Earnings call transcript: Canaan Inc. Q2 2025 reveals revenue miss, EPS surprise

Canaan Inc. (NASDAQ:CAN), a $335.1 million market cap cryptocurrency mining equipment manufacturer, reported its Q2 2025 earnings, revealing a significant revenue miss but a surprising earnings per share (EPS) result. The company posted an EPS of -1.02, starkly below the forecasted -0.04, marking a 2450% surprise. Revenue fell short at $71.86 million against a forecast of $109.45 million, a 34.34% miss. Following these results, Canaan’s stock dropped by 5.29% in pre-market trading, closing at $0.7722 from a previous $0.8153. According to InvestingPro analysis, the stock generally trades with high price volatility, which investors should consider when evaluating this investment.

Key Takeaways

• Canaan’s Q2 2025 EPS was significantly below expectations, with a large negative surprise.
• Revenue missed forecasts by over 34%, impacting investor sentiment negatively.
• The stock experienced a 5.29% decline in pre-market trading following the earnings announcement.
• Despite revenue challenges, the company reported a record high adjusted EBITDA of $25.3 million.
• Canaan is focusing on expanding its North American market and launching new products.

Company Performance

Canaan Inc. faced a challenging quarter with revenue falling short of expectations. Despite this, the company reported a 40% year-over-year revenue increase to $100.2 million, driven by strong product sales and increased mining revenue. The company continues to expand its operations, with a focus on North American markets and new product developments.

Financial Highlights

• Total revenue: $100.2 million, a 40% increase year-over-year
• Gross profit: $9.3 million, up from $0.6 million in Q1
• Product sales: $72 million
• Mining revenue: $28.1 million, a 15% increase from Q1
• Adjusted EBITDA: $25.3 million, a record high for the company
• Cash on hand: $66 million

Earnings vs. Forecast

Canaan’s Q2 2025 EPS of -1.02 was a significant miss compared to the forecasted -0.04, representing a 2450% negative surprise. Revenue also fell short at $71.86 million, missing the forecast by 34.34%. This performance contrasts with previous quarters where the company met or exceeded expectations.

Market Reaction

Following the earnings announcement, Canaan’s stock fell by 5.29% in pre-market trading, closing at $0.7722. This decline reflects investor concerns over the revenue miss and the broader market’s reaction to the company’s financial performance. The stock remains volatile, with a beta of 3.25, trading between its 52-week high of $3.27 and low of $0.535. Analyst targets range from $1.50 to $4.00, suggesting potential upside from current levels. For deeper insights into Canaan’s valuation and 12+ key financial metrics, check out the comprehensive research available on InvestingPro.

Outlook & Guidance

Canaan is cautiously optimistic about the future, with Q3 revenue guidance set between $125 million and $145 million. The company plans to continue focusing on the North American market, develop home mining products, and launch the A16 ASIC series soon.

Executive Commentary

"We believe this strategy will carry us through short-term volatility and deliver long-term stable and outstanding returns," said Engie Zhang, CEO. James Chang, CFO, highlighted the company’s unique position: "Our vertical integrated model encompassing the entire chain of R&D, manufacturing and sales of mining equipment, self-mining operations, and cryptocurrency treasury management positions us uniquely."

Risks and Challenges

• Tariff uncertainties in the US market, potentially increasing costs by 15-25%
• Market volatility and fluctuating Bitcoin prices impacting revenue
• Supply chain disruptions affecting production and delivery timelines
• Intense competition in the cryptocurrency mining industry
• Regulatory changes impacting cryptocurrency operations

Q&A

During the earnings call, analysts inquired about the company’s Bitcoin treasury management strategies and the impact of tariffs on the US market. Executives addressed these concerns, emphasizing the complementarity of Bitcoin mining with AI and HPC projects and exploring trends in cooling technologies.

Full transcript - Canaan Inc (CAN) Q2 2025:

Conference Operator: Ladies and gentlemen, thank you for standing by, and welcome to Canons Inc. Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the management’s prepared remarks, we will have a question and answer session. Please note that this event is being recorded.

Now I’d like to hand the conference over to your speaker today, Ms. Gwen Lauber, Investor Relations Director of the company. Please go ahead, Gwen.

Gwen Lauber, Investor Relations Director, Canaan Inc.: Thank you, operator. Hello, everyone, and welcome to our earnings conference call. Joining us today are Chairman and CEO, Nanjing Zhang and our CFO, Jin James Chang. Leo Wang, Vice President of Capital Markets and Corporate Development, and Xu Zhang, Senior IR Manager, will also be available during the question and answer session. Our CEO will start the call by providing an overview of the company and performance highlights for the quarter.

Our CFO will then provide details on the company’s operating and financial results for the period before we open up the call for your questions. Before I begin, I would like to refer you to our Safe Harbor statements in our earnings press release. Today’s call will include forward looking statements. These statements include, but are not limited to, our outlook for the company and statements that estimate or project future operating results and the performance of the company. These statements speak only as of today, and the company assumes no obligation to revise any forward looking statements that may be made in today’s press release, call, or webcast, except as required by law.

These statements do not guarantee future performance and are subject to risks, uncertainties, and assumptions. Please refer to the press release and the risk factors and documents we file with the Securities and Exchange Commission, including our most recent report on Form 20F, for information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today’s call, we will discuss both GAAP financial measures and certain non GAAP financial measures, which we believe are useful as supplemental measures of the company’s performance. These non GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. You can find additional disclosures regarding these non GAAP measures, including reconciliations with comparable GAAP results, in our earnings press release, which is posted on the company’s website.

And finally, please note that during the call, all dollar amounts refer to U. S. Dollars. With that, I will now turn the call over to our Chairman and CEO, Engie Jeng. Please go ahead.

Engie Zhang, Chairman and CEO, Canaan Inc.: Thank you, Kuni. Hello, everyone. This is Engie, CEO of Cannon. Welcome to our earnings call. Together with our CFO, James, we are in our Singapore headquarters to share our Q2 twenty twenty five business results and the latest updates with you.

This past quarter marked the first anniversary since the most recent Bitcoin halving, and we are delighted to celebrate Bitcoin’s all time high price in recent days. We are pleased to report the strongest quarter quarterly results in the current Bitcoin cycle, and also the best quarter in the past ten quarters since Q3 twenty twenty two. Total revenue for Q2 reached US100.2 million dollars up 40% year over year, breaking the US100 million dollars mark. Gross profit rose to US9.3 million dollars a significant increase from US0.6 million dollars in Q1. Operating loss narrowed to $27,100,000 EBITDA turned profitable at $1,680,000 and adjusted EBITDA reached US25.3 million dollars both hitting record high since we began reporting these metrics in Q1 twenty twenty four.

We attribute our strong results this quarter to three main factors. The higher and the stable bitcoin price, our quick and effective response to the new tariff policy environment, and the rapid growth of our home use bitcoin mining product line. Throughout the quarter, Bitcoin remained strong, rising from around 75,000 US dollars at the start of the quarter to the peak of nearly 120,000 US dollars by late May, and then staying at a high level with some volatility. At the same time, total network cash rate also stayed high, which kept mining margins under pressure. The hash price in Q2 moved up overall from a low of about $48 per petahash per day to a peak of US58 dollars per petahash per day in May.

In addition, during this quarter, many countries were affected by the reciprocal tariff policy, which increased the import cost of equipment for U. S. Mining customers and brought a lot of uncertainty to global trade. This led many U. S.

Customers to delay building mining sites or deploying hybrids. Facing these challenges, our sales, supply chain and the compliance teams worked closely together and focused on markets outside The U. S, delivering strong performance that offset the negative impact from The U. S. Market’s weaker business environment.

Our product sales reached approximately US72 million dollars including million dollars from Alone Industrial Mining Solutions and $5,700,000 from the Avalon Home Use Miner Series. In Q2, we delivered a total of 6,400,000 per second of computing power with an average selling price of 11.1 US dollars per terahash. Our AlloHomeMiner product line delivered strong performance this quarter, generating million dollars in revenue, a sharp increase of 359% from US1.3 million dollars in the previous quarter and maintained a gross margin of 39%, which is higher than that of our institutional mining machines. This segment now accounts for over 5% of our total revenue. What is more remarkable is that this growth was achieved despite the challenges of high summer temperatures and rising electricity costs.

Looking ahead, we will continue to rapidly expand the home use market, especially in heating related application scenarios, where energy that might otherwise be wasted can be turned into additional value. In Q2, our self mining operations produced $2.84 bitcoins, up about 9.4% from $2.59 bitcoins in the previous quarter. Benefiting from the rise of bitcoin prices during this period, our mining revenue reached a record US28.1 million dollars an increase of over 15% from US24.3 million dollars in Q1. At the June, our total installed mining capacity worldwide reached 8.15 exahash per second, with 6.57 exahash per second already in operation. Last week, we also released our July Bitcoin production and mining operations update, showing continuous progress in our mining business.

By the July, our Bitcoin treasury has had reached $15.11 bitcoins. This brings us to our next topic, our bitcoin treasury. Historically, we have increased our bitcoin treasury in three ways. First, by accepting bitcoin payments for mining equipment. Second, by earning bitcoins through our mining operations.

And third, by directly purchasing bitcoins in the open market. Look back at this bitcoin cycle, we have steadily accumulated bitcoins at all stages. In recent quarters, our cash cost of mining has constantly been lower than the average market price of Bitcoin during the same period. While the cost of acquiring Bitcoins may fluctuate from quarter to quarter, its long term value has continued to rise. This is why self money remains a profitable strategy for us even during bear markets.

At Canaan, we are proud to be one of the few companies in the Bitcoin ecosystem that truly achieves vertical integration. Vertical integration is not just about mining Bitcoins. We design and manufacture our own ASIC chips and mining machines. We operate our mining business together with partners around the world, and we follow a displaced treasury strategy to accumulate bitcoins at attractive price levels. These three pillars work together to help us lower the cost of acquiring bitcoins, reducing operational risks and maintain strategic flexibility throughout the bitcoin cycle, all while steadily building and enhancing our bitcoin treasury.

Since our founding, we have always believed Bitcoin is both a global asset class and the foundation of the entire cryptocurrency ecosystem. Likewise, our business spans the global and does not rely on any single country or customer group. Our ability to adapt flexibility across different markets and supply chains has helped us achieve steady improvements through market cycles and policy changes. We have a reputation in many countries, especially in The United States, which has earned us repeat orders from some of the most respected mining companies in the industry. In R and D and supply chain, our A16 series is now in the chip packaging and testing stage and will soon move into full machine testing.

We are making every effort to bring A16 series to market as quickly as possible. On the supply chain side, our manufacturing capability in US is now up and running, complementing our existing capacity in Malaysia. This allows us to meet bulk delivery needs for US customers with only a modest cost increase. This includes fulfilling part of the order from the listed company Cypher in Q3. Recently, we also secured a follow on order from CleanSpark for our A15 emergent cooling model, showing strong customer recognition of our products and services.

As a US listed company committed to 100% compliance, our customers have a great confidence in the compliance of our offerings. In today’s already volatile trademark environment, reducing potential regulatory risks for our clients is more important than ever. Looking ahead, we will continue to follow our unique full cycle strategy, our vertical integration, disciplined bitcoin treasury management, and ability to flexibility shift between self mining and bitcoin purchase when market conditions arrive, giving Canon a clear edge at every stage of the bitcoin cycle. By designing and producing our own hardware, operating money under the most favorable conditions, and steadily building our Bitcoin strategy, we have established a clear competitive advantage, one that allows us to keep accumulating bitcoins at a cost lower than the market price, even in challenging environments. Our ongoing commitment to build a company with both resilience and agility, leveraging the advantages of vertical integration to grow our Bitcoin assets, protect shareholder value and seize every market opportunity.

We believe this strategy will carry us through short term volatility and deliver long term stable and outstanding returns. It will also position Canin as a leading institution in both technology innovation and bitcoin treasury management. We will continue to focus on the North America as our core expansion region, strengthening project execution and customer service, while closely monitoring geopolitical and the politics policy changes to adjust our strategy, seize opportunities and mitigate risks. In summary, based on the current situation, we remain cautiously optimistic for Q3 twenty twenty five, with revenue expected to be in range of US125 million dollars to US145 million dollars This forecast is based on the present market and operational conditions, and actual results may vary given recent policy uncertainties and market fluctuations. This concludes my prepared remarks.

Thank you, everyone. Now I will hand it over to our CFO, James.

James Chang, CFO, Canaan Inc.: Thank you, Angie, and good day, everyone. This is James, CFO of Cannon. I’m very glad to share our Q2 financial results with you today. As Engie stated at the start of the call, we are firmly committed to vertical integration in the Bitcoin ecosystem. Our vertically integrated model encompassing the entire chain of R and D, manufacturing and sales of mining equipment, self mining operations and cryptocurrency treasury management positions us uniquely.

With the cryptocurrency industry and Bitcoin ecosystem gaining increasing attention and support globally, we are confident that our forward thinking strategic investment is demonstrating its sustained value potential. We are pleased to report record quarterly results with both the peak of the current Bitcoin cycle and the highest performance in the past ten quarters following Q3 twenty twenty two. Let me give a quick summary of our financial performance. First, we reported a strong Q2 results with total revenue of $100,200,000 not only exceeding our guidance, but also reaching $100,000,000 quarterly milestone and representing a 40 year over year increase. Our product sales delivered robust performance with revenue of $72,000,000 an increase of 23% quarter over quarter and up 17% year over year.

In Q2, we experienced the softening US demand under the pressure of tariff uncertainties. While continuously delivering some early booked contract sales orders from US customers, we were also working hard to expand our distribution channels in Asia. With all efforts, our average selling price or ASP increased to $11.1 per THz, reaching a new quarterly high in the past two years. Turning to the revenue from our Avalon Home series. In quarter two, we delivered approximately 13,000 units of our Avalon Home products, contributing revenue of approximately $5,700,000 and reaching the gross profit margin of 39%.

As of August 13, unfulfilled orders and finished deliveries in quarter three totaled $9,500,000 Second, our mining business also recorded its best quarterly performance. Our mining revenue surged 202% year over year to $28,000,000. We mined $2.84 bitcoins in the quarter, up 101% year over year. Our deployed hash rate expanded 23% from 6.6 exahash per second at the end of quarter one to 8.15 exahash per second at the ’2. In quarter two, more than 10,000 minuteing rigs were newly deployed in our American project.

And the installed computing power in America reached 3.66 exahash per second at the end of quarter two. Next, driven by the strong results of machine sales and mining operations, our profitability sold both sequentially and year over year. Gross profit came in at $9,300,000 compared with $600,000 in quarter one, also setting a record high for the first time since quarter three twenty twenty two. Adjusted EBITDA achieved a gain of $25,000,000 a significant turnaround from the prior quarter’s loss of $38,000,000 Our basic and diluted net loss per ADS narrowed to US0.03 representing the lowest loss in the past ten quarters following quarter three twenty twenty two. Last but not least, we maintained a solid balance sheet with over $14.80 Bitcoins with a market value of approximately $160,000,000 at the end of quarter two.

We continued to manage our Bitcoin reserves to generate sustainable outperformance. Turning to the expenses, our operating expenses totaled approximately $36,000,000 remaining flat sequentially. As previously announced, we are steadily progressing with the exit of our AI business. Once completed, this is expected to significantly reduce operating costs. Although there will be a one time expense related to organization optimization in the short term, the overall operating expense structure will become healthier.

By the end of second quarter, the price of Bitcoin increased to around $107,000 versus around $83,000 at the end of the first quarter. The increased Bitcoin price on the last day of the quarter resulted in an aggregate unrealized fair value gain on crypto assets of $34,000,000 The non cash accounting treatment for the fair value change of the preferred shares hit our quarter two bottom line with $17,000,000 consisting of $8,000,000 from the Series A1 preferred shares converted during this quarter and $9,000,000 from the remaining unconverted Series A and Series A-one preferred shares at the quarter end. In order to represent our performance more accurately and more comparably, we have excluded the impact of this accounting treatment for our non GAAP measures. Turning to our balance sheet and cash flow. In quarter two, we paid $41,000,000 to secure our wafer supply, dollars 62,000,000 for production and operation, and $5,000,000 prepaid for our share repurchase program.

The cash outflow aforementioned was offset by cash inflow of $66,000,000 from sales, dollars 7,000,000 from export VAT refunds and $4,000,000 from ADI program reimbursement. Consequently, at the end of quarter two, we held cash of $66,000,000 on our balance sheet. Now turning to our Bitcoin assets. Bitcoins held as our own holding assets increased in the quarter, reaching a record high of $14.84 bitcoins as of June 30. This is 76 more than $14.00 8 at the end of the first quarter.

On 06/30/2025, the fair market value of our own bitcoins totaled around $160,000,000 and our Holdo gain was approximately $82,000,000 higher than the original value of the Bitcoins that we gained from mining or other operations. As of July 31, our total Bitcoin treasury increased to $15.11 as already disclosed. As announced recently, by the July 2025, all Series A1 preferred shares have been converted into ADSs and sold. As of the date of the earnings, we have cumulatively repurchased approximately 3,600,000.0 ADSs for approximately $2,400,000 under the share repurchase program. With rebounding customer demand and proven local manufacturing in North America, We will maintain our strategic focus on this core market.

Concurrently, we will continue to be agile in response to geopolitical and policy shifts, seizing opportunities while mitigating risks. Given these developments, we expect the revenue for the third quarter to be in the range of $125,000,000 to $145,000,000 This concludes our prepared remarks. We are now open for questions.

Conference Operator: Thank you. We will now begin the question and answer session. As a courtesy to other investors and analysts who may wish to ask a question, please limit yourself to one question and one follow-up. If you have any additional questions after the Q and A session, the Investor Relations team will be available after the call. For the benefit of all participants on today’s call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English.

Your first question coming from the line of Mike Gundahl with Northland Capital Markets. Your line is now open.

Logan, Analyst, Northland Capital Markets: Hey, guys. This is Logan on for Mike. Thanks for taking our question, and congrats on the quarter. First, it was nice to see the 6.4 exahash sold in ASP of $11.1 Is there anything to call out on current market dynamics, pricing strategy and demand for A15s you guys saw in July and August? Thanks.

Engie Zhang, Chairman and CEO, Canaan Inc.: Hi, Mike. Yes. In Q1 this year, first I give some first, I give some quick answers about the numbers. Bitcoin price now rise to new heights and demand of $8.15 today looks somewhat different from when we issued our first year, first twenty twenty five guidance in January. And in Q1, I think the ASP for our the ASP for Q1 is $10.5 per terahash And q two is the ASP is rise to 11.1 terahash.

Now this is at ASP side. But, you know, in q q two, there’s, you know, because the tariff policy, has increased the overall cost for our US customers. And I think the estimated impact is roughly from, like, 15% to 25%, and it remains fluctuate. So as a result, customers in US are still taking we have still wait and see. But several US orders we announced recently, especially from public listed miners shows that through joint efforts, customers are gradually adapting the tariff changes and that they are willingness to purchase.

It’s coming back. Yes. And also we we have opened our production facilities in The US. And now we can deliver machines from US and Malaysia to avoid tariffs, some of the tariffs to improve the overall user experience, improve service. So I think in the last three quarters, our ASP is increasing.

And also, ongoing demand outside, especially outside US for high performance monitors is also growing. So and another thing is because for for a 15, the manufacturing advantage process is improving and the performance is increasing and the cost is slightly lower and lower. So it’s supported our ASP and gross margin. Great.

Logan, Analyst, Northland Capital Markets: Thanks for the color there. And then one follow-up from us. Congrats on the Cypher and CleanSpark order during the quarter. Can you guys just provide an update now with the I think you said The United States production facility. How is Canada viewing its strategy for penetrating the North American market?

Is there any updates for how you guys see to grow market share there?

Engie Zhang, Chairman and CEO, Canaan Inc.: First, I will say something and about the Cypher Cypher’s orders, maybe James will add some color after after that. I think we we have always believed that actively expanding in North America market is right decision, at least in mid and long term and fully in line of our long term strategy. I think that The US continues to stand strong policy signals supporting that. The reason is the signals supporting the cryptocurrency industry. And also America has the worst most mature capital community and is home to the largest number of publicly listed mining companies.

It also has abundant and diverse power resources, including wind and solar renewable energy that can support very large scale deployments. Americans culture of innovation and its capital markets ecosystem private provide a very strong foundation for institutional miners. Yeah. So for for us, because the institutional miners always have set habits in site operations in equipment purchasing. So for us, the key to gain more market share in U.

S. Is to get more customers to try our products first. So our machines must have very clear performance advantages. So customers have good reasons to test our new models. Second is our service quality must be the highest in the industry standard.

I think in 2024, North America already contributed about 40% of our total mining machine sales revenue. On the mining side, we already have deployed 3.67 extra head per second for of mining hazard in in this region. In Q2, our mining revenue in North America reached a record high of US28 million dollars And this year, we as I mentioned, we also established manufacturing capacity in U. S. Is all solid for long term growth in North America.

In short term, I think the changes in business environment and policies already this year slowed our expansion pace in US. So but we make adjustments and some and I think the most current period is now behind us. Key metrics are recurring, and we remain confident in long term potential of North American market. Yes. Thank you.

James Chang, CFO, Canaan Inc.: Yes. I will add some color on this because U. S. Market is so important for us. In our annual report, we have mentioned like 40% of our revenue in 2024 has come from US market.

And recently, we got orders from Cypher and CleanSpark. And in the Cypher order, it’s the first time we start to have used the manufacturing factory in The United States as a new alternative. Although the cost is a little bit higher and I think it’s beneficial to our customers, it’s close to them and they recognize our product performance. So we would like to improve the delivery capability and overall cooperation experience for them. So I think that also showed our execution to the strategic thinking from CEO who just mentioned that we really value our customers in United States and The U.

S. Strategy is one of the most important strategy in our whole integrated system. I think the new orders is mutually beneficial to both us and also Cypher. And we also have the immersed cooling orders from CleanSpark as well. So I think now is the better time compared to the early stage of the tariff come out after liberation days, U.

S. Customers tend to slow down their orders. But now we get back our customers and we start to have some orders. I believe we will have chance, have opportunity to have more. Thank you, Mike.

Conference Operator: Thank you. Our next question coming from the line of Edward Engel with Compass Point Research. Your line is now open.

Engie Zhang, Chairman and CEO, Canaan Inc.: Hey, everyone. This is Abdulid Lover on for Ed. Can I just ask, have you seen any changes in customer ASEC demand since May? And has sentiment rebounded back towards, like, q one levels, for example? Let me see.

I think since July, we have indeed seen some positive changes in the market demand recently. We have, you know, we have announced several new orders from institutional customers in North America, showing that local customers gradually adapting the new tariff environment, and their willingness to purchase is returning. I think it’s important to note that the direct impact of the tariff policy is concentrated mainly in US. During

James Chang, CFO, Canaan Inc.: Q2,

Engie Zhang, Chairman and CEO, Canaan Inc.: we saw very active demand in Asia and other regions where we secured a large number of orders this quarter. The company delivered over 100,000,000 in revenue with more than dollars for mining machine cells. And most of these orders did not come from The US. This shows that overall global demand remains healthy and reseeded. And, you know, because in July, beacon prices have also reached new all time high several times, which has been an important driver for miners to increase purchases.

That said, because The US tariff policy is still not settled, uncertainty remains. I think the demand from US customers has not fully returned to levels we we before the the the tariff was announced. And I think I need to talk about some indirect impacts. It’s because it’s more complex. Restrictions, our mining machines import into US have a great, a very rare situation in this industry, maybe in the past ten years, where mining is still profitable or very profitable.

But due to supply demand imbalances, machine originally intend for US market had to be sold to other regions that at a discounted prices. This created the virus market during bull cycle. So sometimes something is not seen over a decade. So to address this, I must, I think what we can do is we must continue to work on the ways to gather machines into The US, at a lower cost. Yeah.

So I think our US manufacturer is already in operational. But, you know, while it’s it’s still very complex because complements entering The US deal phase tariffs. Overall, I think this setup helps helps us to lower the cost and the speed up the supply for US market to solve the previous question. And, yeah, I think it’s it will help us to gain more, law holders. Thank you.

Great. Thank you.

Conference Operator: Thank you. Our next question coming from the line of Kevin Cassidy with Rosenblatt Securities. Your line is now open.

Kevin Cassidy, Analyst, Rosenblatt Securities: Yes. Congratulations on the great results, and thanks for taking my question. Can you describe the effect that Bitcoin miners with them pursuing the AI and HPC co location hosting agreements? Is that slowing the demand for the Bitcoin mining rigs?

Engie Zhang, Chairman and CEO, Canaan Inc.: Oh, yes. Good morning. Yes. We we have seen some miners in recent quarters. They are shifting a part of their power and the facilities to AI HPC co location projects.

And some have done so very successfully, often leveraging their peer experience in Bitcoin mining and access to energy resources. We see AI HPC and Bitcoin mining as complementary for two reasons. First is AI HPC projects typically have longer sales cycles and capital recovery period than Bitcoin mining. So when Bitcoin price is high, the network demand strong, mining continued to offer higher and more predictable returns, which is why many companies are pursuing both. Second, from energy standpoint, there is no direct competition for resources.

Bitcoin mining is an unusually flexible power consumer. Over the long term, it can quickly secure large volumes of energy at very low cost, enabling enabling rapid scaling rather than waiting years for traditional projects. Over shorter time frames down to a year or even days, its load profile allows it to absorb intermediate renewable or surpass energy, helping stabilize supply for AI and HPC workloads. So many large energy projects now plan for both mining and potential HPC customers together, improving overall energy utilization. So overall, our customers include large institutional miners, distribution partners, and home use around the world with a flexible for product portfolio and global delivery compare capabilities, I think we can meet a wide range of deployment needs.

So we expect Bitcoin mining equipment to remain the core driver for our business. Yeah, thank you.

Kevin Cassidy, Analyst, Rosenblatt Securities: Okay. And maybe just as a follow-up, you give us an update on the next gen ASICs, the A16s and, you know, are you seeing a trend for more liquid cooled and immersion systems than in the past?

Engie Zhang, Chairman and CEO, Canaan Inc.: Firstly, I will answer liquid pool and the air cooled question. Yes. I think currently, water cooler system have been growth steadily. But now, our model still account for most of our minor cells. I think the reason is because they have lower deployment requirements.

It’s more simpler to install and maintain and can be quickly rolled out across a wide range of global markets, especially for customers who have value flexibility and the low operating costs. For water cooled system, because it performed very well in high density computing environments, but require stricter standards for water quality and operations. They are mainly used by large mining farms with fixed infrastructure. Since July, we’ve seen growing demand in Asia from customers who want to use the heat output for water heating. Many of them start with small batches for around like tens to several hundreds machines while they prepare for larger deployments later winter.

Yeah. In emergent cooling is growing very fast, particularly in North America and parts of The Middle East. Large institutional miners like CleanSpark are choosing emergent for its strong performance. High density, low low noise, and stable very stable. These projects often involve higher customization, long term capital investments, which also strengthen customer rotation orientation.

Yeah. For that, the generation, we will offer all three different cooling options, and we will optimize designs for different market or even different customers for different energy conditions. Yeah. For for example, I think in higher temperature regions, motor and cooling, water cooling may be more attractive. And some distributed distributed sites are a smaller size air cooling may be continuing to deliver strong cost effectiveness.

Kevin Cassidy, Analyst, Rosenblatt Securities: So

Engie Zhang, Chairman and CEO, Canaan Inc.: I think for because the energy efficiency and the next gen ASIC minus requirements and the larger and the larger scale operators emerging and the water cooled models will become more and more common. Yes. Thank you. You. Sorry, another I think you asked about the A16.

The a 16 now is at yeah. Yeah. The a 16 now is at stages for chip chip assembly and the testing. Yeah. It’s only we only maybe one, two weeks before we we have the full machine testing results.

So, yeah, so after that, we will have a product launch. When the full system test is complete, we will announce officially introduce this AI assistant series to the market. Yes. Thank you.

Conference Operator: Thank you. And our next question coming from the line of John Sodaro with Needham and Company. Your line is now open.

Kevin Cassidy, Analyst, Rosenblatt Securities: Hey, guys. Thanks for taking my question. Two for you. One, if we could just dig a little bit more into the Bitcoin treasury strategy and kind of your thoughts on some of the Bitcoin treasury companies out there. Is there a possibility you could start getting a premium into the stock similar to those type of companies?

And then as a follow-up, as you do think about your Bitcoin stack, and apologies if I missed this, but any ways to generate yield off it, derivative strategies, anything like that, like some of your peers where they’re able to generate a yield on that Bitcoin holding?

James Chang, CFO, Canaan Inc.: Thank you, John. This is James speaking. I would like to introduce a little bit. Although we are still in the early stage of doing Bitcoin treasury strategy, I think our approach to do this Bitcoin treasury management, the first thing is to build up a kind of conservative foundation with the goal to make sure our holdings is quite safe. And also, we would like to increase the long term value and liquidity.

I think that’s the purpose of doing this. First of all, we have already demonstrated a way of doing this collateralized financing. Kind of rising Bitcoin market, we can pledge part of our Bitcoin to access low cost capital for high return projects such as minor production and also self mining expansion for our operation. I think when the financing term ends, we usually can, you know, repay the principal. Also, can generate additional financing.

This can also improve the efficiency of our capital use. Think that’s the first method. Secondly, I think we can also place some of the Bitcoin in short term interest bearing accounts. As you said, earning a modest yield also make sure it’s safe and compliance. In addition, we can also evaluate the selective derivative strategies to manage price volatility or capture extra returns under certain market conditions.

I think that’s also important. So overall speaking, we have a kind of vertical integrated model. This model is quite interesting. We can grow our Bitcoin reserves through multiple channels. You know, for example, accepting Bitcoin as payment for miners.

Also we can mine coins at a kind of a cost below market average, and also we can directly buy Bitcoin in the secondary market when the prices are more attractive. So, think, although we are still in the early stage, our Bitcoin treasury has already reached $15.11 coins by the July. It’s a new record. So over time, I believe the market will see us not only as a kind of hardware maker or mining machine provider or computing solutions, the whole market will also look at us as a, you know, capable Bitcoin treasury company. Thank you.

Thank you, John.

Conference Operator: Thank you. Our next question coming from the line of Kevin Dean with H. C. Wainwright. Your line is now open.

Kevin Cassidy, Analyst, Rosenblatt Securities: Hi, Angie. Hi, James. I’m I’m curious to, dig in a little bit deeper, following up on John’s question. Would you consider consider using the the Bitcoin treasury to help fund operations? It wasn’t really clear, James, know, if that was part of the intention.

I apologize if I messed that up.

James Chang, CFO, Canaan Inc.: Kevin, to fund find a different operations like, you know, mining sites expansion and also in certain stage, we also order wafers by utilizing Bitcoins to as a pledge to get a loans. Does that answer your question, Kevin?

Kevin Cassidy, Analyst, Rosenblatt Securities: That helps very much. Appreciate it, James. Yes. So also curious about the geographies that you’re finding the greatest demand for the Avalon home miners and how you intend to market

Engie Zhang, Chairman and CEO, Canaan Inc.: Okay. Yes, I think currently we sell the Alenkoma series globally. There’s many, many different countries. But I think the primary region is still in The US. So, yes, and I think we have the HomeMiner, we have a very good matrix in quarter two.

And in quarter three, it’s only one month, a little more than one month, and we have better, much better performance than the quarter two. I don’t have the exact numbers, but it’s roughly much better than quarter two. So the interesting thing is we are selling we are trying to sell more heaters in summer and still it’s getting very good results. So I think the homeowner is a very new production line for the whole industry. We are working and learning.

This is what we are doing. From my personal view, I think the homeowners today can get a good it’s already reached a good level for for the product if it’s a target customer is it’s miners. But for traditional consumer market, we still need to enhance everything, include the user experience, costs, and the quality, everything to to reach the requirements for traditional consumer markets. So this is what we need to do next. And we are we are building a very special team to to working on the product itself.

Yeah. So I hope this answer your question. Thank you.

Conference Operator: Thank you. Our next question coming from the line of Mark Palmer with The Benchmark Company. Your line is open.

Mark Palmer, Analyst, The Benchmark Company: Yes. Good morning and congratulations on the resilience demonstrated during the quarter. I wanted to see if you could address the company’s current capital deployment priorities. Given where the share price is, how inexpensive the stock certainly appears, it seems like buybacks would be very much in order. I know that there were some executed during the second quarter.

How are you thinking about capital deployment writ large, where buybacks fit into the mix versus alternative uses of capital? Thank you.

James Chang, CFO, Canaan Inc.: Yes. Thank you, Mark. I think we have already completed the 100,000,000 preferred shares financing in March. After that, we have not used our ATM program. We have paused the ATM program since February 20 to avoid putting additional pressure on the market, especially after our share price fell below $2 I think in early February.

Instead in May, we have announced up to 30,000,000 share repurchase program. And in June, both CEO and myself personally purchased like 817,000 shares. I think in current stage, we believe our shares are significantly undervalued. So buying back stock at current level is a better use of capital than issuing equity. So far we have already purchased like 3,600,000.0 ADSs.

I think that’s something we have already do. And also in using the fund, recently the demand in Asia remains strong, and I think the customers’ interest on expanding their mining fleets from North American customers is steadily recovering. So it seems like the overall market demand is going up and we got healthy orders and sales growth. Every quarter is better than the previous one quarter. So this allows us to prioritize using the capital from the operation to do the operation.

Of course, we can also do some self mining, although it’s not as fast as previously, but still we are growing our mining fleets. I think that’s something we are trying to trying to do. We will continuously maintain flexible in capital allocation. You know, we we can make all kinds of spending decisions based on the actual business needs. We should balance the allocation of minor inventory between sales and self mining.

Usually, we follow a kind of, strategy to build to order, keeping some delivery capacity in reserve. So I think for the capital use in the operation, we always do the allocation in between different business needs. So make sure we have the sufficient funds for future. But of course, we will also do some stock repurchase recently, and we will not start any kind of fundraising immediately. I think I hope I answered your question, Mark.

Conference Operator: Thank you. Our next question coming from the line of Fedorchak Belen with B. Riley Securities. Your line is now open.

Fedorchak Belen, Analyst, B. Riley Securities: Thank you very much, operator. Hello, everyone. And, G and James, maybe my question is the kind of summary and follow-up of what been asked regarding your North America plans. So given that many, many minor kind of postponed their expansion plan due to HPC AI initiative, how do you see the evolution of average selling price, let’s say, by the 2025 and maybe going forward in 2026? Thank you very much.

Engie Zhang, Chairman and CEO, Canaan Inc.: Yeah. I think because I think I just mentioned the global market is quite active currently because, you know, think we I mentioned a number which is the hash price for how many dollars per per petahash per day. Now today, I think it’s it’s about $58 per petahash per day. There is a experienced number. If this number is higher than 55, then it’s bull market for the minor market.

But if it’s lower than 55, it’s maybe a bear market. So currently, it’s 58. So technically, it’s it’s a bull market for, you know, for the the minor market. But still because the unbalance cost by the tariff policy fluctuations in North America. So currently, think the ASP for the miners is lower than it should be.

This is what we are facing today. And how to, you know, we are talking higher ASP. So the method for us is to reopen the channel to send more or manufacture or produce more miners in The U. S. Then the supply and demand and bias could be solved.

So I think for The US market, because the tariff stuff, the ASPs may be may be higher than what we expected, but, you know, because the cost is higher, so we need to sell the machines at a higher price. It’s not a healthy ASP growth, I think, but it will happen. And also, most of the orders, it happens outside The U. S. In Q2.

In Q3, more and more new customers coming, which is coming in Q1 and Q2 are making deals with us. So we are in I think, personally, we are we are in a very cautious, optimistic for the ASPs in late twenty twenty five. And because the machine’s performance is higher, and we have a sixteenth following. So we have better machines than the ASP should be higher than should should also higher. Yeah.

Any okay. So I yeah. So this is my comment on the ASP session. Thank you.

Conference Operator: Thank you. As there are no further questions in queue, now I’d like to turn the call back over to the company for any closing remarks.

Gwen Lauber, Investor Relations Director, Canaan Inc.: Thank you, everyone, for joining us on the call today. If you have any further questions, feel free to reach us directly or through the contact information that you can find on our website. Thanks.

Conference Operator: That concludes the conference call for today. Thank you, everyone, for attending, and you may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.