Canaan Breaks Record in Mining Revenue but Struggles to Turn a Profit

Tuesday, 29/08/2023 | 10:38 GMT by Damian Chmiel
  • The rise in Bitcoin mining revenue did not help the company to achieve profitability.
  • Other crypto miners also reported weaker results for Q2 2023.
Bitcoin Mining

Another publicly traded cryptocurrency miner has published a financial report for Q2 2022, reflecting complex market conditions and mixed results in the face of low Bitcoin (BTC) prices and increasing mining difficulty. On one hand, Canaan Inc. (NASDAQ: CAN) showed significant growth in computing power and Bitcoin mining revenues. However, it highlighted the challenges it faces, including regulatory changes and market pressure, which have affected its sales and mining operations.

Canaan Reports Mixed Revenues in Q2 2023

The company sold total computing power of 6.1 million Thash/s, marking an increase of 44.2% from Q1 2023. Revenues for the quarter stood at $73.9 million, compared to $55.2 million in Q1 2023. Despite these gains, the company is grappling with a market that has yet to recover, affecting its sales and mining operations entirely.

Furthermore, the results improved quarterly, but they are much worse on an annual basis. In the revenue category, $73.9 million for the last quarter is significantly less than $245.9 million in the same period in 2022. Still, the result was better than market expectations.

Nangeng Zhang, the Chairman and CEO of Canaan, stated that the company managed to surpass its revenue guidance despite a stagnant Bitcoin market. James Jin Cheng, the CFO, added that the better-than-expected revenue was due to improvements in both sales and mining activities. However, both executives acknowledged the challenges that could impede future operations, including regulatory shifts and market unpredictability.

The results from mining operations alone deserve special mention. Revenue in this category stood at $15.9 million, growing 43.3% from $11.1 million reported three months earlier. On an annual basis, the growth exceeded 105% from $7.8 million.

“Our mining revenue further set a new historic high in the second quarter of 2023. Recently, we have expanded into new mining projects in Africa and South America,” Zhang added.

Source: Canaan
Source: Canaan

For Q3 2023, Canaan expects total revenues to be approximately $30 million. This forecast is influenced by the challenging market conditions across the industry and ongoing regulatory issues.

Regulatory and Price Challenges

Canaan faces regulatory hurdles in Kazakhstan, where it had to temporarily shut down approximately 2.0 Exahash/s of its mining computing power. Further, the company is involved in a legal dispute in the US over a breached ‘Joint Mining Agreement’, adding another layer of complexity to its operations.

The company is among five publicly-listed firms that have suffered a $2.8 billion loss following a sharp decline in Bitcoin and the overall cryptocurrency market in mid-August. Data from AltIndex shows a drop of 30% in the market capitalization of publicly listed crypto miners within a month.

Market Cap
Source: AltIndex

Other major players like Riot Platform and Marathon Digital Holdings experienced significant capitalization losses, amounting to $1.1 billion and $800 million, respectively. Companies like Canaan, Hut 8 Mining, and Cipher Mining Technologies saw a considerable reduction in their market shares.

Hard to Swallow Financials

In addition, these firms reported mixed financial results for Q2 2023. Argo Blockchain reduced its non-mining operational costs but faced a decline in revenue of 31% due to the falling Bitcoin prices and increased global hashrate competition. Riot Platforms Inc. and Galaxy Digital Holdings Ltd. also posted negative financial outcomes for Q2 2023.

Galaxy Digital, founded by American investor Michael Novogratz, reported a loss of $46 million, contrasting sharply with its previous quarter's profit. Riot Blockchain disclosed $76.7 million in revenue for Q2 2023 but still posted a net loss of $27.7 million, albeit an improvement over the previous year's loss.

Despite initial optimism for 2023, the cryptocurrency industry is again facing market stagnation, following a lackluster performance in 2022.

Another publicly traded cryptocurrency miner has published a financial report for Q2 2022, reflecting complex market conditions and mixed results in the face of low Bitcoin (BTC) prices and increasing mining difficulty. On one hand, Canaan Inc. (NASDAQ: CAN) showed significant growth in computing power and Bitcoin mining revenues. However, it highlighted the challenges it faces, including regulatory changes and market pressure, which have affected its sales and mining operations.

Canaan Reports Mixed Revenues in Q2 2023

The company sold total computing power of 6.1 million Thash/s, marking an increase of 44.2% from Q1 2023. Revenues for the quarter stood at $73.9 million, compared to $55.2 million in Q1 2023. Despite these gains, the company is grappling with a market that has yet to recover, affecting its sales and mining operations entirely.

Furthermore, the results improved quarterly, but they are much worse on an annual basis. In the revenue category, $73.9 million for the last quarter is significantly less than $245.9 million in the same period in 2022. Still, the result was better than market expectations.

Nangeng Zhang, the Chairman and CEO of Canaan, stated that the company managed to surpass its revenue guidance despite a stagnant Bitcoin market. James Jin Cheng, the CFO, added that the better-than-expected revenue was due to improvements in both sales and mining activities. However, both executives acknowledged the challenges that could impede future operations, including regulatory shifts and market unpredictability.

The results from mining operations alone deserve special mention. Revenue in this category stood at $15.9 million, growing 43.3% from $11.1 million reported three months earlier. On an annual basis, the growth exceeded 105% from $7.8 million.

“Our mining revenue further set a new historic high in the second quarter of 2023. Recently, we have expanded into new mining projects in Africa and South America,” Zhang added.

Source: Canaan
Source: Canaan

For Q3 2023, Canaan expects total revenues to be approximately $30 million. This forecast is influenced by the challenging market conditions across the industry and ongoing regulatory issues.

Regulatory and Price Challenges

Canaan faces regulatory hurdles in Kazakhstan, where it had to temporarily shut down approximately 2.0 Exahash/s of its mining computing power. Further, the company is involved in a legal dispute in the US over a breached ‘Joint Mining Agreement’, adding another layer of complexity to its operations.

The company is among five publicly-listed firms that have suffered a $2.8 billion loss following a sharp decline in Bitcoin and the overall cryptocurrency market in mid-August. Data from AltIndex shows a drop of 30% in the market capitalization of publicly listed crypto miners within a month.

Market Cap
Source: AltIndex

Other major players like Riot Platform and Marathon Digital Holdings experienced significant capitalization losses, amounting to $1.1 billion and $800 million, respectively. Companies like Canaan, Hut 8 Mining, and Cipher Mining Technologies saw a considerable reduction in their market shares.

Hard to Swallow Financials

In addition, these firms reported mixed financial results for Q2 2023. Argo Blockchain reduced its non-mining operational costs but faced a decline in revenue of 31% due to the falling Bitcoin prices and increased global hashrate competition. Riot Platforms Inc. and Galaxy Digital Holdings Ltd. also posted negative financial outcomes for Q2 2023.

Galaxy Digital, founded by American investor Michael Novogratz, reported a loss of $46 million, contrasting sharply with its previous quarter's profit. Riot Blockchain disclosed $76.7 million in revenue for Q2 2023 but still posted a net loss of $27.7 million, albeit an improvement over the previous year's loss.

Despite initial optimism for 2023, the cryptocurrency industry is again facing market stagnation, following a lackluster performance in 2022.

About the Author: Damian Chmiel
Damian Chmiel
  • 1517 Articles
  • 32 Followers
About the Author: Damian Chmiel
Damian's adventure with financial markets began at the Cracow University of Economics, where he obtained his MA in finance and accounting. Starting from the retail trader perspective, he collaborated with brokerage houses and financial portals in Poland as an independent editor and content manager. His adventure with Finance Magnates began in 2016, where he is working as a business intelligence analyst.
  • 1517 Articles
  • 32 Followers

More from the Author

CryptoCurrency

!"#$%&'()*+,-./0123456789:;<=>?@ABCDEFGHIJKLMNOPQRSTUVWXYZ[\]^_`abcdefghijklmnopqrstuvwxyz{|} !"#$%&'()*+,-./0123456789:;<=>?@ABCDEFGHIJKLMNOPQRSTUVWXYZ[\]^_`abcdefghijklmnopqrstuvwxyz{|}