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Bitcoin Mining Rig Maker Canaan Sees 'Prolonged Headwinds' After Challenging Quarter
CEO Nangeng Zhang cited a slumping bitcoin price and COVID-19 lockdowns in China.
Updated May 11, 2023, 6:49 p.m. Published Aug 18, 2022, 10:42 a.m.
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Canaan (CAN), which makes bitcoin mining machines and designs chips used for mining, said tougher market conditions will hurt its financial performance in the coming months after a difficult second quarter.
On Thursday, Beijing-based Canaan reported that its revenue in the second quarter rose 53% from the year-earlier period to 1,653 million yuan ($247 million) and that earnings were 53 cents per American depositary share. That was 3.53 yuan per ADS, up from 1.46 yuan per ADS a year ago.
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In the earnings press release, CEO Nangeng Zhang described the quarter as a "challenging period" because bitcoin's price tumbled below $20,000 in June and China locked down some cities due to COVID-19. The lower bitcoin price "will bring prolonged headwinds to our performance in the coming quarters," Zhang added.
Bitcoin miners' margins were slashed following a market crash that pulled the world's largest cryptocurrency below $20,000 in early June. Miners have also been faced with soaring energy prices in recent months, brought to a head by the war in Ukraine.
Computing power sold fell to 5.5 million terahashes per second from 5.9 million TH/s. Canaan responded by dropping prices on spot sales, which it said will lead to a dramatic decrease in gross margin during the second half of the year.
"Looking forward to the coming quarters, we see a tougher market environment from the lower bitcoin price level, overall increased energy price and various pandemic and geopolitical uncertainties globally, which may all jeopardize the demand and price for our products," Chief Financial Officer James Jin Cheng said in the press release.
Canaan's Nasdaq-listed shares rose 4.6% to $4.09 in premarket trading on Thursday.
UPDATE (Aug. 18, 11:17 UTC ): Adds additional paragraph with context around bitcoin miners' margins.
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