Chinese block reward mining and ASIC developer Canaan Inc. (NASDAQ: CAN) recorded a 90% dip in its income in the third quarter of the year as the industry struggles in the bear market.
In its recently-published earnings call, the Chinese firm revealed that it generated RMB978.2 million (US$137.5 million) in revenue, a 40% drop from the $233 million it recorded in Q2 and 25% from a year prior.
At $33 million, gross profit was down 75% from Q2, while its net income of $8.6 million represented a drastic 90% drop from Q2 and an 88% drop from the same period in 2021.
With the digital asset industry going through a bear market this year, the demand for BTC block reward mining equipment has slowed down significantly. This has seen some, like Compute North, file for bankruptcy after it was unable to meet its debt obligations, while others, such as Compass Mining, have had to shut down some of their facilities.
Canaan has also been affected, selling 3.5 million th/s in computing power, 37% below the Q2 demand and a 49% drop from the same period in 2021.
“The [BTC] mining market deteriorated during the third quarter, as the [BTC] price fluctuated and further dipped to around sixteen thousand dollars recently. The negative market dynamics have significantly hindered [BTC] miners’ revenues and cash flows,” Nangeng Zhang, the chairman and Chief Executive Officer of Canaan, commented.
Despite the revenue hit, Canaan is optimistic that the block reward mining sector will recover. Zhang pointed out that the company launched its new AvalonMade 13 ASIC machines in October, “reaffirming our confidence in the fundamental value of the [BTC] ecosystem.”
The CEO also revealed that Canaan has recently expanded its BTC block reward mining business into the United States.
James Jin Jeng, the company’s Chief Financial Officer, further revealed that Canaan had to realign the selling price of most of its machines as demand soured. This considerably weighed down the firm’s gross margin, but Jeng is confident Canaan can bounce back.
“We have been through multiple market cycles and endured countless challenges in the past. Now, with our focus on securing our cash flow and preserving our cash position, we believe we will emerge from the recent headwinds too,” he commented.
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