge the contribution percentage on revenue, but also in the same time, while 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 cloud and LLM consumptions in a long run. Through that, we'll be able to push the cloud-based services margin from 70% into 75% and 80%.

I wish that make sense to you.

Thank you.

Thank you, operator, and thank you all once again for joining us today. If you have any further questions, please feel free to contact IR team of Tuya.

Goodbye, and see you next quarter.