Canaan CEO expects ‘prolonged headwinds’ amid downward pressure on Bitcoin

Canaan Inc. (NASDAQ: CAN) Chief Executive Officer Nangeng Zhang believes the Bitcoin (BTC/USD) mining hardware provider, and the broader sector, could see “prolonged headwinds” in the next few months as the crypto market battles the downside pressure that’s thwarted bulls since the fourth quarter of last year.

Zhang, also Chairman of the Beijing-based computing solutions provider and Bitcoin miner, noted this in a statement shared in a press release highlighting the company’s unaudited Q2 2022 financial results.

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Bitcoin tumbling and COVID lockdowns a challenge in Q2

Zhang says the second quarter of 2022 was particularly challenging, with highlight factors being Bitcoin’s tumble to prices below $20,000 and the Covid-19 lockdowns across major Chinese cities.

According to the Canaan chief executive, the lockdowns had huge impact on the firm’s daily operations and disrupted demand for its AI chips. Nonetheless, the company tried hard to ensure all its clients were satisfied, and supported its global expansion by integrating operations across its international headquarters in Singapore.

With Southeast Asia becoming an integral supply chain and Canaan teaming with mining partners to boost its business, total BTC mined in the quarter increased to 346.84 bitcoins as of 30 June 2022.

Overall, we are fully aware of the downward pressure from the Bitcoin price since the last fourth quarter and expect it to bring prolonged headwinds to our performance in the coming quarters. Nevertheless, we believe in the unique value of Bitcoin and its long-term prospects. We are committed to developing our supercomputing technology on more advanced nodes and providing competitive products and best-of-class services to clients around the world.”

Canaan Inc financial results

A summary of Canaan’s financial highlights indicate total computing power sold jumped 27.5% to 5.5 million Thash/s in Q2, up from the 4.3 million Thash/s sold Q1 2022. Revenue also rose, increasing 21.9% in Q2 to hit RMB1,652.7 million ($246.7 million) – compared to RMB1,356.1 million in Q1.

The company also posted quarterly increases of 12% in gross profit, 37.9% in net income and 26.6% in non-GAAP adjusted net income. In Q2, mining revenue rose 60.9% to RMB52.1 million ($7.8 million).

James Jin Cheng, the CFO of Canaan, commented on the performance:

In the second quarter of 2022, we generated total revenue of RMB1,652.7 million, in line with our guidance range. The solid topline performance primarily resulted from the sequentially increased computing power sold and relatively high average selling price we secured with contract sales from previous quarters where the Bitcoin price was at a higher level. As the Bitcoin price further decreased in the second quarter, we responsively lowered our product price for spot sales to shoulder the pressure with our clients.”