You should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this annual report. This discussion contains forward-looking statements about our business and operations. Our actual results may differ materially from those we currently anticipate as a result of many factors, including those we describe under “Item 3. Key Information—3.D. Risk Factors” and elsewhere in this annual report. 5.A.Operating Results KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS Our results of operations and financial condition are affected by the general factors driving the global IoT industry, including, among others, economic growth of major economies, the increase in per capita disposable income, consumer demand for smart devices, stability of the global supply chain, any global epidemics, new and innovative technologies, competition, and government regulations. Unfavorable changes in any of these general industry conditions could negatively affect demand for our products and services and materially and adversely affect our results of operations. In addition, we believe our results of operations are primarily and more directly affected by the following specific factors. Market Adoption of AI Cloud Platform Our future success depends in large part on the market adoption of AI cloud platforms which, in turn, is driven by the proliferation of smart devices. As technologies advance, businesses and end users increasingly demand superior AI and software experience, driving AIoT adoption to an inflection point. However, brands and developers still face certain challenges, such as cost and complexity associated with developing an integrated AI cloud platform. We see growing demand for our platform because we are in a unique position to deliver a one-stop, developer-first, all-agnostic AI cloud platform with broad use cases that allows our customers to digitalize their businesses and transform the experience of their end users. We believe that the benefits offered by our platform put us in a strong position to capture significant market opportunities ahead. In 2023, in response to the additional business opportunities arising from the exit of certain market players during the previous headwind across the IoT and AIoT platform market, we further enhance our impact on B2B customers and end users around the world, solidifying our market share. In 2024 and onwards, with a more stable macroeconomic environment and normalized downstream inventory levels, and rising demand for consumer electronics, the industry is experiencing a positive growth trajectory. Throughout 2025, the global AIoT platform industry operated in a complex and volatile macroeconomic environment, and many market participants adjusted their growth strategies in response. Against this backdrop, demand conditions across end markets remained uneven, with customer spending patterns and deployment timelines continuing to evolve. At the same time, interest in generative AI and large language model applications increased during the year and contributed to continued market attention on intelligence-enabled infrastructure. In response, we continued to focus on higher-value market segments and on optimizing our customer mix. While short-term market conditions remained challenging, we believe these measures supported the development of our business during the year. Expanding Usage by Existing Customers We have amassed a large and diversified customer base covering a wide spectrum of verticals. We believe that there are significant growth opportunities within our existing customers. As our platform is built to be product- and brand-agnostic, many customers using our AI cloud platform for one product category expand to more brands, categories and use cases in order to maximize the benefits of our platform and ensure consistent, high quality AIoT experience for their end users. Through the increase in usage, we grow more brands and OEMs on our platform into larger customers, such as premium customers who contribute more than US$100,000 of revenue during the immediately preceding 12-month period. Despite the complex macroeconomic environment in 2025, we observed a continued trend of our core customers deepening their integration with our ecosystem to achieve operational efficiency. This deepened integration reinforces our platform’s “stickiness” and demonstrates the resilience of our business model. Our brand awareness also increases, generating word-of-mouth referrals that not only attract more brands, developers and partners, but also lead to growing end user demand, better user insights and a more vibrant IoT ecosystem. We expect to expand into additional product categories and use cases to expand cross- and up-selling opportunities and continue to invest in sales and marketing and customer success activities to achieve additional revenue growth from existing customers. We believe that these efforts will have a long-term, positive impact on our business and results of operations. 117 Table of Contents New Customer Acquisition Our operating results and growth prospects will also depend on our ability to attract new customers. We are intensely focused on growing our customer base. We continue to invest in our sales and marketing efforts and developer community outreach, which are critical to driving customer acquisition. We have built a developer and partner network through effective marketing efforts which continuously raise awareness of our AI cloud platform. For example, through our self-service developer portal, a developer can use our platform to develop a smart device within minutes. This has allowed us to acquire customers rapidly and cost-effectively. Furthermore, we seek to improve the breadth and quality of our platform and products, and to enhance our brand recognition, which will allow us to capture additional market share, better optimize the pricing of our products and services, and reach customers in a broader range of verticals and use cases. Additionally, a cornerstone of our approach is the key customer focus strategy, which has increased our personnel efficiency and enabled us to dedicate sufficient resources to securing and better serving large and strategically important customers with significant long - term potential. We are committed to delivering industry-leading products to continue building and maintaining credibility with the global IoT community. We believe that the comprehensive product offerings and our continued efforts to introduce new features and capabilities, particularly AI capabilities, on our platform provide us with a significant competitive advantage. We consistently focus on software and hardware product enhancement and offer the dual option of PaaS model or the Smart Solutions model, giving our customers a broad spectrum of choices. For example, key account customers can leverage the PaaS model, which incorporates the operating system, cloud, and app SDK, in accordance with their business needs, facilitating a more autonomous business development environment. Cross-sector multinational corporations, SaaS service providers, and integrators may choose the smart solutions model to achieve a streamlined and expedited market entry. Through our integrated hardware-software Smart Solutions, we are committed to helping customers expedite product launches and establish differentiated competitive advantages, directly increasing end-market penetration and delivering greater and more substantial value. We are committed to leveraging AI to significantly enhance smart product experience, driving product competitiveness and delivering greater value to end users. We will continue innovating across high-potential markets such as smart lighting, smart companionship, smart outdoor, smart energy, and smart spaces, complementing and accelerating smart device penetration by AI applications. We also steadfastly adhere to the developer model to address the challenges of fragmentation within the IoT industry, aiming to establish a robust foundation for the broad adoption of smart devices and the growth of the IoT ecosystem. As market penetration deepens, we expect that the developer community will become the backbone of the future IoT ecosystem. We will continuously iterate and refine Tuya’s AI Agent development platform, empowering developers worldwide to create customized AI devices and scenario-based applications. Additionally, we will leverage AI tools to improve development efficiency. We will continue to enhance our platform by expanding functions of existing products, developing new products, and delving into more verticals and use cases to support the growth of our business, and to invest heavily in our technological capabilities and marketing activities to maintain our strong position in the developer community. Seasonality and macroeconomic environment We have in the past experienced, and expect in the future to continue to experience, seasonal fluctuations in our revenue from time to time, with the fourth quarter historically being our strongest quarter for sales to new and existing customers, as a result of the holiday season, customers’ buying patterns, and changes in the business and economic environment that are outside our and our customers’ control. For example, we have experienced lower growth in revenue in the first quarter as a result the reduced output of OEM customers located in China due to the Lunar New Year holidays. We expect the historical seasonality trends to continue to impact our results of operations and financial condition. However, certain unique events may cause the historical seasonal trends and patterns to temporarily no longer apply, such as high global inflation weakening consumption sentiment and dampening enterprises’ confidence in doing business, downstream inventory backlog disrupting enterprises’ business and operating plans, supply chain disruption interfering with the delivery of goods, and the imposition of new tariffs or adjustments in existing tariffs or trade barriers. 118 Table of Contents Revenue Mix Our products and services primarily consist of PaaS, Smart Solution for smart devices, and SaaS including industry SaaS and cloud-based software value-added services, etc. Our results of operations are affected by our product mix, as different products have a range of different margins and profitability profiles. For example, an increase in the revenue contribution from SaaS, which typically has a higher margin than PaaS or Smart Solution, generally leads to an increase in our overall profit margin. Our product mix may shift over time due to a variety of factors, including customer demands and preferences, competition, our ability to maintain and expand customer relationships, our ability to forecast market and technology trends, and our sales and marketing efforts. We continuously monitor our revenue mix and seek to increase revenue contribution from products and use cases with attractive margin profiles. Effective Cost and Expense Control Our results of operations are affected by our ability to control our costs and operating expenses. Since a significant portion of our costs relates to the modules and cloud infrastructure services from third parties, our cost control depends significantly on our ability to estimate customer demand properly in order to inform our procurement decisions. With respect of product development, we have strategically streamlined our research and development team and operations. We intend to optimize our costs and operating expenses by achieving increasing economies of scale and improved cost-efficiency as we continue to invest in R&D. With respect to sales and marketing expenses, we have proactively adjusted our market spending and undergone strategic refinement of the sales and marketing team. We expect to continue to improve our sales and marketing efficiency and benefit increasingly from the network effect of our enhanced brand awareness. We also intend to optimize our administrative expenses by enhancing our level of management, strengthening efforts in controlling professional expenditure, streamlining our internal workflows, and leveraging technology to drive convenience, cost-efficiency and productivity. Through the successful implementation of efficiency improvement initiatives, our operating result turned around from a loss of US$47.6 million in 2024 to a profit of US$11.5 million in 2025, and our non-GAAP operating profit of US$22.7 million in 2024 increased to US$33.7 million in 2025. Additionally, our net profit further increased to US$57.9 million in 2025 on GAAP basis from US$5.0 million in 2024 when we achieved net profit for the first time. Effect of Currency Translation We currently derive the majority of our revenue from PaaS generated primarily through our contracts with OEMs located in the PRC. Such revenue is predominantly denominated in RMB. We operate internationally with local offices in Europe, Singapore, India, Japan and Colombia, among other locations, and expect that our international activities will continue to grow over the foreseeable future as we pursue opportunities in existing and new markets. Our reporting and functional currency is the U.S. dollar. The financial statements of our subsidiaries and the former VIE using functional currencies other than the U.S. dollar, such as RMB, are translated to the U.S. dollar. As a result, as RMB or other currencies in which we generate revenue depreciate or appreciate against the U.S. dollar, our revenue presented in U.S. dollars will be negatively or positively affected. See “Item 11. Quantitative and Qualitative Disclosure about Market Risk—Foreign exchange risk.” KEY OPERATING METRICS We manage our business using the following key operating metrics. We use these metrics to assess the progress of our business, make decisions on how to allocate capital, time and technology investments. ​ 119 Table of Contents Number of PaaS Customers Our ability to grow the number of PaaS customers is a key indicator of our business and future growth opportunities. We define an PaaS customer for a given period as a customer who has directly placed at least one order for PaaS with us during that period. While we serve both brands and OEMs, it is typically the OEMs, instead of brands, who directly place orders with us for PaaS. ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ 2023 ​ 2024 ​ 2025 Number of PaaS customers(1) ​ ​ ​ 3,966 ​ ​ ​ 3,710 ​ ​ ​ 3,700 ​ Note: (1) The slight decline in PaaS customer in 2024 was mainly due to the continued and effective execution of our key-account strategy that prioritizes long-term partnerships with high-value customers. See “Item 4.B. Business Overview—Overview” and “Item 4.B. Business Overview—Our Customers.” Number of Premium PaaS Customers While we continue to improve our PaaS customer base over time, we focus on growing the number of our premium customers to scale our business. We define a premium PaaS customer as a customer as of a given date that contributed more than US$100,000 of revenues during the immediately preceding 12-month period. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the trailing 12-month period ended ​ ​ December 31, ​ ​ 2023 ​ 2024 ​ 2025 Number of premium PaaS customers ​ ​ ​ 265 ​ ​ ​ 298 ​ ​ ​ 291 ​ ​ In 2024, as the economic environment stabilized and downstream consumer electronics demand increased, we continued to execute our key-account and product enhancement strategies effectively. As a result, the number of premium PaaS customers increased notably in 2024, reflecting the success of our product enhancement efforts and our focus on high-value, long-term partnerships. The number of our premium PaaS customer slightly decreased in 2025, primarily due to our continued focus on key-account customers and ongoing optimization of our customer base. Dollar-based Net Expansion Rate for PaaS Our ability to maintain long-term revenue growth depends on our ability to increase customers’ usage of our platform over time and grow revenues generated from existing customers. An important way for us to track our performance in this area is by measuring dollar-based net expansion rate for our PaaS. To calculate the dollar-based net expansion rate for PaaS for the current period, we first specify a measurement period consisting of the trailing two years from the current period end. Next, we define as our “cohort” the population of PaaS customers for the first year of the measurement period (i.e., those who have placed at least one order for PaaS during that year). We then calculate the dollar-based net expansion rate as the quotient obtained by dividing the PaaS revenues from this cohort in the second year of the measurement period by the PaaS revenues from the same cohort in the first year of such measurement period. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the trailing 12-month period ended ​ ​ ​ ​ December 31, ​ ​ ​ March 31, ​ ​ ​ June 30, ​ ​ ​ September 30, ​ ​ ​ December 31, ​ ​ ​ March 31, ​ ​ ​ June 30, ​ ​ ​ September 30, ​ ​ ​ December 31, ​ ​ 2023 ​ 2024 ​ 2024 ​ 2024 ​ 2024 ​ 2025 ​ 2025 ​ 2025 ​ 2025 ​ Dollar-based net expansion rate for PaaS ​ 103 % 116 % 127 % 124 % 122 % 118 % 114 % 109 % 102 % ​ The dollar-based net expansion rate for our PaaS is affected by customers’ purchase cycles, which could fluctuate from time to time within a year, as well as a number of other factors, including new product introductions, customer mix, promotional activities, and the variable timing and amount of customer purchases. As a result, the dollar-based net expansion rate for our PaaS for the trailing 12-month period ended the last day of each quarter is an inherently volatile metric. 120 Table of Contents Maintaining a high dollar-based net expansion rate demonstrates our strong ability to continue to expand customer usage of our platform over time and grow revenue from existing customers. For the trailing 12-month period ended December 31, 2023, the dollar-based net expansion rate for PaaS was 103%, primarily due to the easing of the downstream inventory backlog and the gradual recovery of the global economy, coupled with the effective customer-focus and product enhancement strategies we adopted to navigate through the macroeconomic headwinds. Driven by increasing demand amid the global economic recovery and supply chain normalization in 2024, and our strategic focus on customer needs and product enhancements, the dollar-based net expansion rate for PaaS improved to 116% as of March 31, 2024, 127% as of June 30, 2024, 124% as of September 30, 2024, and 122% as of December 31, 2024, compared to the same period in 2023. The dollar-based net expansion rate for PaaS moderately declined to 102% as of December 31, 2025, reflecting the normalization of growth patterns among some of our customers with large revenue contribution following a period of rapid expansion in 2024, and our shifted strategic focus prioritizing new customers acquisition, who are currently in the initial ramp-up phase and expected to drive long-term expansion. KEY COMPONENTS OF CONSOLIDATED STATEMENTS OF (LOSS)/INCOME Revenue We generate revenue from three sources, namely (i) PaaS; (ii) Smart Solution; and (iii) SaaS and others. The following table sets forth a breakdown of our revenue, in absolute amounts and as percentages of total revenue, for the years indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ ​ ​ ​ ​ ​ 2023 ​ ​ ​ ​ ​ ​ 2024 ​ ​ ​ ​ ​ ​ 2025 ​ ​ US$ ​ % ​ US$ ​ % ​ US$ ​ % ​ ​ (in thousands, except for percentages) Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ PaaS 167,694 72.9 217,069 72.7 231,209 ​ 71.9 Smart Solution 26,517 11.5 41,965 14.0 45,702 ​ 14.2 SaaS and others 35,779 15.6 39,583 13.3 44,880 ​ 13.9 Total 229,990 100.0 298,617 100.0 321,791 ​ 100.0 ​ PaaS. We generate PaaS revenue mainly from the fees charged to customers based on the number of PaaS products we deploy. Smart Solution. We generate Smart Solution revenue mainly from providing finished devices that integrate more extensive and comprehensive software capabilities, such as AI, embedded operating systems and cloud software capabilities, enabling these customers to efficiently build their smart business product portfolios. SaaS and others. We generate our SaaS and others revenue mainly from (i) the subscription fees charged to customers of SaaS, including industry SaaS we offer to enterprises and cloud-based software value-added services we offer enterprises or end users of Tuya-powered smart devices, and (ii) the fees that we receive for other value-added services we offer to brands and OEMs, such as APP customization, and for projects such as the deployment of the Cube and other technical developments. Cost of Revenue Our cost of revenue consists of the costs directly related to providing our products to our customers. These costs and expenses primarily include (i) material costs, primarily including the costs relating to the modules where the edge capabilities of PaaS are embedded; (ii) third-party cloud infrastructure expenses; (iii) employee-related costs, including payroll of production support personnel; and (iv) others, including estimated warranty costs and inventory write-downs, among other things. ​ 121 Table of Contents The following table sets forth a breakdown of our costs of revenue, in absolute amounts and as percentages of revenue, for the years indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ ​ ​ 2023 ​ ​ ​ 2024 ​ ​ ​ 2025 ​ ​ ​ ​ % of ​ ​ ​ % of ​ ​ ​ % of ​ ​ US$ ​ revenue ​ US$ ​ revenue ​ US$ ​ ​ ​ revenue ​ (in thousands, except for percentages) Cost of revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ PaaS 94,349 41.0 114,812 38.4 119,541 ​ 37.1 Smart Solution 19,744 8.6 31,262 10.5 34,867 ​ 10.8 SaaS and others 9,242 4.0 11,113 3.7 12,342 ​ 3.8 Total 123,335 53.6 157,187 52.6 166,750 ​ 51.8 ​ Our cost of revenue has been and will continue to be affected by a number of factors, including economies of scale, improved efficiency achieved through effective R&D, and product mix, among other things. Gross Profit and Gross margin The following table sets forth a breakdown of our gross profit and gross margin for the years indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ 2023 ​ 2024 ​ 2025 ​ ​ ​ ​ Gross ​ ​ ​ Gross ​ ​ ​ Gross ​ ​ ​ Gross ​ ​ ​ Gross ​ ​ ​ Gross ​ ​ profit ​ margin ​ profit ​ margin ​ profit ​ margin ​ ​ US$ ​ % ​ US$ ​ % ​ US$ ​ % ​ ​ (in thousands, except for percentages) Gross profit and gross margin ​ ​ ​ ​ ​ ​ PaaS 73,345 43.7 102,257 47.1 111,668 ​ 48.3 Smart Solution 6,773 25.5 10,703 25.5 10,835 ​ 23.7 SaaS and others 26,537 74.2 28,470 71.9 32,538 ​ 72.5 Total 106,655 46.4 141,430 47.4 155,041 ​ 48.2 ​ Our gross margin has been and will continue to be affected by a number of factors, including economies of scale, improved efficiency achieved through effective R&D, product mix, and the success of higher-value products and services that we provide to our customer, among others. Research and Development Expenses Research and development expenses consist primarily of (i) employee-related costs, including salaries, benefits and bonuses, for our research and development personnel; (ii) share-based compensation; (iii) cloud infrastructure cost; (iv) rental and utilities; and (v) other expenses associated with our research and development activities. Sales and Marketing Expenses Sales and marketing expenses consist primarily of (i) employee-related costs, including salaries, bonuses and benefits, for our employees responsible for business development, branding and marketing; (ii) share-based compensation; (iii) marketing costs related to our developer conferences and events; and (iv) other sales and marketing expenses, including those spent on content and social media marketing. General and Administrative Expenses Our general and administrative expenses consist of (i) employee-related costs, including salaries, bonuses, and benefits paid to general and administrative personnel, (ii) share-based compensation, and (iii) other expenses associated with our general and administrative activities. 122 Table of Contents Other Operating Incomes, Net Other operating incomes, net primarily consist of software VAT tax refund and various general subsidies for enterprises. Other Income Other income primarily consists of other non-operating incomes, net, financial income, net and foreign exchange gain/(loss), net. TAXATION Cayman Islands We are incorporated in the Cayman Islands. The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or after execution, brought within the jurisdiction of the Cayman Islands. In addition, the Cayman Islands does not impose withholding tax on dividend payments. Hong Kong Our subsidiaries in Hong Kong, including Tuya (HK) Limited, our wholly owned subsidiary, are subject to Hong Kong profits tax on their activities conducted in Hong Kong at a uniform tax rate of 16.5%. Under Hong Kong tax law, our subsidiaries in Hong Kong are exempted from income tax on their qualified foreign-sourced specified income (including but not limited to dividend and interest) to the satisfaction of the relevant conditions, and there is no withholding tax in Hong Kong on remittance of dividends. During 2023, 2024 and 2025, no provision for Hong Kong profits tax was made as we had no estimated taxable income that was subject to the Hong Kong profits tax. PRC Our subsidiaries and consolidated former VIE in China are companies incorporated under PRC law and, as such, are subject to PRC enterprise income tax on their taxable income in accordance with the relevant PRC income tax laws. Pursuant to the Enterprise Income Tax Law of the People’s Republic of China, or the PRC EIT Law, which was amended on December 29, 2018 and became effective on the same date and the Regulation on the Implementation of the Enterprise Income Tax Law of the People’s Republic of China, which was amended on April 23, 2019 and became effective on the same date, a uniform 25% enterprise income tax rate is generally applicable to both foreign-invested enterprises and domestic enterprises, except where a special preferential rate applies. Tuya Information, our wholly owned PRC subsidiary, is eligible to enjoy a preferential tax rate of 15% in 2023, 2024 and 2025, to the extent it has taxable income under the EIT Law. Tuya Information qualifies as a high and new technology enterprise (the “HNTE”) and was entitled to the 15% beneficial tax rate for the year ended December 31, 2025. Tuya Information completed its renewal application for the HNTE qualification on December 6, 2024, and it will continue to qualify as an HNTE, which entitles it to enjoy the 15% beneficial tax rate for the years ending December 31, 2026 and 2027. The enterprise income tax is calculated based on the entity’s global income as determined under PRC tax laws and accounting standards. We are subject to VAT on the products sold and services provided. We are also subject to surcharges on VAT payments in accordance with PRC law. The PRC Provisional Regulations on Value-Added Tax were promulgated by the State Council on December 13, 1993, which became effective on January 1, 1994 and were subsequently amended from time to time. The Detailed Rules for the Implementation of the PRC Provisional Regulations on Value-Added Tax (2011 Revision) were promulgated by the MOF on December 25, 1993 and subsequently amended on December 15, 2008 and October 28, 2011. On November 19, 2017, the State Council promulgated the Decisions on Abolishing the PRC Provisional Regulations on Business Tax and Amending the PRC Provisional Regulations on Value-Added Tax. Pursuant to these regulations, rules and decisions, all enterprises and individuals engaged in sale of goods, provision of processing, repair, and replacement services, sales of services, intangible assets, real property, and the importation of goods within the PRC territory are VAT taxpayers. On March 20, 2019, the MOF, the SAT, and the General Administration of Customs jointly issued the Announcement on Relevant Policies on Deepening the Reform of Value-Added Tax. Pursuant to this announcement, the generally applicable VAT rates are simplified as 13%, 9%, 6%, and 0%, which became effective on April 1, 2019, and the VAT rate applicable to the small-scale taxpayers is 3%. 123 Table of Contents As a Cayman Islands holding company, Tuya Inc. may receive dividends from our PRC subsidiaries through Tuya (HK) Limited. The PRC EIT Law and its implementing rules provide that dividends paid by a PRC entity to a nonresident enterprise for income tax purposes is subject to PRC withholding tax at a rate of 10%, and may be subject to reduction by an applicable tax treaty with China. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and the Prevention of Fiscal Evasion, which was signed on August 21, 2006, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10% if the Hong Kong enterprise (i) directly holds at least 25% of the PRC enterprise, (ii) is a tax resident in Hong Kong and (iii) could be recognized as a Beneficial Owner of the dividend from a PRC tax perspective. Pursuant to the Notice of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or the SAT Notice, a Hong Kong resident enterprise must meet the following conditions, among others, in order to apply the reduced withholding tax rate: (i) it must be a company; (ii) it must directly own the required percentage of equity interests and voting rights in the PRC resident enterprise; and (iii) it must have directly owned such required percentage in the PRC resident enterprise throughout the 12 months prior to receiving the dividends. In October 2019, the State Administration of Taxation issued the Announcement of the State Taxation Administration on Issuing the Measures for Non-resident Taxpayers’ Enjoyment of Treaty Benefits, or the SAT Circular 35, which became effective on January 1, 2020. SAT Circular 35 provides that nonresident enterprises are not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax. Instead, nonresident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by the relevant tax authorities. Accordingly, Tuya (HK) Limited may be able to benefit from the 5% withholding tax rate for the dividends it receives from its PRC subsidiaries, if it satisfies the conditions prescribed under the SAT Notice and other relevant tax rules and regulations. However, according to the SAT Notice and SAT Circular 35, if the relevant tax authorities consider the transactions or arrangements we have to be for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future. If our holding company in the Cayman Islands or any of our subsidiaries outside China were deemed to be a “resident enterprise” under the PRC EIT Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%. In addition, our PRC subsidiaries are also required to withhold a 10% (or 7% if paid to a Hong Kong tax resident who qualifies for the benefits of the Tax Treaty between the Mainland China and Hong Kong) tax on interest paid under any cross-border shareholder loan. Prior to the payment of any interest and principal on any such shareholder loan, our PRC subsidiaries must present evidence of registration with SAFE regarding any such shareholder loan and may be required to provide evidence of payment of withholding tax on the interest payable on that shareholder loan. Interest income derived from the PRC are subject to a 7% PRC withholding tax if paid to a Hong Kong tax resident who qualifies for the benefits of the Tax Treaty between the Mainland China and Hong Kong. DISCUSSION OF RESULTS OF OPERATIONS Year Ended December 31, 2025 Compared with Year Ended December 31, 2024 Revenue Our revenue increased by 7.8% from US$298.6 million in 2024 to US$321.8 million in 2025, primarily due to the increase in PaaS and SaaS and others. ● PaaS. Our revenue generated from PaaS increased by 6.5% from US$217.1 million for 2024 to US$231.2 million for 2025, primarily due to steady demand from core customers and our continued focus on product enhancements and customer needs. ● Smart Solution. Our revenue generated from Smart Solution increased by 8.9% from US$42.0 million for 2024 to US$45.7 million for 2025, primarily attributable to increasing customer demand for smart devices with integrated intelligent software capabilities we developed beyond IoT. ● SaaS and others. Our revenue generated from SaaS and others increased by 13.4% from US$39.6 million for 2024 to US$44.9 million for 2025, primarily due to an increase in revenue from cloud software products. During the year of 2025, we remained committed to offering value-added services and a diverse range of software products with compelling value propositions to our customers. 124 Table of Contents Cost of revenue Our cost of revenue increased by 6.1% from US$157.2 million for 2024 to US$166.8 million for 2025, in line with the increase in our revenue. Gross profit and gross margin As a result of the foregoing, our gross profit increased by 9.6% from US$141.4 million for 2024 to US$155.0 million for 2025. Our gross margin increased from 47.4% for 2024 to 48.2% for 2025. ● PaaS. The gross profit of PaaS increased by 9.2% from US$102.3 million for 2024 to US$ 111.7 million for 2025. The gross margin of PaaS was 48.3% for 2025, compared to 47.1% for 2024. ● Smart Solution. The gross profit of Smart Solution increased by 1.2% from US$10.7 million for 2024 to US$ 10.8 million for 2025. The gross margin of Smart Solution was 23.7% for 2025, compared to 25.5% for 2024. ● SaaS and others. The gross profit of SaaS and others increased by 14.3% from US$28.5 million for 2024 to US$32.5 million for 2025. The gross margin of SaaS and others was 72.5% for 2025, compared to 71.9% for 2024. Gross margin of each revenue steam increased or fluctuated primarily due to changes in products and solutions mix. As a developer platform with rich ecosystem of smart devices and applications, we are committed to focusing on software products with compelling value propositions while maintaining cost efficiency. Research and development expenses Our research and development expenses decreased by 5.6% from US$95.0 million for 2024 to US$89.7 million for 2025. The decrease was mainly due to lower share-based compensation expenses as equity incentive awards granted at higher valuations in previous years have been gradually amortized, partially offset by higher employee-related costs and other operating expenses associated with regular team movements and ongoing investments in research and development capabilities. Sales and marketing expenses Our sales and marketing expenses decreased by 10.7% from US$37.1 million for 2024 to US$33.1 million for 2025. The decrease was mainly attributable to (i) a decrease in employee-related costs due to regular team movements, and (ii) lower share-based compensation expenses as equity incentive awards granted at higher valuations in previous years have been largely amortized. General and administrative expenses Our general and administrative expenses decreased by 54.7% from US$68.3 million for 2024 to US$30.9 million for 2025, primarily due to (i) lower share-based compensation expenses as equity incentive awards granted at higher valuations in previous years have been gradually amortized, (ii) a decrease in professional service costs, and (iii) a decrease in credit loss expenses recognized during the period, among other things. Other operating incomes, net Our other operating incomes, net, decreased by 10.4% from US$11.3 million for 2024 to US$10.2 million for 2025, which was mainly attributable to decrease of government grants. Other income We generated other income of US$54.8 million and US$48.4 million, respectively, for 2024 and 2025. The decrease in other income was mainly because of a decline in financial income, net. 125 Table of Contents Income tax expenses Our income tax expense remained relatively stable at US$2.1 million and US$2.0 million in 2024 and 2025, respectively. Net profit for the year As a result of the foregoing, our net profit increased from US$5.0 million for 2024 to US$57.9 million for 2025. Year Ended December 31, 2024 Compared with Year Ended December 31, 2023 For a detailed description of the comparison of our operating results for the year ended December 31, 2024 to the year ended December 31, 2023, see “Item 5. Operating and Financial Review and Prospects—5.A. Operating Results—Discussion of Results of Operations—Year Ended December 31, 2024 Compared with Year Ended December 31, 2023” beginning on page 130 of our annual report on Form 20-F for the fiscal year ended December 31, 2024 filed with the SEC on April 24, 2025 (File No. 001-40210). NON-GAAP FINANCIAL MEASURE In evaluating the business, we consider and use non-GAAP measures, such as non-GAAP operating expenses, non-GAAP (loss)/profit from operations (including non-GAAP operating margin), non-GAAP net profit (including non-GAAP net margin), and non-GAAP basic and diluted net profit per ADS, as supplemental measures to review and assess our operating performance. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for U.S. GAAP measures. We define non-GAAP measures by excluding the impact of share-based compensation expenses, credit-related impairment/(reversal) of long-term investments and litigation costs from the respective GAAP measures. We present non-GAAP financial measures because they are used by the management to evaluate its operating performance and formulate business plans. We also believe that the use of the non-GAAP measures facilitates investors’ assessment of our operating performance. Non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. Non-GAAP financial measures have limitations as analytical tools. One of the key limitations of using the aforementioned non-GAAP financial measures is that they do not reflect all items of expenses that affect our operations. Share-based compensation expenses, credit-related impairment/(reversal) of long-term investments and litigation costs have been and may continue to be incurred in the business and are not reflected in the presentation of non-GAAP financial measures. Further, the non-GAAP financial measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore their comparability may be limited. We compensate for these limitations by reconciling the non-GAAP financial measures to the nearest U.S. GAAP performance measures, all of which should be considered when evaluating our performance. We encourage you to review our financial information in its entirety and not rely on a single financial measure. ​ 126 Table of Contents Non-GAAP adjusted profit for the year represents net profit for the year excluding share-based compensation expenses, credit-related impairment of long-term investments and litigation costs. The table below sets forth a reconciliation of our net profit for the year to non-GAAP adjusted profit for the year indicated. Share-based compensation expenses relate to the share-based awards that we grant to employees and directors. We exclude share-based compensation expenses, credit-related impairment of long-term investments and litigation costs. The credit-related impairment of long-term investments arose from our equity investments in private companies, for which we have recognized as credit losses on a prudent basis. Our management believes that these exclusions facilitate the ability of investors to compare our operating results with those of other companies in the industry in which we operate, many of which also exclude share-based compensation expenses, credit-related impairment of long-term investments and litigation costs in determining their non-GAAP financial measures. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ ​ ​ ​ 2023 ​ ​ 2024 ​ ​ 2025 ​ ​ (US$ in thousands) ​ ​ ​ ​ ​ ​ ​ Net (loss)/profit for the year (60,315) 4,997 57,890 Adjustment: ​ ​ ​ Share-based compensation expenses 65,216 67,750 22,263 Credit-related impairment/(reversal) of long-term investments ​ 15,537 ​ 261 ​ (53) Litigation costs ​ — ​ 2,300 ​ — Non-GAAP adjusted profit for the year 20,438 75,308 80,100 ​ We recorded non-GAAP adjusted profit of US$20.4 million in 2023, US$75.3 million in 2024, and US$80.1 million in 2025, respectively. We have been more focused enhancing our AI cloud platform and products to provide a higher value proposition, growing our customer base with key accounts, fostering our developer community, and prioritizing our business and operating efficiency, in order to lay a solid foundation for our long-term growth. 5.B.Liquidity and Capital Resources CASH FLOWS AND WORKING CAPITAL Our principal sources of liquidity have been cash generated from private sales and public offerings of equity securities, as well as cash from our business operations. As of December 31, 2025, we had US$952.5 million in cash and cash equivalents and short-term investments. Of our cash and cash equivalents, US$148.3 million were held by our subsidiaries in the PRC; US$739.2 million, mainly denominated in U.S. dollars, were held by our subsidiaries in Hong Kong; and US$3.1 million, mainly denominated in U.S. dollars, EUR, and Japanese Yen, were held by Tuya Inc. and our other overseas subsidiaries. Our cash and cash equivalents and short-term investments primarily include cash in bank, time deposits placed with banks or other financial institutions, treasury securities and wealth management products issued by banks. We believe that our current cash and cash equivalents, balance of short-term investments and anticipated cash flows from operations will be sufficient to meet our anticipated cash needs, including cash needs for working capital and capital expenditures, for at least the next 12 months. We intend to finance our future working capital requirements and capital expenditures with anticipated cash generated from operating activities and funds raised from financing activities. However, we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth, scale our infrastructure, develop product enhancements and to respond to business challenges could be significantly impaired, and our business, operating results and financial condition may be adversely affected. See “Item 3. Key Information—3.D. Risk Factors—Risk Related to Our Business and Industry—We may require additional capital to support our business and response to business opportunities, and this capital might not be available on favorable terms, if at all.” 127 Table of Contents Historically, prior to 2024, we had not been profitable on a GAAP basis, and until 2023, we had not generated positive operating cash flows. We achieved a net profit of US$5.0 million in 2024, marking our first fiscal year of GAAP profitability, which increased to US$57.9 million in 2025. We had net cash generated from operation activities of US$80.4 million in 2024 and US$81.0 million in 2025. However, if we are unable to sustain profitability or maintain positive operating cash flow, our business, liquidity, financial condition and results of operations may be materially and adversely affected. See “Item 3. Key Information—3.D. Risk Factors—Risks Related to Our Business and Our Industry—We have a history of net loss and net cash operating outflow and may not be able to achieve or sustain profitability in the future.” The following table presents our consolidated cash flow data for the years presented. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ December 31, ​ ​ ​ ​ 2023 ​ ​ ​ 2024 ​ ​ ​ 2025 ​ ​ (US$ in thousands) Net cash generated from operating activities ​ 36,443 ​ 80,352 ​ 81,040 Net cash generated from investing activities ​ 332,455 ​ 107,428 ​ 225,979 Net cash used in financing activities ​ (2,223) ​ (33,200) ​ (69,870) Effect of exchange rate changes on cash and cash equivalents, restricted cash(1) ​ (1,148) ​ 116 ​ 420 Net increase in cash and cash equivalents, restricted cash(1) ​ 365,527 ​ 154,696 ​ 237,569 Cash and cash equivalents, restricted cash(1) at the beginning of the year ​ 133,161 ​ 498,688 ​ 653,384 Cash and cash equivalents, restricted cash(1) at the end of the year ​ 498,688 ​ 653,384 ​ 890,953 Note: (1) Restricted cash represents cash that cannot be withdrawn without the permission of third parties. Our restricted cash is substantially cash balance on deposit required by our business partners and commercial banks during our ordinary course of business. The restricted cash balance for the year ended December 31, 2023 was nil. The restricted cash balance for the year ended December 31, 2024 and 2025 was US$0.05 million and US$0.25 million, respectively. Net Cash Generated from Operating Activities Net cash generated from operating activities was US$81.0 million in 2025. The difference between our net profit of US$57.9 million and the net cash generated from operating activities was mainly due to (i) share-based compensation of US$22.3 million, (ii) an increase in accounts payables of US$9.6 million and (iii) changes in unrealized investment income of US$5.4 million; partially offset by (i) an increase in inventories of US$8.2 million, (ii) an increase in accounts receivable of US$4.9 million and (iii) a decrease in lease liabilities of US$4.4 million. Net cash generated from operating activities was US$80.4 million in 2024. The difference between our net profit of US$5.0 million and the net cash generated from operating activities was mainly due to (i) share-based compensation of US$67.8 million, (ii) a decrease in inventories of US$7.0 million and (iii) an increase in accounts payables of US$5.9 million; partially offset by (i) an increase in prepayments and other current assets of US$3.9 million, (ii) a decrease in lease liabilities of US$3.5 million and (iii) a decrease in other non-current liabilities of US$3.1 million. Net cash generated from operating activities was US$36.4 million in 2023. The difference between our net loss of US$60.3 million and the net cash generated from operating activities was mainly due to (i) share-based compensation of US$65.2 million and (ii) an increase in credit loss of US$15.5 million of long-term investments. Net Cash Generated from Investing Activities Net cash used in investing activities was US$226.0 million in 2025, which was primarily attributable to (i) proceeds from disposal of short-term investments of US$184.3 million and (ii) proceeds from disposal of long-term investments of US$98.9 million and partially offset by payment for short-term investments of US$50.6 million. Our short-term investments mainly include time deposits. 128 Table of Contents Net cash generated from investing activities was US$107.4 million in 2024, which was primarily attributable to (i) proceeds from disposal of short-term investments of US$354.5 million and (ii) proceeds from disposal of long-term investments of US$43.2 million and partially offset by payment for short-term investments of US$264.7 million. Our short-term investments mainly include time deposits and treasury securities. Net cash generated from investing activities was US$332.5 million in 2023, which was primarily attributable to (i) proceeds from disposal of short-term investments of US$853.7 million, and partially offset by (ii) payment for short-term investments of US$327.2 million and (iii) payment for long-term investments of US$193.0 million. Our short-term investments mainly include time deposits and wealth management products offered by banks or other financial institutions in the PRC. Net Cash Used in Financing Activities Net cash used in financing activities in 2025 was US$69.9 million, which was due to the payment for dividend of US$69.8 million. Net cash used in financing activities in 2024 was US$33.2 million, which was due to the payment for dividend of US$33.0 million. Net cash used in financing activities in 2023 was US$2.2 million, which was due to payment for repurchase and cancellation of ordinary shares of US$3.3 million, partially offset by proceeds from exercise of share options of US$1.2 million. MATERIAL CASH REQUIREMENTS Our material cash requirements as of December 31, 2025 and any subsequent interim period include primarily our working capital and operating expenditure needs, capital expenditures, services purchase commitments and operating lease commitments. Other than the capital expenditures, services purchase commitments and operating lease commitments, as discussed below, we did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2025. We did not have future minimum capital commitments as of December 31, 2025. Capital Expenditures Our capital expenditures are incurred primarily in connection with purchase of property, equipment, software and land use rights. Our capital expenditures were US$1.5 million, US$13.1 million and US$7.1 million in 2023, 2024 and 2025, respectively. We intend to fund our future capital expenditures with our existing cash balance and proceeds from our public offering of equity securities. 129 Table of Contents Services Purchase Commitments As of December 31, 2025, our services purchase commitments were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ Less Than 1 year ​ ​ ​ 1-3 years ​ ​ ​ 3-5 years ​ ​ (US$ in thousands) Purchase obligations(1) 64,332 12,332 44,250 7,750 Note: Purchase obligations represent US$64,332 thousand of remaining non-cancellable contractual commitments as of December 31, 2025, related to one of our third-party cloud infrastructure agreements, under which we committed to spending an aggregate of at least US$72,500 thousand between July 1, 2025 and June 30, 2030 with minimum purchase commitment. We had made payments of US$8,168 thousand in total under this agreement as of December 31, 2025. Operating lease commitments We had outstanding commitments on several non-cancellable operating lease agreements. Operating lease commitment within one year or less lease term as of December 31, 2025 was US$15 thousand. We have elected not to recognize these operating lease commitment any lease liability or right-of-use asset, therefore they are not yet reflected in the consolidated financial statements. HOLDING COMPANY STRUCTURE Tuya Inc. is a holding company with no material operations of its own. We conduct our operations mainly through our PRC and other overseas subsidiaries. As a result, our ability to pay dividends depends upon dividends paid by our subsidiaries. If our subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our subsidiaries in China are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with the Accounting Standards for Business Enterprise as promulgated by the Ministry of Finance of the PRC, or PRC GAAP. Pursuant to the law applicable to China’s foreign-invested enterprises, our subsidiaries that are foreign-invested enterprises in the PRC have to make appropriation from their after-tax profit, as determined under PRC GAAP, to reserve funds including (i) the general reserve fund, (ii) the enterprise expansion fund and (iii) the staff bonus and welfare fund. The appropriation to the general reserve fund must be at least 10% of the after-tax profits calculated in accordance with PRC GAAP. Appropriation is not required if the reserve fund has reached 50% of the registered capital of our subsidiary. Appropriation to the other two reserve funds are at our subsidiary’s discretion. In accordance with the Company Law, the former VIE in China must make appropriations from its after-tax profit to non-distributable reserve funds, including (i) the statutory surplus fund and (ii) the discretionary surplus fund. The appropriation to the statutory surplus fund must be at least 10% of the after-tax profits calculated in accordance with PRC GAAP. Appropriation is not required if the statutory surplus fund has reached 50% of the registered capital of the former VIE. Appropriation to discretionary surplus fund is made at the discretion of the former VIE. We are permitted under PRC laws and regulations to provide funding to our PRC subsidiaries through capital contributions or loans, subject to the approval of government authorities and limits on the amount of capital contributions and loans. 5.C.Research and Development, Patents and Licenses, etc. Our AI cloud platform and proprietary cutting-edge IoT technologies have been primarily developed in-house. See “Item 4. Information on the Company—4.B. Business Overview—Research & Development.” 5.D.Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2025 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial condition. 130 Table of Contents 5.E.Critical Accounting Estimate Our consolidated financial statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes. Our estimates are based on historical experience and various assumptions that we believe to be reasonable under the circumstances. Given that changes in circumstances, facts and experience may cause us to revise our estimates, actual results could differ materially from those estimates. Our critical accounting estimates for the years ended December 31, 2023 and 2024 are described below. There is no critical accounting estimate identified for the year ended December 31, 2025. Lower of cost or net realizable value provision for inventories Inventories comprised finished goods, work in process, raw materials and low value consumables and spare parts. Inventories are stated at the lower of cost and net realizable value. In determining excess or obsolescence reserves for inventories, we consider assumptions such as aging profile, historical consumption projection, estimated future selling prices and selling expenses of the respective inventories. If in any period we anticipate a change in assumptions such as future demand or market conditions to be less favorable than our previous estimates, additional inventory write-downs may be required and would be reflected in cost of sales, resulting in a negative impact to our gross margin in that period. If in any period we are able to sell inventories that had been written down to a level below the ultimate realized selling price in a previous period, related revenue would be recorded with a lower or no offsetting charge to cost of sales resulting in a net benefit to our gross margin in that period.