Tuya Inc. (NYSE: TUYA; HKEX: 2391) reported Q2 2026 revenue of US$92.9 million, up 16.0% year over year, while diluted net profit per ADS rose to US$0.03 from US$0.02. Net profit increased 48.0% to US$18.6 million, but gross margin narrowed and operating cash generation fell, creating a more mixed profitability and cash-flow picture than the GAAP earnings growth alone suggests.
Core Financial Results
For the quarter ended June 30, 2026, revenue growth was led by PaaS and smart home and robot products. Gross profit increased more slowly than revenue because product and solution mix and semiconductor supply-chain pricing reduced the overall gross margin.
GAAP operating profit improved substantially, helped by lower share-based compensation and other operating income. The adjusted results were less pronounced: non-GAAP operating margin edged lower, and non-GAAP net profit declined.
| Metric | Q2 2026 | Q2 2025 | Year-over-Year Change |
|---|---|---|---|
| Revenue | US$92.9 million | US$80.1 million | +16.0% |
| Gross profit / margin | US$43.0 million / 46.3% | US$38.7 million / 48.4% | Profit +11.1%; margin -2.1 pp |
| GAAP operating profit / margin | US$9.3 million / 10.0% | US$1.1 million / 1.4% | Margin +8.6 pp |
| Non-GAAP operating profit / margin | US$9.6 million / 10.3% | US$8.6 million / 10.7% | Profit +11.7%; margin -0.4 pp |
| GAAP net profit / margin | US$18.6 million / 20.1% | US$12.6 million / 15.7% | Profit +48.0%; margin +4.4 pp |
| Non-GAAP net profit / margin | US$18.9 million / 20.4% | US$20.1 million / 25.1% | Profit down approximately 5.8%; margin -4.7 pp |
| Diluted net profit per ADS | US$0.03 | US$0.02 | Increased |
| Operating cash flow | US$6.2 million | US$18.2 million | Down approximately 66% |
Each ADS represents one Class A ordinary share. Tuya’s non-GAAP measures exclude share-based compensation and credit-related impairment or reversals involving long-term investments.
Business and Segment Performance
PaaS remained Tuya’s largest business and primary revenue driver. Smart home and robot products recorded the fastest percentage growth, while AI application and other revenue increased at a more moderate rate.
| Segment | Q2 2026 Revenue | Q2 2025 Revenue | Growth | Q2 2026 Gross Margin |
|---|---|---|---|---|
| PaaS | US$67.9 million | US$58.1 million | +16.9% | 46.8% |
| AI application and others | US$11.5 million | US$11.1 million | +3.9% | 72.0% |
| Smart home and robot products | US$13.5 million | US$10.9 million | +23.2% | 21.9% |
Tuya attributed PaaS growth to increased demand, attention to customer needs and product enhancements, despite tariff-related disruptions in the international business environment. AI application and other revenue benefited primarily from cloud-based services, while growth in smart home and robot products reflected higher customer demand.
Premium PaaS customers reached 318 for the trailing 12 months ended June 30, up from 285 a year earlier. These customers generated approximately 89.5% of PaaS revenue, compared with 88.6% in Q2 2025. Registered AI developers exceeded 2.092 million at quarter-end, up 16.2% from approximately 1.801 million at December 31, 2025.
Lower Share-Based Compensation Lifted GAAP Profit While Core Margins Tightened
The quarter’s profitability trends differed significantly between GAAP and non-GAAP measures. Overall gross margin declined to 46.3% from 48.4%, reflecting changes in product and solution mix and semiconductor supply-chain pricing. PaaS gross margin fell to 46.8% from 48.7%, while smart home and robot product gross margin decreased to 21.9% from 22.5%. AI application and other gross margin remained unchanged at 72.0%.
The fastest-growing segment—smart home and robot products—also had the lowest reported gross margin. Combined with the lower PaaS margin, this limited the conversion of 16.0% revenue growth into gross profit, which rose 11.1%.
Below gross profit, GAAP operating expenses declined 10.4% to US$33.7 million, but non-GAAP operating expenses increased 10.9% to US$33.4 million. The difference largely reflected a reduction in share-based compensation to approximately US$0.6 million from US$7.5 million. General and administrative expenses fell 49.8% to US$4.7 million, primarily because previously granted equity awards continued to amortize, while other operating income included US$2.4 million mainly from software value-added tax refunds.
As a result, GAAP operating margin expanded sharply to 10.0%, but non-GAAP operating margin slipped to 10.3% from 10.7%. This indicates that much of the GAAP margin improvement came from lower equity compensation and operating income rather than broader adjusted expense leverage.
Cash Flow and Balance Sheet
Operating cash flow decreased to US$6.2 million from US$18.2 million. Tuya said the quarter’s cash generation mainly reflected ordinary-course working-capital changes, creating a notable gap between the 48.0% increase in GAAP net profit and the decline in operating cash flow.
Cash and cash equivalents, time deposits and treasury securities totaled US$976.1 million at June 30, 2026, compared with US$1.017 billion at December 31, 2025. Over the same six-month period, inventory increased to US$63.8 million from US$30.9 million, prepayments and other current assets rose to US$29.2 million from US$16.5 million, and customer advances increased to US$43.0 million from US$29.3 million.
Management View
Management said demand remained resilient in selected home appliance categories and that customers were increasingly adopting differentiated, AI-enabled products and solutions. Shipments of AI-powered companion product solutions continued to expand, while the launch of Tuya Cobuilder was intended to help developers move more efficiently from product concepts to physical-device deployment.
For the broader market, management described manufacturers, brands and channel partners as cautious, although project execution was becoming more normalized and demand was recovering across several core categories. Tuya plans to continue investing selectively in AI applications, developer-platform capabilities and its ecosystem while expanding validated solutions globally.
Risks Investors Need to Watch
- Continued gross-margin pressure: Product mix and semiconductor supply-chain pricing reduced both the overall and PaaS gross margins. Faster growth in the lower-margin smart home and robot product segment could continue to affect consolidated profitability.
- Weaker cash conversion: Operating cash flow fell substantially even as GAAP net profit increased. Working-capital movements, including higher inventory and prepayments over the first half, remain important indicators to monitor.
- External demand and policy uncertainty: Management identified cautious customer planning, tariffs, trade-policy changes, regional economic divergence, foreign-exchange and interest-rate volatility, inventory dynamics and geopolitical conditions as factors that could affect future performance.
Summary
Tuya’s Q2 2026 results combined double-digit revenue growth with stronger GAAP earnings, led by PaaS and smart home and robot products. However, lower gross margin, a slight decline in non-GAAP operating margin and weaker operating cash flow show that the improvement was not uniform. Future quarters will clarify whether demand recovery and AI-related adoption can support growth while Tuya manages product mix, semiconductor costs and working-capital requirements.
Find out more
