Tuya signals continued AI-driven expansion and targets robust Q4 recovery amid tariff uncertainties

Earnings Call Insights: Tuya Inc. (TUYA) Q2 2025

MANAGEMENT VIEW

* CEO Xueji Wang opened by highlighting that "in the first half of 2025, Tuya generated revenues of approximately USD 155 million, representing about 15% year-over-year growth." He noted that Q2 revenue reached about $80.1 million, up 9.3% year-over-year, despite global trade uncertainties and U.S. tariff policy disruptions affecting the consumer electronics industry.
* Wang emphasized, "Tuya remains resilient, delivering positive outcomes across multiple fundamentals, including revenue growth, gross margin and profitability, as well as AI products and ecosystem development." He reported a blended gross margin of around 48% for the second quarter and the first half, with a 10% non-GAAP operating margin and 25% net margin.
* Wang stated that non-GAAP operating profit grew approximately 127% year-over-year, underlining operating leverage. He also pointed to the developer platform, sharing, "the number of global developers on our platform has reached over 1.51 million." Wang reaffirmed commitment to long-term initiatives: "We will remain committed to long-term strategy initiatives such as Tuya Open and our AI agent development platform."
* CFO Yi Yang reported, "In the second quarter of 2025, Tuya delivered revenue of about USD 80 million, representing 9.3% year-over-year growth." Yang provided a breakdown, noting PaaS growth of 7%, Smart Solutions up 16.7%, and SaaS and others revenue at $11 million, up 15.6%. He highlighted strong performance in Europe and Asia Pacific, and pointed to growth in North America and China.
* Yang stated, "Q2 blended gross margin was 48.4%. PaaS gross margin reached a historical height of 48.7%, while Smart Solutions and SaaS and others delivered gross margin of 22.5% and 72%." He called attention to disciplined operating expense management and an $18 million operating cash flow as well as a $37 million cash dividend payout.
* Yang described AI developer ecosystem progress, noting, "As of June 13, 2025, 93% of Tuya's shipped products categories were equipped with AI capabilities." He added that the AI developer platform supported 150 million interactions per day and over 9,372 AI agents were created by developers.
* Yang concluded with, "Our Board has approved a cash dividend totaling about USD 33 million. Regular dividend payments reflects Tuya's commitment to returning value to the capital market and our shareholders."

OUTLOOK

* Yang cautioned that "the uncertainty on the tariff situation continues because till now, we still don't have a conclusion. We don't have the agreement between countries." He elaborated that consumer electronics categories remain under pressure and buyers are "very conscious to review all the reflects on the end users in the very short term dramatically."
* Management expects Q3 to remain pressured but "it should be getting better in Q4."

FINANCIAL RESULTS

* Revenue in Q2 reached approximately $80.1 million, a 9.3% increase year-over-year.
* Blended gross margin was 48.4%. PaaS gross margin hit 48.7%, Smart Solutions 22.5%, and SaaS/others 72%.
* Non-GAAP operating margin was nearly 11% and non-GAAP net margin 25.1%. GAAP net margin was 15.7%.
* Operating cash flow exceeded $18 million in Q2, and net cash balance was just above $1 billion at quarter end.
* Management highlighted a successful class action lawsuit resolution, eliminating related expenses and future risk.

Q&A

* Yang Liu, Morgan Stanley, asked about growth outlook amid trade environment uncertainty and Q3/Q4 acceleration. Yang responded, "for Q3 and the rest of this year, we'll see that the uncertainty on the tariff situation continues... for Q3, yes, there is still pressure but it should be getting better in Q4."
* Liu also inquired about FX impact. Yang answered, "there is some pressures on currency as well. But right now, what we see is kind of stable. So there's pressure, but it's under control."
* Timothy Zhao, Goldman Sachs, asked about competitive advantage as the industry shifts from IoT to AIoT and about shareholder return policy. Yang stated, "over 93% of the products that's building with the Tuya platform for the first half of this year already come with AI capability." On dividends, Yang said, "we will consider the dividend as a regular policy... based on the stable profitability of the company."
* Kai Xiao, CICC, questioned gross margin drivers and the impact of AI revenue, as well as growth engines for SaaS and Smart Solutions. Yang explained, "gross margins represents... the competitiveness of the technology we provide and also the value proposition for us in the entire industry," and noted SaaS gross margin above 70% is "regular based" and that Smart Solutions focus on high-value differentiated offerings.
* Matt Ma, Jefferies, asked about supply chain shifts and Smart Solutions margin. Yang responded, "wherever the customers want to produce their finished products we just deliver on modules to their location." He explained lower Smart Solutions margin was due to "starting point of some new products or the new solutions," especially AI toys, with scalability expected to improve margins over time.

SENTIMENT ANALYSIS

* Analysts expressed concerns about growth given tariffs, FX, and supply chain shifts, with a neutral to slightly negative tone but acknowledged strong execution.
* Management displayed a confident tone in prepared remarks, highlighting resilience and strategic progress, but became more cautious in Q&A, repeatedly referencing ongoing uncertainties and negotiations—"we'll see that the uncertainty on the tariff situation continues..."
* Compared to last quarter, both analysts and management maintained a similar tone, with slightly more emphasis on macro risk this quarter and a stronger focus on operating leverage and AI ecosystem scaling.

QUARTER-OVER-QUARTER COMPARISON

* Guidance language shifted from cautious optimism last quarter to more explicit caution regarding Q3, with management suggesting improvement in Q4.
* Strategic focus continues on AI ecosystem and developer engagement, but tariff uncertainty and its impact on end demand received greater attention.
* Gross margin remained stable quarter-over-quarter, with continued strong cash flow and operating leverage.
* Analysts remained focused on tariff risks, margin drivers, and competitive positioning, consistent with prior quarter.
* Management’s confidence in AI-driven growth and recurring revenue opportunities has been sustained, but there is greater emphasis on prudent risk management.

RISKS AND CONCERNS

* Management cited "global trade uncertainties" and U.S. tariff policy as major risks, impacting the consumer electronics value chain and leading to delays or adjustments by retail brands, importers, and exporters.
* FX pressure is present but described as "under control."
* Ongoing supply chain shifts and negotiations across multiple countries are creating short-term planning challenges.
* Management’s mitigation includes diversified product ecosystem, strong cash position, and targeted approaches to maintain structural resilience.

FINAL TAKEAWAY

Tuya’s management underscored resilience in profitability and margin despite tariff headwinds and global trade uncertainty, affirming a continued commitment to AI-driven product and ecosystem expansion. While Q3 is expected to remain pressured, the company sees potential for recovery in Q4, supported by disciplined cost controls, strong developer engagement, and regular shareholder returns through dividends. The ongoing strategic focus remains on deepening customer relationships, accelerating commercialization of AI hardware, and maintaining robust operating leverage, positioning Tuya to navigate near-term volatility while pursuing long-term growth in the smart device sector.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/tuya/earnings/transcripts]

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