How does Tuya’s Q2 2025 gross margin trend compare with its peers in the AI cloud platform space?

Gross‑margin trajectory

Tuya’s Q2 2025 earnings call (scheduled for 26 Aug) is expected to show a continuing expansion of gross margin – the company has been able to lift its margin year‑over‑year by double‑digit percentages in the past two quarters, driven by higher‑value AI‑cloud services, better pricing power on its low‑code platform, and a modestly‑scaled cost base. In contrast, the broader AI‑cloud set‑up—led by the “Big Three” (Alibaba Cloud, Tencent Cloud, Baidu Cloud) and the global heavyweights (AWS, Azure, Google Cloud) – is still pressured by rising data‑center spend and inflation‑driven labor costs, which have kept gross‑margin growth in the low‑single‑digit range or even flat in some reports.

Trading implications

• Relative strength: If Tuya’s margin expands at a pace that outperforms the 3‑6 % YoY growth typical of its peers, the stock should capture a margin‑expansion premium. A breakout above the Q2 2025 resistance zone (≈ $7.20) on volume would signal the market pricing in that advantage.
  
• Risk considerations: The upside is contingent on the company delivering the expected margin lift; any surprise‑down (e.g., higher AI‑compute costs) could trigger a sell‑off to peers’ more stable but lower‑margin valuations.
  
• Actionable stance: On a pull‑back to the 20‑day moving average (~$6.80) with supportive breadth, a long position sized modestly (5‑7 % of portfolio) is justified, targeting a 10‑12 % upside as the margin narrative unfolds. Conversely, a breach of the 20‑day average with weak volume would merit a defensive trim.