BTC miner Canaan posts $110M net loss in Q2 despite improved revenues

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Block reward miner Canaan Inc. (NASDAQ: CAN) recorded a 31% spike in losses in the second quarter despite increased revenue, the company revealed in its latest earnings report.

Canaan reported $73.9 million in Q2 revenues, up 33% from Q1’s $55.2 million. However, it was significantly lower than the $246 million it registered in the same period last year.

The Beijing-based company made the bulk of its revenue from product sales, which hit $58 million. It recorded an uptick in total computing power sold despite lower prices as demand soured.

The company also brought in $0.1 million from artificial intelligence (AI) products, a small proportion of its overall revenue at a time when AI is all the rage with technology companies. Canaan launched its first AI chip five years ago but has yet to gain traction in the sector.

Revenue from the firm’s mining business increased to $16 million, a 105% spike from the same period last year on the back of BTC price recovery.

However, despite the increased revenue, the company recorded a net loss of $110 million, down from a net income of $90 million in Q2 last year.

According to CFO James Jin Cheng, the net loss was mainly attributable to “inventory write-down, provision for commitment reserve and impairment of property and equipment.”

The company still believes in the market’s potential and will continue to invest in its technology and products to secure a larger market share, Cheng added.

In his comments, CEO and founder Nangeng Zhang echoed the company’s commitment to BTC mining while acknowledging the mounting challenges. They include a market downturn that has led to lower ASIC rig demand and the collapse of key partners, leading to contract breaches and defaults. On the latter, the company is involved in a dispute with a partner who failed to install 13,000 BTC mining machines and ceased the operation of another 13,000 installed machines.

Shifting regulations have also dealt a blow to the company. In Kazakhstan, the company had to temporarily shut down its mining rigs after a new law came into effect, requiring all miners to first obtain a specialized license. It says it’s working with a local partner to obtain the license and hopes to be back in business soon.

A chilly winter for BTC miners

Canaan joins many other miners who have reported losses this year. Canada’s Hut 8 reported a $12.3 million loss in Q2, blaming a rise in BTC network difficulty and the suspension of some of its mining facilities.

Marathon Digital (NASDAQ: MARA), the world’s largest BTC miner, reported a $21.3 million loss in the second quarter. The company, which is being pursued by the Securities and Exchange Commission (SEC) for securities violations, lost $686 million in 2022.

The block reward mining industry has been under siege for years now. Recently, Laos cut off the power supply to miners, and Angola plans to ban mining in the country. Other havens like the U.S. and Kazakhstan are also turning against the miners.

The Middle East remains the only region welcoming of miners. Recently, Oman unveiled a $350 million mining hub that’s set to host over 2,000 mining rigs. The country intends to raise the number to 15,000 by the end of October.

UAE is also investing heavily in the sector. In May, Abu Dhabi announced the launch of the region’s first large-scale mining facility. A partnership between Abu Dhabi’s sovereign wealth fund ADQ and Marathon, the 250MW facility cost over $400 million.

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