Tuya's Profit Pivot: A Blueprint for Resilience in the AIoT Economy

SANTA CLARA, Calif. – November 24, 2025 – In an economic landscape fraught with trade uncertainties and cautious consumer spending, AI cloud platform provider Tuya Inc. has delivered a masterclass in strategic resilience. The company’s third-quarter 2025 results reveal a striking pivot to profitability, showcasing how operational discipline and a steadfast focus on high-value software services can forge a path to financial health, even when top-line growth is modest.

While total revenue saw a slight 1.1% year-over-year increase to US$82.5 million, the real story lies deep within the financial statements. Tuya reported a GAAP net profit of US$15.0 million, a dramatic reversal from the US$4.4 million loss recorded in the same period last year. This marks a significant milestone, reinforcing the company's move towards sustainable profitability after achieving its first full year of GAAP net profit in 2024. The market has taken notice, rewarding the firm's operational strength over its tepid revenue growth.

The Anatomy of a Turnaround

Tuya's journey back to black ink was not accidental; it was engineered. The most telling metric is the company's operating margin, which leaped an astonishing 25.6 percentage points to 4.6%, compared to a negative 21.0% in the third quarter of 2024. This was achieved through a rigorous approach to cost management, with total operating expenses decreasing by 34.1% year-over-year.

The company has systematically trimmed costs, particularly in share-based compensation expenses, while maintaining investment in its core research and development. This disciplined approach has fortified its financial foundation, a point emphasized by company leadership.

"In the third quarter, Tuya maintained a solid financial foundation," stated Mr. Yi (Alex) Yang, Director and Chief Financial Officer of Tuya. "Gross margin improved to 48.3% year over year, and we continued to expand operating leverage through disciplined cost management... We generated US$30 million in operating cash flow during the quarter and maintained a robust net cash position of over US$1.0 billion."

This war chest of over US$1 billion in cash and equivalents provides Tuya with significant flexibility. It not only acts as a buffer against market volatility but also empowers the company to continue investing in long-term growth initiatives without being overly dependent on external capital markets.

Shifting Focus to the High-Margin Core

A closer look at Tuya's revenue streams reveals a deliberate strategic shift. The engine of its profitability is the growing dominance of its Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS) offerings. PaaS revenue, the company's core business of providing cloud infrastructure for IoT device developers, grew a steady 2.4% to US$59.2 million. More impressively, the higher-margin SaaS and others segment, which includes software for smart commercial spaces like hotels and apartments, jumped 15.4% to US$11.5 million, boasting a gross margin of over 70%.

This growth starkly contrasts with the performance of its Smart Solutions segment, which often involves finished hardware products. This segment saw revenue decline by 14.6% to US$11.8 million. While a drop, this trend underscores Tuya's strategic pivot away from lower-margin, hardware-centric business that is more vulnerable to supply chain disruptions and tariffs. By prioritizing its software and platform offerings, Tuya is building a more predictable and profitable revenue base. The overall gross margin climbed to 48.3%, demonstrating the positive financial impact of this evolving product mix.

This strategy aligns with broader trends in the IoT market, which is projected to surpass US$112 billion by 2030. While hyperscalers like Amazon's AWS and Microsoft's Azure dominate parts of the market, Tuya has carved out a significant 16% market share in IoT platform services by focusing on an open, hardware-agnostic architecture that appeals to a wide range of global manufacturers and brands.

Cultivating a Global AI Developer Army

Beyond the quarterly numbers, Tuya is playing a long game centered on its most valuable asset: its developer ecosystem. The company is positioning itself not just as an IoT enabler, but as a foundational AI developer platform. As of September 30, 2025, the number of registered AI developers on its platform surged past 1.62 million, a 23% increase in just nine months.

This rapidly expanding community of brands, OEMs, and independent software vendors is the engine for future innovation on Tuya's platform. The company is actively fostering this ecosystem by integrating advanced AI tools, such as its own Doubao large language model, to lower the barrier to entry for creating sophisticated AIoT applications.

"Amid ongoing global trade uncertainties, Tuya delivered another quarter of strong execution and resilient performance," said Mr. Xueji (Jerry) Wang, Founder and Chief Executive Officer of Tuya. "Looking ahead, we remain focused on deepening our relationships with core customers, strengthening our global presence, and advancing product innovation, particularly in AI-driven software and developer services."

While direct monetization of these new AI features is still in its pilot phase, the strategy is clear: build an indispensable platform that becomes the go-to standard for the millions of developers building the next generation of smart devices. The primary monetization remains through PaaS fees tied to device deployment, creating a scalable model where Tuya's success is directly linked to the success of its developer community.

Navigating a Complex Global Stage

Tuya’s performance is made all the more impressive by the challenging global environment it navigates. The company has been transparent about facing "tariff-related headwinds" and "global trade uncertainties," particularly stemming from U.S. trade policy. These pressures have directly contributed to the decline in its hardware-focused Smart Solutions segment, as customers delay orders or reconfigure supply chains to mitigate risk.

The company's ability to absorb this segment's decline while still growing its overall profit demonstrates the wisdom of its diversified, software-first strategy. The slowdown in the Dollar-Based Net Expansion Rate (DBNER) for PaaS, from 124% to 109%, also reflects this cautious customer environment. However, a DBNER above 100% still indicates that existing customers, on average, are increasing their spending, a healthy sign for any platform business.

With a strong balance sheet and a clear focus on its core platform strengths, Tuya appears well-equipped to weather ongoing geopolitical and economic storms. The company's strategy of disciplined execution combined with selective investment in key technologies like AI provides a compelling blueprint for how tech firms can not only survive but thrive in today's complex new economy.