Summary of Tuya's Earnings Call Company Overview - **Company**: Tuya (TUYA) - **Industry**: Internet of Things (IoT) Platform as a Service (PaaS) Key Financial Highlights - **2Q25 Revenue**: Increased by 9% year-over-year to **US$80 million**, exceeding estimates by 2% and 3% compared to Goldman Sachs estimates and Visible Alpha Consensus respectively [1] - **Non-GAAP Operating Profit**: Rose by 17% year-over-year to **US$8.6 million**, surpassing estimates by 18% and 12% [1] - **Non-GAAP Net Profit**: Reported at **US$20 million**, a decline of 4% year-over-year due to lower interest income [1] - **Dividend Declared**: Cash dividend of **US$0.54 per ADS**, totaling **US$33 million**, reflecting an 84% payout ratio related to 1H25 non-GAAP net profit [1][21] Core Themes from Management 1. **AI Penetration**: - 93% of products shipped in 2Q25 were equipped with AI capabilities, with **150 million daily AI interactions** globally [2][21] - Collaboration with companies like NetEase and KidsWant to develop AI toys [2] 2. **Monetization Opportunities**: - Increased focus on AIoT SaaS to provide emotional value in sectors like entertainment and pet care [2] 3. **Revenue Pressure**: - Anticipated incremental revenue pressure from tariffs in 3Q25, affecting IoT PaaS and smart solutions segments [2] - Softer orders expected for the year-end festive season [2] 4. **Operating Efficiency**: - Efforts to drive operating profit margin (OPM) expansion to mitigate impacts from lower interest rates on net profit [2] 5. **Commitment to Dividends**: - Ongoing commitment to regular dividend payouts [2] Forecast Adjustments - **Revenue Forecasts**: Lowered 2025-2027 revenue forecasts by 1-2% due to potential demand softness, while adjusting net profit forecasts upwards by 1-4% due to better-than-expected operating expense control [3] - **3Q25 Revenue Estimate**: Projected to be flattish year-over-year at **US$82 million** [3] Regional and Product Growth Insights - **Customer Base**: - White PaaS customers remained flat at **2,100**, while premium PaaS customers increased to **285**, contributing approximately 88.6% of PaaS revenue [18] - **Regional Performance**: - **APAC**: Fastest growing region, with significant contributions from smart home and real estate products [18] - **Europe**: Double-digit growth in ambient lighting and home appliances [18] - **China**: Positive feedback on AI toy solutions, with plans for expanded IP collaborations [18] - **North America**: Strong demand for smart bird feeders [18] Tariff Impact and Supply Chain Dynamics - **Tariff Pressure**: Expected continued revenue pressure from tariffs in 3Q25, with potential improvement in 4Q24 [18] - **Supply Chain Adjustments**: Some manufacturers relocating to countries like Vietnam and India, while others still rely on Chinese manufacturers for certain products [19] Investment Thesis - **Market Position**: Tuya is positioned as the largest IoT PaaS platform, benefiting from favorable competitive dynamics in a growing market [29] - **Risks**: Potential risks include weaker-than-expected global consumer IoT demand, inventory backlogs, and geopolitical risks related to tariffs [28][29] Valuation and Price Target - **Target Price**: Raised to **US$3.2** based on DCF and EV/GP methodologies [28] - **Market Cap**: Approximately **US$1.6 billion** [6] Conclusion Tuya's strong performance in 2Q25, driven by AI integration and a commitment to dividends, positions the company favorably despite anticipated revenue pressures from tariffs and demand softness. The strategic focus on AI and regional growth opportunities presents a positive outlook for future performance.