Matt Ma

Matt Ma from Jefferies asked about the reasons behind the 14% decline in Smart Solution revenue during the third quarter. He also requested a growth outlook for the Smart Solutions segment in 2026 and management's thoughts on future product category expansion within this segment.

Answer

Alex Yang, Director, Co-founder, COO, and CFO of Tuya, did not directly address the Q3 decline but projected a better 2026 for Smart Solutions with less market turbulence and increasing AIoT feature adoption. He noted that more detailed insights for 2026 would follow Q4 sell-through feedback. For category expansion, he emphasized focusing on strategically high-value areas where AI offers significant differentiation or enables new innovations, such as video, control panels, gateways, and energy solutions, expanding only when scalable opportunities arise.

Matt Ma inquired about the reasons behind the 14% decline in Smart Solutions revenue during the third quarter, the growth outlook for this segment in 2026, and Tuya's strategy for product category expansion within Smart Solutions going forward.

Answer

Alex Yang, Co-founder and CFO, explained that the Smart Solutions segment strategically scaled back lower-efficiency products while prioritizing scalable, high-value solutions like AI energy management and spatial AI to improve gross margin and cash recovery. For 2026, he anticipates a better year with less market turbulence and increasing penetration of AIoT features. Regarding category expansion, Yang stated that Smart Solutions will continue to focus on strategically high-value categories where AI offers significant differentiation or enables entirely new innovations, such as video and multimodal capabilities, comprehensive control panels, specific scenario gateways, and energy management solutions.

Matt Ma of Jefferies asked if Tuya is observing a supply chain shift out of China due to U.S. tariffs and the potential impact on the company, such as incremental costs. He also questioned the reason for the relatively lower gross margin in the Smart Solutions segment in Q2 and inquired about the company's expected margin profile over the next three to five years.

Answer

Co-founder, COO, and CFO Alex Yang explained that supply chain shifts have been ongoing for years, and Tuya adapts by delivering modules to customers' chosen manufacturing locations. He noted short-term uncertainty is high as tariffs affect multiple countries. Regarding the Smart Solutions margin, Mr. Yang attributed the slight Q2 dip to 22.5% to the initial rollout of new products like AI toys, which start with lower margins that are expected to improve with scale.