Why Tuya's Platform Pivot Paid Off in Q3 With Higher Margins and Profit

Tuya Inc. (NYSE:TUYA) is one of the best-performing small-cap tech stocks in the past three years. On November 24, the company reported its Q3 results for the period ended September 30. Total revenue reached $82.5 million, up 1.1% year-over-year, marking Tuya’s ninth consecutive quarter of YoY revenue growth.

Gross margin rose to 48.3%, while operating expenses declined 34.1% to $36 million. These improvements contributed to GAAP net profit of $15.0 million, compared with a net loss in the same quarter last year. Net margin reached 18.2%, up 23.6 percentage points year-over-year.

Management attributed the turnaround to a combination of cost discipline and demand for its Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS) offerings. PaaS revenue grew 2.4% to $59.2 million, while SaaS and other software rose 15.4% to $11.5 million. In contrast, smart solutions revenue, Tuya’s hardware-centric segment, declined.

During the earnings call, executives highlighted that over 93% of the devices shipped in Q3 were AI-enabled, signaling increased integration of AI across Tuya’s ecosystem.

Tuya Inc. (NYSE:TUYA) provides a global IoT development platform, offering PaaS, SaaS, and other tools to help brands build, deploy, and manage smart devices across categories such as energy, home automation, and security.

While we acknowledge the potential of TUYA as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

READ NEXT: 30 Stocks That Should Double in 3 Years and 11 Hidden AI Stocks to Buy Right Now.

Disclosure: None.