As the Bitcoin bull market continues its surge, leading Bitcoin ASIC manufacturer Canaan Inc. reported Q4 2023 earnings on February 27. The report unveils a challenging landscape for the company amidst lukewarm demand for ASIC miners and servers.
Canaan Inc. Q4 2023 Results
The report showcased a 16% decrease in revenue to $49 million in Q4 2023 compared to the same period last year, with a widening net loss of $139 million. In particular, Canaan recorded $3.7 million in mining revenue, stating:
“Mining revenue was $3.7 million, representing an increase of 13.6% from $3.3 million in the third quarter of 2023 and a decrease of 65.5% from $10.7 million in the same period of 2022.”
Canaan’s financial performance showcased a gross loss of $54.1 million in Q4 2023, compared to $64.1 million in the same period of 2022. The firm foresees tougher times ahead, projecting total revenues of around $33 million for Q1 2024 and $70 million for Q2 2024, citing challenging market conditions across the industry. During this period, Canaan recognized a non-cash inventory write-down of $55 million due to pricing pressures.
The company’s full-year 2023 report showcases a decrease in revenues to $211.5 million from $651.5 million in 2022. It stated:
“The decrease was mainly due to the lower selling price which resulted from overall soft purchasing power from the market demand front.”
Positive Outlook
Canaan acknowledged the persisting challenges in the bearish market for mining machines but drew inspiration from the recent approval and listing of spot Bitcoin ETFs. The company sees this milestone as a potential signal for Bitcoin to attract a larger user base, fostering a more solid consensus in the long run. Nangeng Zhang, Chairman and CEO of Canaan, stated:
“This milestone signals the potential for Bitcoin to attract a larger user base and foster a more concrete consensus in the long run. Our commitment remains unwavering as we stand shoulder-to-shoulder with the Bitcoin ecosystem and miner partners.”
Challenges Ahead
Despite Bitcoin’s recent stellar gains of 144.4% over the past year, the mining industry, as reflected by Canaan’s performance, faces increasing headwinds.
Notably, Bitcoin’s mining difficulty has doubled to 81.73 trillion during the same period. Moreover, the next Bitcoin halving scheduled for April, will reduce mining rewards by 50%. These factors lead to the anticipation of new challenges even as bitcoin’s price continues climbing to its previous all-time high.
On a similar note, analysts at Galaxy Research recently emphasized the sensitivity of breakevens for various ASIC models to bitcoin price and transaction fees as a percent of rewards. They estimate that between 15 to 20% of network hash rate from ASIC models could potentially go offline after the halving.
As the industry anticipates the impact of the upcoming Bitcoin halving on returns and capital expenditure decisions, Canaan emphasizes a proactive approach. It aims to invest in strategic directions like research and development, supply capacity, and self-mining while remaining prudent in operating expense spending.
