Tuya Inc. (TUYA) Q1 2026 Earnings Report, Transcript and Summary

Good morning, and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Tuya Inc.'s First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be informed that today's conference is being recorded. I'll now turn the call over to the first speaker today, Ms. Regina Wang, Investor Relations, Associate Director of Tuya. Please go ahead.

Thank you, operator. Hello, everyone, [ welcome ] to our First Quarter 2026 Earnings Conference Call. Joining us today are our Founder and CEO, Mr. Jerry Wang; and our Co-Founder and CFO, Mr. Alex Yang. Our results and webcast of the conference call are available at ir.tuya.com. A replay of this call will also be available on our IR website in a few hours. Before we continue, I'd like to refer you to our safe harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements. With that, I will now turn the call over to our Founder and CEO, Mr. Jerry Wang. Jerry will give his remarks in Chinese and English translation follows. Jerry, please.

[Interpreted] Hello, everyone, and thank you for joining Tuya's earnings conference call for the first quarter of 2026. During the quarter, despite ongoing uncertainties in the external environment and disturbances from certain regional factors, the company delivered solid growth momentum and strong execution capabilities, benefiting from a continued recovery in downstream demand, our business scale has been expanding modestly since the fourth quarter. Total revenue increased by 8.3% year-over-year with growth momentum improving quarter-on-quarter and posting positive growth for multiple consecutive quarters. Gross margin remained at a healthy level, reflecting the continued enhancement of our product value proposition and platform competitiveness. [Interpreted] In terms of execution of our key strategies, we continue to advance our AI-driven development strategy. As we have mentioned earlier, AI is shifting from simple feature stacking towards deep integration with hardware devices and vertical industry scenarios. It is gradually evolving from a mere conversational tool into an intelligent agent that interacts and operates in the physical world. This trend has been further validated by a richer portfolio of application offerings and customer scenarios in quarter 1 2026. [Interpreted] At the same time, we are accelerating the transition of AI capabilities from the platform layer to application layer and scenario-based products with successful deployments across multiple real-world use cases. We keep upgrading our developer tools and platform capabilities, empowering global developers to access and apply cutting-edge AI technologies at lower cost and higher efficiency. The sustained growth in AI-related revenue also reflects steady progress across our commercialization efforts. [Interpreted] During the quarter, we introduced a range of applications aligned with this direction, including the AI-powered Smart Life assistant Hey Tuya and AI security Guardian. The significance of these initiatives lies not only in single product, but in validating the capabilities of AI agents to move beyond handling digital tasks into physical world execution and device coordination. We are seeing AI gradually develop the ability to operate across both digital and physical worlds, marking a critical step forward in the real-world deployment of physical AI. [Interpreted] Looking ahead, we will further deepen our strategic focus on the following key areas. First, we will continue to advance AI-native application innovation, centering on high engagement categories such as smart toys. We will accelerate the penetration and large-scale adoption of AI capabilities in consumer scenarios, expanding physical AI into a wider range of everyday use cases. Second, we will scale the global rollout of proven AI solutions, particularly in the energy and green technology sectors. By bringing mature solutions to international markets, we aim to enhance our industry recognition globally. Third, we will continue to strengthen our developer ecosystem. Through open platforms and enhanced tool capabilities, we will lower the barriers to AI application development and work closely with industry partners to drive deeper exploration and commercialization of AI technologies. [Interpreted] Now let me turn the call over to our Co-Founder and CFO, Alex Yang, for a closer look at our financial performance and business progress.

Hello, everyone. This is Alex. I will provide a brief overview of our first quarter results. Please note that, unless otherwise stated, all figures are in U.S. dollars and all comparisons are on a year-over-year basis. In the first quarter of 2026, we generated total revenue of approximately USD 80.9 million, representing a year-over-year increase of around 8.3%. Despite ongoing uncertainties in the external environment, the company maintained its steady growth trajectory. Our core platform business remained stable, while AI-related business continued to demonstrate a strong growth [indiscernible]. Our profitability, our operating margin continued to improve. GAAP operating margin reached 9.2%, representing a significant year-over-year increase, while non-GAAP operating margin was 10%. Net margins further improved to 19.5%, reflecting continued optimization in operating efficiency and cost structure. Overall, the combination of improvements in revenue mix and disciplined expense management has driven sustained profitability gains. Before going into segment details, we would like to note that we have adjusted the name of certain business segments this quarter. So the former SaaS and Others segment has been renamed to AI Application & Others, reflecting our continued push forward AI-enabled software services to add more applications, accurately capturing the transition from traditional cloud services to AI application services. Meanwhile, the former Smart Solutions segment has been renamed to Smart Home & Robot Products, highlighting our increased focus on AI-powered home products, household robotics and scenario-driven AI-initial devices on the hardware side. We would like to emphasize that these changes are purely presentational and do not affect the revenue composition, recognition methods or historical comparabilities of each segment. Within our segments, the PaaS business generated revenue of USD 59 million in this quarter, representing a year-over-year increase of approximately 9.8%. As customer demand gradually recovered, we continue to drive steady growth in our core business through ongoing optimization of our customer mix and PaaS capabilities. At the end of this first quarter, the number of PaaS premium customers reached 306, reflecting the variability of our core customer base and the structural resilience of the platform business. The AI Application & Others segment generated revenue of USD 11.6 million in this quarter, representing a year-over-year increase of approximately 16.9%, continuing to outpace overall company growth. This growth was primarily driven by increased revenue from the cloud software services and AI application services, including AI cloud storage, energy management [ saving ], value-added services like SMS and voice services as well as app OEM and SDK offerings. This reflects the continuous progress in commercialization of our AI applications as more software products completed their AI-driven upgrades. This segment has gradually become a more growth-oriented and software services-centric component of our revenue mix. The Smart Home & Robot Products segment generated revenue of USD 10.2 million, representing a year-over-year decrease of approximately 6.9%. The fluctuation in this segment primarily reflects our proactive efforts to phase out relatively low-value hardware products and optimize the product mix and reallocate resources towards higher value-added, especially AI-initial hardware terminals. As the segment undergoes structural adjustments, we expect the long-term profitability and scalability to gradually improve with a higher mix of higher value products. From an operational perspective, several verticals this quarter has demonstrated structural opportunities driven by the integration of AI and smart hardware. Like in the security segment, our smart door lock business achieved 73% year-over-year growth, driven by upgrades in the multi-modeling Wi-Fi solutions, video intercoms as well as AI voices and vision capabilities. PaaS revenue from Wi-Fi-enabled smart door locks increased 65% year-over-year growth. At the same time, the AI revenues from the video-enabled locks increased substantially 500% year-over-year. This demonstrates that AI and multi-modeling capabilities are driving the traditional smart lock vertical to evolve from a stand-alone hardware model into a higher-value business model of hardware plus software service plus AI capability combined. In the energy sector, related PaaS products, including the EV chargers, metering products and professional metering solutions are emerging as new growth drivers. We are also continuing to advance in the higher-value solutions such as AI-enabled display, gateway and voice capabilities, providing a strong foundation for our customers' product upgrades and future growth. In the AI energy, demand in the European market for home energy management, energy storage and AI-driven energy saving solutions continue to grow. During this quarter, we made solid progress in advancing AI energy-related initiatives with key milestones achieved in the commercialization of energy storage and ecosystem accessories. Our customers received very positive feedback and secured multiple channel partnerships and orders at the exhibition such as Light + Building in Frankfurt and Solar Solutions in the Netherlands. In Singapore's HDB project, new capabilities, app panels and deliveries are progressing on schedule. AI Energy is gradually evolving towards a comprehensive solutions model, integrating hardware bundles, software and AI orchestration plus channel operations. From a regional and scenario perspective, Europe remains a key deployment market for energy and green technology solutions with growing demand for AI energy, smart electrical systems, spatial intelligence applications, AI smart home appliances and AI safety and security protections. In Asia Pacific region, the Singapore HDB project continue to move through implementation and validation, while Southeast Asia and other emerging markets are beginning to generate opportunities in energy management, spatial intelligence and [ SME ] scenarios as well. In China, AI-enabled smart door locks, AI toy and AI home products, including AI companion, continue to attract strong customer interest with some customers already advancing project upgrades and solution integration. On margins, our blended gross margin for this quarter was 46.9%, with slightly year-over-year fluctuation primarily due to the change in the product mix and certain upstream cost variations. By segment, gross margin for PaaS was 46.1%. Gross margin for AI Application & Others was 71.7%, remained stable and reflecting the structural advantage of software and AI-driven business. And the gross margin for Smart Home & Robot Products was 23%, maintaining a level of above 20%. While advancing AI applications and high value, we continue to focus on the cost efficiency and product value. Our expenses, we maintained disciplined cost management during the quarter with total operating expenses, OpEx, of approximately USD 30.4 million, while continually investing in core AI development and platform capability improvements driven by AI and digitization, and digitalizing operations enabled further operating leverage. In terms of profitability, we recorded profit from operations of about USD 7.5 million for this quarter. Non-GAAP profit from operations was approximately USD 8.1 million. Net profit reached USD 15.8 million. The improvement was primarily driven by positive contribution from gross profit growth as well as lower share-based compensation expenses. Our cash flow, net operating cash flow remained positive during this quarter. At the end of this quarter, the company's total cash, cash equivalents, time deposits and treasury securities amounted to approximately USD 1 billion plus. The strong cash position provide solid support for our continued investment in long-term AI capability development, our ability to navigate external uncertainties and opportunities and our [ competitiveness ] to enhance shareholders' returns. We will also prudently evaluate and pursue higher quality strategic investment opportunities. Overall, the company continued to deliver revenue growth and improved profitability in a complex environment while the accelerated development of AI application business is driving the ongoing evaluation of our revenue mix towards higher-value segments. And next, I will briefly walk you through our progress in the AI development ecosystem. Within our development ecosystem, during the first quarter, we continued to advance to the open source capabilities of TuyaOpen and further development on our AI agents. So to better address the diverse needs of AI-native developers, we also launched our new offerings, including the ultra-lightweight agent kit for the hardware developers and the vibe coding based on the Tuya hardware applications. So the vibe coding will be able to help lower the bar for many new developers as well. Those tools enable developers to build a wide range of AI-native hardware products in a more flexible and agile manner. We remain committed to lower the bar for AI hardware and application developments while enhancing flexibility and openness, allowing developers, brands, solution providers to accelerate the process from ideation and prototyping to product commercialization. At the end of the first quarter of 2026, the number of registered AI developers on our platform exceeded 1.96 million, maintaining steady growth. At the same time, engagement within the TuyaOpen community continued to increase. Based on our current ecosystem data, the TuyaOpen documentation platform has been accumulated over 340,000 views with more than 16,000 community members. It has accumulated abundant open-source project resources and launched a standardized demo cases library, covering mainstream application scenarios and development needs. TuyaOpen is gradually evolving from an open-source framework into an open ecosystem infrastructure for the AI hardware innovation. From our deployment perspective, AI capabilities are increasingly extending from the platform layer into a broader range of end devices format. Whether in AI-enabled door locks, energy management solutions, sensors, AI companion toys or AI robots, they all reflect the same underlying trend. AI is evolving from isolated functions towards deep integration with the devices, scenarios and user needs. This is fully aligned with our previously articulated vision of physical AI, enabling AI to engage in real-world environments and actively participate in [ centering ] decision-making and execution in real life. In summary, our first quarter performance further validate the commercial viability of our AI strategy. Our core PaaS business continued to provide a solid growth foundation while the deep integration of AI application services with physical hardware is emerging as a new driver for the value creation. At the same time, we have achieved meaningful progress in deploying AI solutions across high-value scenarios such as energy, entertainment and security. Looking ahead, we will remain focused on 2 key priorities: physical AI scenarios and high value-added AI products. While maintaining financial discipline, we will accelerate the transition of AI technologies from a 2-level capability to products with tangible commercial value, creating sustainable long-term returns to our shareholders. Thank you. Operator, we can begin the Q&A right now.

[Operator Instructions] First question, we have Yang Liu from Morgan Stanley.

Congratulations on the solid results. I would like to ask about the value chain because a lot of the sectors are suffering from the chipset shortage globally. So could management update us in terms of Tuya's situation in value chain, especially the chipset sourcing, and also update us the pricing strategy, if there's any shortage or constraint from the value chain and how to pass through the inflationary cost to the downstream.

Yes. Thank you, Liu. Yes, we really noticed those kind of fluctuations around 1.5 quarters ago. So that's why we gave a heads-up of that type of trend around the end of last year. And so the things we're doing is, the first one is that, considering of large buys of some of the major chips in the industry. And so the fluctuations we maintain as limited as we could because of the buying power. In the same time, for those costs that inevitably we have to increase, so we'll pass through those costs to the downstream side. So that will be the basic idea and how we've been doing. And so you can notice that there are several reactions we've already been doing. The first one is that, in Q1, we already do some strategic purchasing before any cost change. So you can notice that in our balance sheet that our inventory increased slightly. So that majorly is that it's kind of the procurement. We do that before the cost increased. And so that reflected to my inventory level and including my net cash as well. So that's the first one. So we try to use larger inventories to buy more times to working through the fluctuations. The second one is that, you already noticed that, especially on the PaaS side, the change or those kind of difference of the gross margin of PaaS reflects that we're really trying to pass through the cost. But we didn't add the margin on the cost change because we don't want to bring more burden from our downstream side. So that reduced slightly on -- my gross margin on the PaaS as well. We'll continue to keep focus on that and to working along with my customers and through those fluctuations. So no matter, using our scalability to manage the cost difference at the least level as we could. In the same time, we're using our inventories to try to bring more balance coming through with the time. So that will be the basic idea there. But we found that the shortage and the intensity of the momentum continue to increase in Q2 -- in the beginning of Q2.

Our next question will come from the line of Goldman Sachs, Mr. Timothy Zhao.

Congrats on the solid results. I think my question is on the revenue front. I noticed that this quarter, you achieved a pretty solid sequential acceleration on the revenue growth. However, given the very dynamic geopolitical and macro environment globally right now, I was just wondering what is your latest thoughts on the demand outlook and revenue growth outlook for the rest of this year? And what measures have you taken to stabilize or further boost the demand? And my second question is that I noticed, as you mentioned, you changed the reporting line or changed the reporting name of the 2 of the segments that you report. Just could you further elaborate on the rationale behind and specifically on AI applications and robotic products? Just wondering if you could share more color on your plan regarding these 2 specific subsegments.

Yes. Thank you for that. So first one on the market environment, we already noticed that as we shared the colors when we released our Q4 results, we found that while the trading -- the international trading environment became stable after the November of last year, so the momentum is starting to recover and the customers are starting to return to a growing trend on the business side. So it's not that conservative. So starting from December, we already see that starting to recover. It's not overnight. So they're doing that gradually. And even though in March, we know that there will be a new fluctuation coming. But overall speaking, the downstream side is recovering. But we have to break down into different sectors. So what we see here is that, like the appliances, like the energy, like the innovative devices, including the securities or the locks, we found that the growth momentum are more positive and almost for sure. So -- because the matter is that we found a more solid [ the amount ] of pain points on the user side and all those sectors, those companies are doing better. But in some other sectors like the lighting, we don't see significant recovery. So it's kind of still doing what we call is into an evaluating stage on the lighting side. And some sectors that those chipset cost variations, not from our side, but from their own side, like the cameras, so all -- like some control panels with the screen, so the memory chip cost variations will bring a more significant cost difference for the finished product for the device side. And the factories and the brands, they can do less to change that direction. So that price increase might be significant for them, like the camera, for business, the entry-level cameras. Usually the FOB price or the retail price will be like -- retail price will be like USD 20 and FOB will be below USD 10. But during those kind of memory chip and non-chip increase, we noticed that the FOB price might be able to hit above USD 15, so which means that the retail price have to increase around -- to USD 35. So that significant increase on the retail price side might bring -- might influence the consumers' buying decision. So we already noticed some sectors might be more sensitive on the -- will be more -- will be impacted more on the cost increase. Some will be more resilient. So that will be on the product sector side. And on the region side, so combined with that is that -- still for the energy that Europe and the Southeast Asia sees strong demand for the -- including Australia, is very strong demand for the energy management solution. Especially in this year, what people are starting to notice is that energy become more and more -- how can I say, energy become more and more crucial and on the cost scalability side. So they have to pre-invest -- they are more willing to pre-invest on any energy efficiency. So for that part. But for some other regions like Latin America, they are more price sensitive. So like I mentioned, some sectors like the cameras for this market consider that they have a lower buying power for the -- based on the macro economy in that sector -- in that region. So for them, that -- so some sectors will meet some challenge out there. So for us is that still we're trying to use our very comprehensive hardware category mix and combined with multi-region mix to go in against different type of fluctuations. We're always looking for opportunity in some regions to balance the seesaw on the other side. So that's overall for the macro environment. And the second one is for the AI transition. Yes, no matter it's AI application or the home robot products, so both sides, we're looking forward to give the market the signal that we're doing so hard to reallocate our resources since 2023 to transit our previous, we'll call, the first version of smart devices offering into the AI-initial offering. So starting from the end of the 2023, we really upgraded our entire platform architectures into large language model hosted, which means that since end of 2023, all those decision-making on the platform side for the device and the software applications can be based on the different large language model or the mainstream one. And in 2024 -- May of 2024, we really launched our hardware agent platform that enable our customers to design an agent on top of the devices to make the devices be more smart and doing some things autonomously. But even no customers understand what it is, but it's the agent. And in last year, we launched our new AI platform as a new AI foundation, including the multi-modeling offerings, including the open-source projects to open some new doors for the new innovation -- innovative ideas for those customers and then give them a bridge, giving a path that how they can combine technology into innovative ideas and make it come to. And in April, in our new developer summit, we launched our new offerings, including the agent kit that allow the hardware designers to do things more freely and including our vibe coding tools that right now, they can design any software, including apps, including the firmware on the hardware side, including the cloud services, they can do that all through vibe coding. So all the things we're doing is that we -- to show that we are kind of an initial AI user and AI enabler. And so for that, we're trying to upgrade our offering in those 2 segments. So take the AI application, for example. We're really starting to provide that for all the cloud storage on the camera side that right now comes in with AI capability. So customers will be able to customize the event. So it's not just [indiscernible] detect any movement on the picture and give you the alarm. And you can find that you [ assume ] false alarm and then you have to turn down the notification, right, because the camera cannot tell whether it's something you should pay attention to or not. Any delivery boys come by, anyone comes from the door, you get alarm. And starting from there, you can build an event that -- so if it's a package, so don't give me notification. And if someone stay at the front door like over 10 minutes a day, a notice. If someone showed up every day and seems like very suspicious, give me a notice. So people start to be able to create their own events and then have the camera to watch out for it. So that means it will provide significantly more values and creating more [indiscernible] pain point for the end user side. So that kind of things upgrade on those kind of offerings is -- it's a natural upgrade from our previous SaaS offering. So we think that right now, we're starting to provide more and more AI capabilities seamlessly to the previous SaaS. And then we show that more and more users start to subscribe that services because of the AI offering, and then we're doing the upgrade on other AI applications. And that's the [indiscernible] scale, it's agent or it's purely services on the recurring model. And for the home products and robotics, so some scenarios is including like the companion that's offering of Tuya toy or AI toy for some customers. Some customers, they have their own brands. They have their own very good toy design capabilities and channel distributions, but they don't have the capability to design things from scratch, especially they don't know anything about coding, they don't know anything about the circuit boards, about the microphone array design. So for some of the part, we're starting to offer the entire solution. And to do that, we'll put more focus not on some, what we call is the, first generation of smart devices; we're starting to focus more on the AI, what we call AI-initial devices. So like the toy, they need the multi-modeling capability. They need the reduced noise canceling and microphone array design and they need the string projection and technologies to reflect different type of reactions from the toy side. So for that part, that's how we allocated the resources since last year. And so right now, for this segment, the direction is that we guide the entire department to put folks on all those kind of AI-enabled and AI-initial devices. And usually, those devices will come naturally with not only the AI feature, but combined with a larger opportunity for the AI application business. So that's how we're driving folks to do that. So not a kind of connected devices segment anymore. It's become a more AI-initial offering for those customers by helping do that. Yes. So that will be the typical use cases.

Our next question will come from the line of Kai Xiao of CICC.

This is Kai, and I have 2 questions. First one is on competition. So following the emergence of agents, on-device agent deployment has become an industry trend. So could you share how has the competitive landscape evolved in Q1? And how do you view Tuya's advantage in this field? And my second question is on R&D. So could you share how is the company applying AI tools like agent coding tools in internal R&D? And what's the potential impact on margins and profitability?

Yes. So the first one, I already covered some of the parts in the market environment side. So as we see here is that 2 things. The first one, since the customer is trying to kind of escape from over-conservative momentum in our shares, this time to get back into the growth path, so what we're doing is that we just identify the right road map along with them and to fulfill that and help them to providing better products, better offering on their shelf, on their own channels and to catch the customers, catch their own end users, what I mean. And in the same time, we already see that the end user stickiness on AI are growing very, very healthily. So which means that more and more users are trying whatever AI features and AI offerings. And I believe that it's not that significant right now. But in the near future, the consumers when they're sourcing the smart devices, AI features or what type of AI features will be kind of the key differentiations or key factors for them to make the decision. And so we are very happy to see that since second half of last year that our penetration among my ecosystem to integrate the AI capabilities we offer to the new product design and become significant and improved. So that will help us capture the trend. So that's for this part. So what we see is that we'll always be kind of the early adapter and to notice the trend for the industry, maybe 2 or 3 quarters ahead because I can see that how -- what type of technology my customer is trying to pre-study, starting to try and when they start to implement that into the new product road map and produce that. So what we see is in us to consider as early education for the entire industry or in most of the sectors we cover to give them type of the right educational approach that AI will be considered as the next generation of key differentiations for any new things they build and to the market. And so they need to try that or need to try to understand to learn that. Starting from the second half of last year, the customers, majority of the new products or the new projects that they kicked off, they tried that. And so then the new products they start to offer maybe at the end of the last year or at the second of this year, bring that into market going through a long procedure into the development, manufacturing, logistics and to the end design. So that's what we see here. And so it will be a very positive trend. And on the second part is for the AI usage, I'd like to share some things. First one is that at the end of last year, the front end, which means that those ones that design the UI, user interface, and the UX, user experience, are using AI in most for our R&D side overall. And so at the end of last year, around 40% of the codes we designed for UI side are doing through AI. So that's the first one. And we're improving that as well, considering that in this year, in this Q1, the AI coding capability improved a lot. So we found that we can use more AI to do more terminals, including the agent kit I mentioned, for the hardware designers. And the agent kit, a significant part of that is doing by AI. And while we're offering that kit, we also combine with the vibe coding tool for that kit as well. And which means that not us design the kit for AI, but customer will be doing that through the vibe coding more freely as well and very quickly to turn that into a hardware prototype. Also at the same time, the AI usage is not only used for the R&D. So all our departments, including the financial, including the human resources, including the legal department, will be using heavily through AI. So no matter, it's improving our efficiencies on some office processing -- office work processing but also including the data analytics, BI and decision-making, et cetera. So we consider AI to improve the efficiency in 2 parts. The first one is that to release some of my labor to focus more on higher-value work. That's the first one. And the second one is that for the -- even on the coding side, on the development side, that is to enlarge our capacity to meet the future demand growth because we already noticed that while more and more AI-initial developers coming in, that trend is a very good one, is that in this year, we noticed more and more new developers did not come from the hardware industry, which means that people starting to identify that the AI capability might be a new opportunity for new team to engage in the new smart devices business sectors that only come in the new idea and something that didn't happen in the hardware world before. So special one is like the toy companion ones that many of my very fast-growing customers in the toy sectors, they are not toy players out there. And when we'll see, including some of the, what we call, the youth market like they do the batch is -- animation batch is focused on the cartoon. And those batch players, they don't have that business before. So that type of industry breakthrough of crossover players, they require more on the -- they rely more on the AI capability usage themselves and also they are more come with AI-initial ideas or native ideas. So not only to reduce the cost, but also use the same level of cost to improve the capacity to capture those demands. And that's where we'll have more priority to check out too. So like I mentioned that -- so the net cash flow is considered as a strategic strength for the company, not only for the future competition, but also for the future opportunity. I think that's even more important is that while the industry are growing faster and some breakthrough happen, especially like the crossover happens, that we will not hesitate to increase the investment to capture those demand. So I think that will be the overall momentum and so how we use the AI and we empower customers with AI. What we see is that we need to be a very powerful AI user. And until then, we will be able to empower customers.

Our last question will now come from the line of Matt Ma of Jefferies.

I have 2 questions. So the number one is on the Smart Home & Robot Products segment. I would like to know how do we think about the growth trajectory of this segment in 2026? Should we expect a growth recovery in the coming quarters? And my second question is on the AI application segment. We are seeing that the gross margin of this segment has declined by 2.7 percentage points year-on-year in the first quarter. Are there any specific reasons behind that? That's all.

Yes. So the first one is for the AI home and robot products that we're looking for to have the recovery in the coming quarter or in the coming 2 quarters. And because these are structural changes, we have to make the hard decisions. You can see that even to maintain the revenue and the gross profit growth, but in the same time, we cut off some of the products. Even we got the orders, we decided we're not to do that anymore because we don't like the model out there for the long term. And so there is structural hard decisions, even we made some not that good numbers, but we're looking to speed up to catch it up. So we have the new offerings starting to take place in Q2 and looking for to capture orders and deliver that to make it up. So either it's end of the Q2 or it's Q3, we're looking to get the recovery. So that's the first one for the home and robot products. And for the AI applications, yes, we found the seasonal difference. It's very interesting that we find that the key part is that the AI applications is relying on the usage of the end users based on the devices that are running. And the typical thing that we found maybe is that in the Q1, the usage is always kind of the lower season for the entire year. So that's why the usage is kind of low, so the service basis revenue has become lower for us. Maybe one of the reason is that, the Q1, many of the users are kind of the new users and will have the new devices for the Christmas, for the holiday season promotions. And while they're starting to try the products, usually combined with some of the vacations, the usage starting to drop. So we're looking for to see the natural recovery and on the usage side, we're starting to take place on [indiscernible]. So that will be the stuff. So it's kind of very interesting one.

I will now hand the call back to management team for closing remarks. There are no more questions from the line. Allow me to turn the call back.

All right. Thank you, operator, and thank you all once again for joining us today. If you have any further questions, please feel free to contact Tuya's IR team. Goodbye, and see you next quarter.

That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]