Tuya Inc. (TUYA) Q3 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call presents a strong financial performance with improved margins, reduced expenses, and a substantial net cash balance. While Q4 demand is expected to soften, the long-term outlook is optimistic with AI-driven growth and product expansions. The Q&A highlights potential in AI and strategic categories, although some responses lacked clarity. Despite these uncertainties, the overall sentiment is positive, driven by strong financial health, strategic initiatives, and shareholder returns, suggesting a likely positive stock price movement.

Key Financial Performance

Total Revenue USD 82.5 million, a 1.1% year-over-year increase. The growth was achieved despite a strong comparison base last year and continued caution in external demand, highlighting resilience and stability in the business.

PaaS Business Revenue USD 59.2 million, a 2.4% year-over-year increase. This was driven by strategic focus on customer demand and product optimization.

SaaS and Others Business Revenue USD 11.5 million, a 15.4% year-over-year increase. The growth was fueled by an increase in installed devices and a high proportion of recurring revenues.

Smart Solutions Revenue USD 11.8 million. The company strategically scaled down lower efficiency projects and prioritized scalable high-value solutions like AI energy management and spatial AI solutions to improve gross margin and cash recovery efficiency.

Gross Margin 48.3%, with a total gross profit of approximately USD 39.8 million, representing a 6.1% year-over-year increase. This was driven by improvements in revenue mix and cost structure.

PaaS Gross Margin 48.8%, continuing an upward trend from the second quarter of 2025.

SaaS and Others Gross Margin 70.8%, maintaining a strong level above 70%.

Smart Solutions Gross Margin 23.8%, slightly higher than last year's 23.5%.

Operating Expenses USD 36 million, a 34.1% year-over-year decline. This reflects disciplined financial management and strategic cost control while maintaining R&D investments in key AI initiatives.

GAAP Operating Margin 4.6%, showing significant improvement.

GAAP Net Margin 18.2%, an increase of 23.6 percentage points year-over-year. This was supported by improved gross margin, greater expense efficiency, and sustained scale leverage.

Operating Net Cash Flow USD 30 million, a 25.7% year-over-year increase. This was due to stable cash collection cycles and materially improved cash flow quality.

Net Cash Balance Above USD 1 billion at the end of Q3, providing flexibility for shareholder returns, managing uncertainties, and supporting long-term investments.

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Operating Highlights

AI integration in smart devices: Smart devices equipped with AI capabilities accounted for 93.99% of total shipments, showing an increase from the previous quarter. AI adoption is scaling quickly across various product categories.

AI agent app: Global beta testing of a new AI agent app began, with plans for an official release at the CES show in the United States.

Regional market expansion: In China, AI Toy products showed healthy growth with over 50 customers launching products powered by Tuya. In Europe, demand for AI-powered solutions like AI cloud storage and energy-saving solutions rose. In Asia Pacific, deployment of privatized platforms for Southeast Asian telecom operators scaled rapidly, and the Singapore HDB project progressed. In North America, niche AI-enabled products like smart bird feeders recorded healthy growth.

Revenue growth: Total revenue reached USD 82.5 million, marking a 1.1% year-over-year increase and the ninth consecutive quarter of growth.

Gross margin improvement: Blended gross margin for Q3 was 48.3%, with total gross profit at USD 39.8 million, a 6.1% year-over-year increase.

Expense efficiency: Operating expenses declined by 34.1% year-over-year to USD 36 million, while GAAP operating margins improved to 4.6%.

Cash flow: Operating net cash flow grew by 25.7% year-over-year to USD 30 million, with a net cash balance above USD 1 billion.

AI developer ecosystem: Tuya's platform had 1.62 million registered developers, a 23% year-over-year increase. Over 12,000 AI agents were created, and open-source contributions grew significantly.

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Risk or Challenges

Global consumer electronics industry recovery: The global consumer electronics industry experienced an uneven recovery with customer demand becoming more cautious due to ongoing macroeconomic uncertainties.

High base comparison: The high base from the same period last year created added pressure on year-over-year growth.

External demand caution: Continued caution in external demand impacted revenue growth, despite achieving year-over-year increases.

Macroeconomic volatilities: Pressure in the global consumer environment and external macro volatilities posed challenges to structural growth.

Strategic scaling challenges: Scaling lower efficiency projects and prioritizing scalable high-value solutions required strategic adjustments to improve gross margin and cash recovery efficiency.

Regional market challenges: Expansion into new product categories and regional markets required advancements in product capabilities and connectivity versions, which could pose execution risks.

Supply chain and implementation risks: Deployment of privatized platforms and large-scale projects like the Singapore HDB project involved implementation challenges and risks in delivery phases.

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Guidance & Outlook

AI Integration and Product Development: Tuya is deepening AI integration across its ecosystem, with 93.99% of smart devices equipped with AI capabilities as of Q3 2025. The company is developing a universal AI life assistant app, scheduled for official release at the CES show in the United States in just over a month.

Regional Market Expansion: In the European market, demand for AI-powered solutions such as AI cloud storage and AI energy-saving solutions is rising. In Asia Pacific, deployment of privatized platforms for Southeast Asian telecom operators is scaling rapidly, with additional cities entering the delivery phase. The Singapore HDB project is progressing into implementation. In North America, AI-enabled products like smart bird feeders are experiencing healthy growth.

Financial Projections and Profitability: Tuya achieved a blended gross margin of 48.3% in Q3 2025 and expects continued improvements in revenue mix and cost structure. Operating net cash flow grew by 25.7% year-over-year, reaching USD 30 million, with a stable cash collection cycle and a net cash balance above USD 1 billion.

AI Developer Ecosystem: Tuya's platform had 1.62 million registered developers by the end of Q3 2025, a 23% year-over-year increase. Commercial AI developers have created over 12,000 AI agents on the platform, covering various smart product categories. The company is strengthening its AI developer ecosystem through initiatives like TuyaOS, TuyaOpen, and the T-Series AI Developer Board.

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Shareholder Return Plan

Net Cash Balance: At the end of Q3, our net cash balance stayed above USD 1 billion, giving us ample flexibility to balance shareholders' returns, manage external uncertainties and support long-term strategic investment.

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Key Q&A

Q:What is the business outlook for the fourth quarter of this year and early customer demand for 2026?

A:Yi Yang mentioned that Q4 2023 is expected to have softened demand due to global macroeconomic uncertainties, with a regular promotion season being less robust than the previous year. For 2026, there is a positive outlook driven by AI features and smartphone portfolio trends, with AI expected to enhance IoT experiences and lower entry barriers for new users.

Q:Can you share more details about the AI home assistant to be released at CES and its impact on Tuya's business?

A:Yi Yang described the AI assistant as a comprehensive solution for home scenarios, integrating multiple agents to simplify user interactions. It is designed to lower the entry barrier for new users and enhance the smart home experience. The assistant will interact seamlessly with Tuya-powered devices, aiming to replicate a 'JARVIS-like' experience. The product is expected to boost market penetration and adoption of smart devices.

Q:What is the impact of AI on Tuya's PaaS, SaaS, and smart solution business, and how has it influenced pricing and gross profit margin?

A:Yi Yang stated that over 93% of products shipped by Q3 2023 included AI capabilities. AI is integrated across Tuya's PaaS, SaaS, and solutions, enabling customers to adopt AI features seamlessly. While AI has started to create new demand and improve market penetration, its impact on gross profit margins is expected to materialize in the future as the market matures.

Q:What is the progress on downstream order recovery in overseas markets, especially North America, following recent global tariff policy adjustments?

A:Yi Yang noted that the temporary 1-year tariff terms between China and the U.S. provide cost stability, which could positively impact demand in 2024. However, the current promotion season's impact is still under review, with more clarity expected in December.

Q:What is the latest progress on AI technology, particularly in terms of commercialization?

A:Yi Yang highlighted that AI capabilities are now integrated across all categories, with breakthroughs in new sectors like toys. AI has opened new markets and enhanced existing categories, with trial sales showing positive user feedback. The AI assistant is expected to further expand the market by attracting non-smart device users.

Q:Why did smart solutions revenue decline by 14% in Q3, and what is the growth outlook for 2026?

A:Yi Yang attributed the decline to macroeconomic turbulence in 2023 but expressed optimism for 2026, expecting less turbulence and higher penetration of AIoT features. Customers are increasingly adopting AIoT as a default in new projects, which should drive growth.

Q:What are the plans for product category expansion in smart solutions?

A:Yi Yang stated that Tuya is focusing on strategically valuable categories where AI can make a significant difference, such as video, control panels, gateways, and energy. Expansion into new categories will depend on scalability and market opportunities.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the impact of AI on gross profit margins, stating that it is still in the early stages and focusing on market promotion rather than profitability. Additionally, the response to downstream order recovery progress in North America was vague, with no concrete data or timelines provided.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

TUYA Transcript

Tuya Inc. (TUYA) Q3 2025 Earnings Call Transcript

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Tuya Inc. (TUYA) Q2 2025 Earnings Call Transcript

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Tuya demonstrated strong financial performance with significant revenue growth, improved net margins, and stable cash flow. The Q&A section revealed potential risks due to global uncertainties but also highlighted strategic AI development and strong shareholder return policies. Despite some lack of clarity in management responses, the overall sentiment remains positive due to robust financial health and promising AI-driven initiatives.

Tuya Inc. (TUYA) Q1 2025 Earnings Call Transcript

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The earnings call highlights strong financial performance, with significant revenue and profit growth, improved margins, and effective cost management. The strategic partnership with a top-tier toy group and AI integration plans are promising. Despite concerns about tariff impacts and vague AI monetization strategies, the overall sentiment is positive, supported by a strategic focus on AIoT and international market expansion. The commitment to shareholder returns and a dividend declaration further enhance positive sentiment. The absence of market cap data limits precise prediction, but the overall outlook is positive.

Tuya Inc. (TUYA) Q4 2024 Earnings Call Transcript

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The earnings call reveals strong financial performance with a 30% revenue growth and stable margins. Despite some concerns about AI commercialization and OpEx, the company maintains a robust cash position and issued a significant dividend. The Q&A session highlighted strategic focus on AI and SaaS, with management expressing confidence in long-term growth opportunities. The announcement of a second dividend for 2024 further supports a positive sentiment. Overall, the combination of strong financial results and strategic initiatives is likely to result in a positive stock price movement.

TUYA Report

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