Canaan, Inc. Q2 FY2026 earnings call

• Market Environment: Challenging conditions with Bitcoin prices fluctuating and hash rates weakening. Miners became cautious on equipment purchases due to elevated industry inventory and price competition.
• Product Business: Adjusted pricing for flexibility and shifted to a 'bill-to-order' production model to control inventory and cash flow. Average selling price was $5.5 per TH/s.
• Mining Operations: Deployed hash rate adjusted based on power prices. Project ABC remains a key priority, generating positive cash flow with an installed hash rate of 4.85 EH/s as of late July. Overall power costs remained competitive at ~$0.043/kWh.
• Strategic Transformation: Focus shifting toward long-term, low-cost power resources and infrastructure. Confidence remains in securing gigawatt-scale load by end of 2026.
• Compute-to-Heat: Advancing energy utilization partnerships, such as hydro-cooled equipment for district heating in Nordic projects, validating feasibility for winter heating demand.
• R&D: Continued advancement of A16 series (air-cooled and high-temp hydro-cooled). Avalon Home products prepared for mass production in Q3 to capitalize on the northern hemisphere heating season.
• Capital Allocation: Prioritizing cash management and liquidity. Used proceeds from digital asset sales to repurchase shares ($7.4M YTD). Maintained $66M in cash at quarter-end.

Total Revenue: $32 million (below guidance of $35M-$45M). Product Segment Revenue: ~$14 million, representing approximately 44% of total revenue. Mining Operations Revenue: ~$18 million, representing approximately 56% of total revenue.

• Q3 2026 Revenue Guidance: Lowered/Revised down to $11 million - $15 million (previously guided $35M-$45M for Q2, indicating significant downward pressure).
• Outlook Rationale: Reflects continued caution among miners, need to digest industry inventory, and sustained pressure on mining machine average selling prices.
• Volatility Warning: Management warns that actual results may differ significantly due to macroeconomic changes, policy shifts, Bitcoin price volatility, and industry demand fluctuations.

• Macroeconomic & Policy Risks: Tightening mining policies in China and other regions; geopolitical conflicts affecting investment willingness.
• Market Volatility: Rapid declines in Bitcoin and hash rates impacting revenue and asset valuations.
• Operational Failures/Impairments: Significant non-cash charges including $9.2M impairment of PP&E, $2.7M credit losses, and $4M equity investment loss on Project ABC due to retirement of older machines.
• Liquidity & Compliance: Company transferred to Nasdaq Capital Market and is under a 180-day grace period to regain compliance with listing standards.
• Inventory Risk: Elevated industry inventory levels intensifying price competition and forcing write-downs.

Q: Analyst asked about the gigawatt power pipeline strategy, specifically whether Canaan will pursue co-location or GPU cloud rental models for HPC. / A: CEO stated it is too early to choose between co-location and GPU cloud rental, as project structures depend on specific stakeholder needs. The company will not manage the entire end-to-end chain but will participate where it adds value using partners with complementary strengths. Focus remains on securing cost-advantaged power resources first, with partnership models evolving as projects clarify.

Q: Analyst inquired if rising Bitcoin prices have improved global demand for mining machines. / A: CEO clarified that global demand remains very weak outside the U.S. due to poor mining economics and geopolitical issues. While ESG-related "compute-to-heat" applications in Nordics show early promise (e.g., 6MW orders), this is still small-scale and does not indicate a broad market recovery. Demand is primarily driven by domestic U.S. activity rather than global expansion.

Q: Analyst asked about the pace of share repurchases and how capital allocation balances with liquidity preservation. / A: CFO explained that repurchase pace depends heavily on future regulatory developments (e.g., Clarity Act vote) and resulting share price volatility. Management has strong confidence in undervaluation and continues buying personally. They view buybacks as a critical use of capital when shares are deeply undervalued, supported by board authorization to monetize digital assets for this purpose.

Q: Analyst questioned how capital and resources are allocated between AI/HPC opportunities and core Bitcoin mining. / A: CEO and CFO emphasized that Bitcoin mining remains the immediate cash generator. For HPC/AI, they will use step-by-step joint ventures or development partnerships rather than building end-to-end data centers alone, which exceeds their current capital capacity. They plan to leverage mining assets as collateral for future financing, prioritizing shareholder value through disciplined, incremental growth in infrastructure.