Tuya Inc. Earnings Call Highlights AI-Driven Shift

Tuya, Inc. ((TUYA)) has held its Q1 earnings call. Read on for the main highlights of the call.

Tuya Inc.’s latest earnings call struck an upbeat tone as management showcased solid top-line growth, better profitability and a fortress-like cash position. Executives acknowledged supply-chain friction and deliberate cuts to low-margin hardware, but framed these as tactical moves to accelerate the shift toward higher-value AI software and AI-native devices, which are already expanding faster than the rest of the business.

Revenue Growth

Tuya reported first-quarter 2026 revenue of about $80.9 million, up 8.3% year over year and marking several consecutive quarters of positive growth. Management emphasized that this momentum reflects both recovering demand in key verticals and the early benefits of the company’s AI-focused product strategy.

Strong PaaS Performance

Platform-as-a-Service remained Tuya’s backbone, with PaaS revenue reaching $59.0 million, a 9.8% annual increase. A gross margin of 46.1% underscored the resilience of core platform economics, while the roster of 306 premium PaaS customers highlighted a stable base of higher-quality, recurring enterprise demand.

Rapid AI Application Expansion

AI Application and Others revenue climbed to $11.6 million, growing 16.9% year over year and outpacing the broader company. With a segment gross margin of 71.7%, Tuya showcased the structural profitability of software and AI services, even as management noted some seasonal usage softness that tempered sequential growth.

Profitability and Cash Strength

Profitability metrics improved sharply, with GAAP operating margin rising to 9.2% and non-GAAP margin near 10%. Profit from operations reached about $7.5 million, net profit stood at roughly $15.8 million, and the company ended the quarter with more than $1 billion in cash, time deposits and treasury securities, giving it significant strategic flexibility.

AI-Driven Product Wins and Verticals

AI-enabled hardware categories delivered standout growth, led by the smart door lock business, which expanded 73% year over year. PaaS revenue from Wi‑Fi door locks climbed about 65%, while AI revenue from video-enabled locks surged around fivefold, and the company also highlighted traction in AI energy projects, including exhibition wins in Europe and deployments in Singapore’s public housing sector.

Developer and Open Ecosystem Expansion

Tuya’s developer ecosystem continued to widen, with registered AI developers surpassing 1.96 million, signaling deepening engagement around the platform. The TuyaOpen documentation site logged over 340,000 views and more than 16,000 community members, while new tools such as an ultra-lightweight agent kit and vibe coding were rolled out to simplify AI-native hardware development.

Strategic Product & Platform Transition

Management stressed a strategic pivot from simple feature stacking toward deeply integrated AI agents and app-layer capabilities like the Hey Tuya assistant and AI Security Guardian. This transition is coupled with heavier investments in scenario-based deployments across sectors such as energy, security, toys and robotics, aimed at embedding AI into everyday devices and expanding recurring software revenue.

Hardware Segment Contraction

Against this backdrop, Tuya’s Smart Home and Robot Products revenue fell to about $10.2 million, a 6.9% annual decline that management said was largely intentional. The company is phasing out low-value, low-margin hardware to reallocate resources into higher-value AI-initial devices, accepting short-term top-line pressure for what it believes will be better long-term economics.

Supply-Chain and Chipset Pressure

The call also highlighted mounting supply-chain constraints, notably chipset shortages and rising component costs that intensified entering the second quarter. Tuya boosted inventory through strategic purchases but warned that higher memory and chip prices, such as entry-level camera costs jumping from under $10 to above $15, could push retail prices up and soften demand in more price-sensitive categories.

Seasonal AI Application Usage Pressure

Management explained that the AI Application segment faces seasonal usage patterns, with the first quarter typically reflecting lower engagement for device-driven AI services. This seasonality, together with pricing dynamics, contributed to weaker service-based revenue versus the prior quarter, even though year-over-year growth and margins remained strong.

Segment Margin Movements

Blended gross margin came in at 46.9%, reflecting modest fluctuations from product mix shifts and upstream cost changes. PaaS margins saw slight pressure as some component cost increases were passed through without added markups, while AI Application margins, though still high, declined roughly 2.7 percentage points year over year, partly due to usage seasonality.

Uneven Recovery Across Categories and Regions

The recovery across Tuya’s markets remained uneven, with lighting and other categories yet to show clear improvement. Regionally, growth is skewing toward Europe, Singapore and Southeast Asia, particularly in energy-focused projects, while Latin America and other price-sensitive markets may lag as higher device costs weigh on consumer demand.

Short-term Revenue Tradeoffs

Tuya openly acknowledged that it rejected certain orders and cut lower-margin product lines to accelerate its strategic realignment toward AI-initial hardware and software-centric models. These moves are expected to dampen near-term revenue and growth, but management argued they will yield higher margins, better scalability and a more defensible competitive position over time.

Forward-Looking Guidance

Looking ahead, Tuya plans to double down on three core priorities: innovating AI-native applications, especially in high-engagement categories like smart toys, scaling proven AI energy and green tech solutions globally and strengthening its developer ecosystem. Management expects the Smart Home and Robot segment to recover in the second and third quarters as higher-value AI devices ramp, while AI Application and Others should continue to outperform atop a stable PaaS base, all supported by rigorous financial discipline and a sizeable cash buffer.

Tuya’s earnings call painted a company in transition but with solid footing, balancing near-term headwinds with clear strategic payoffs. For investors, the story hinges on whether the high-margin AI software and AI-native devices can maintain their growth trajectory, but the latest results suggest the shift is gaining traction and the balance sheet gives management ample room to execute.