Canaan – a China-based Bitcoin (BTC) ASIC manufacturer and operator – has reported a significant drop in revenue from mining machine sales in the last quarter. According to its Q3 earnings released on Tuesday, the company’s revenue for the three months ended September 30, 2023, was just $33 million. This is a significant decrease from $73.9 million in Q2 and $145.5 million during the same period last year.
Challenges and Response
The majority of Canaan’s revenue came from sales of its Avalon Bitcoin miners, which experienced a 48% decline quarter over quarter. The company attempted to stimulate new demand by reducing the price of its machines but faced increased pricing competition and a noticeable softening in purchasing power, which severely impacted sales. In response to the downturn, Canaan is actively exploring miner collaborations and making relentless efforts to find new business opportunities despite the tight market conditions.
Industry Climate and Impact
The decline in Canaan’s revenue is reflective of the challenges faced by crypto firms across the industry. Rising interest rates and a sinking digital asset market have resulted in withering revenue and decreased user activity. Many firms, including major crypto lending firms, exchanges, and mining companies, have gone bankrupt, while others have been forced to implement mass layoffs. However, there have been some recovery stories, such as CleanSpark (CLSK) and Marathon Digital (MARA), whose revenue and share value have improved due to the strong performance of BTC.
- Canaan’s local mining business in Q3 declined to $3.3 million, a staggering 79.5% drop from the prior quarter.
- According to Canaan CFO James Jin Cheng, this decline was amplified by the suspension of operations in Kazakhstan due to new local policies and the default of a U.S. counterparty.
Chairman and CEO Nangeng Zhang reassured that despite the challenges faced, the company remains committed to expanding its mining infrastructure through pilot projects in both North and South America.
“Overall, we faced increased pricing competition and a noticeable softening in purchasing power on the demand front, which have posed severe challenges to our sales.” – Canaan
In addition to the revenue decline, Canaan reported a net loss of $80.1 million in the third quarter, with a significant portion attributed to a $53.9 million inventory write-down.
