Canaan Inc.

Canaan Inc. is a Cayman Islands holding company that primarily provides crypto mining solutions through its proprietary Application-Specific Integrated Circuits (ASICs) ¹. The company operates as a fabless IC design firm, focusing on the front-end and back-end of IC design, and then partners with third-party foundries for fabrication, testing, and packaging ². Canaan's core business model revolves around the design, development, production, and sales of its proprietary ASIC-based Bitcoin mining machines under the AvalonMiner brand, serving customers in North America, West Asia, Southeast Asia, Europe, Africa, and other global regions ³. In 2024, Canaan launched the Avalon Home series, a new line of compact, energy-efficient mining devices for individual users and home environments, which was formally commercialized in 2025 ⁴. Beyond product sales, Canaan has also expanded into the Bitcoin mining business through strategic collaborations with cryptocurrency mining farms and energy providers, aiming to develop this as a second growth engine ⁵.

The company's revenue generation is primarily from two segments: product sales (Bitcoin mining machines and related parts/accessories) and mining revenue. For the fiscal year ended December 31, 2025, products revenue accounted for $413.8 million ⁶, representing 78.1% of total revenue ⁷. Mining revenue contributed $113.2 million ⁸, or 21.4% of total revenue ⁹. Other revenues were $2.7 million ¹⁰, or 0.5% of total revenue ¹¹. The company's product offerings include the AvalonMiner series for industrial use, immersion-cooled and hydro-cooled mining machines (with the most advanced hydro-cooled model being Avalon A1566HA with a designed hash rate of 480TH/s) ¹², the Avalon Box (an integrated, containerized mining solution) ¹³, and the Avalon Home series (including Avalon Nano 3/3S, Avalon Mini 3, and Avalon Q) ¹⁴.

For the fiscal year ended December 31, 2025, Canaan reported total revenue of $529.7 million ¹⁵, a significant increase from $269.3 million in 2024 ¹⁶. The cost of revenues for 2025 was $488.5 million ¹⁷, leading to a gross profit of $41.2 million ¹⁸. This represents a substantial improvement from the gross losses of $84.3 million in 2024 ¹⁹ and $240.8 million in 2023 ²⁰. Operating expenses totaled $153.4 million in 2025 ²¹. The company reported a net loss of $210.3 million in 2025 ²², compared to a net loss of $249.8 million in 2024 ²³ and $414.2 million in 2023 ²⁴. Net cash used in operating activities was $261.1 million in 2025 ²⁵, while cash and equivalents at year-end were $80.8 million ²⁶. The company had secured term loans of approximately $52.2 million as of December 31, 2025 ²⁷.

Comparing 2025 to 2024, total revenue increased by 96.7% ²⁸, driven by a rise in products revenue from $223.2 million to $413.8 million ²⁹ and mining revenue from $44.0 million to $113.2 million ³⁰. The increase in products revenue was attributed to both higher computing power sold and an increase in the average selling price of products ³¹. Mining revenue growth was due to increased energized mining computing power and a higher average Bitcoin price ³². Cost of revenues increased by 38.2% to $488.5 million ³³, primarily due to higher product and mining costs, partially offset by a decrease in inventories write-down, prepayment write-down, and provision for inventory purchase commitments from $100.6 million in 2024 to $18.6 million in 2025 ³⁴. Research and development expenses increased by 2.9% to $63.1 million ³⁵, while sales and marketing expenses surged by 138.6% to $13.6 million ³⁶. General and administrative expenses decreased by 5.0% to $68.1 million ³⁷. The company's net loss improved from $249.8 million in 2024 to $210.3 million in 2025 ³⁸.

During 2025, Canaan continued its fundraising efforts, issuing 4,841,000 ADSs with net proceeds of $7.2 million under the 2025 ATM Agreement ³⁹. On November 3, 2025, the company completed a registered direct placement of approximately $72.0 million of ADSs ⁴⁰. Earlier in the year, on March 6, 2025, Canaan entered into a Securities Purchase Agreement for up to 200,000 Series A-1 Preferred Shares, with the first tranche closing on March 10, 2025, raising an initial $100 million ⁴¹. The second tranche was mutually terminated effective April 30, 2025 ⁴². As of December 31, 2025, the net carrying value of mining equipment located in North America and Ethiopia was $26.7 million and $4.5 million, respectively ⁴³.

Canaan Inc. expects its results of operations to continue to be significantly affected by the expected economic returns of Bitcoin mining, particularly the fluctuations of Bitcoin price, as a substantial portion of its revenue is derived from Bitcoin mining machine sales and its Bitcoin mining business ⁴⁴. The company anticipates that any future significant reductions in the price of Bitcoin will likely have a material and adverse effect on its results of operations and financial condition ⁴⁵. The company also notes that the impact on its inventory gradually moderated in 2025 as it optimized inventory levels and sales strategies, resulting in inventories write-down, prepayment write-down, and provision for inventory purchase commitments of $18.6 million in 2025, down from $100.6 million in 2024 and $190.2 million in 2023 ⁴⁶. If the Bitcoin price drops significantly in the future, similar write-downs may occur again ⁴⁷.

A key growth area for Canaan is the continued development of its Bitcoin mining business, which it aims to establish as a second engine to capitalize on the Bitcoin ecosystem and synergize with its Bitcoin mining machine sales ⁴⁸. The company intends to engage in Bitcoin mining through self-owned facilities and strategic collaborations with cryptocurrency mining farms and energy providers ⁴⁹. Canaan endeavors to grow its deployed computing power for mining and improve the energized hash rate to enhance this business ⁵⁰. For the year ended December 31, 2025, revenue from the Bitcoin mining business was $113.2 million ⁵¹, up from $44.0 million in 2024 ⁵². The company believes this business will play an increasingly important role, mitigating inventory risks, strengthening its overall business model, enhancing operational flexibility, and contributing to financial and operating results ⁵³.

Another growth area is the expansion of its product offerings, specifically the Avalon Home series, which was launched in 2024 and formally commercialized in 2025 ⁵⁴. This new line of compact, energy-efficient mining devices is crafted for individual users and home environments, representing Canaan's first step into the home-use mining machine market ⁵⁵. The Avalon Home series includes products like the Avalon Nano 3/3S, Avalon Mini 3, and Avalon Q, designed for user-friendly interfaces, low noise, and streamlined connectivity ⁵⁶. The company aims to empower a broader range of users to support network decentralization and engage with digital assets from home ⁵⁷.

Operationally, Canaan expects to continue its fabless model, relying on third-party foundry partners for IC fabrication and third-party partners for testing and packaging ⁵⁸. The company maintains cooperation with more than one production partner and supplier to diversify its supply base and reduce centralization risk, with its research and development team working to improve chip designs for compatibility with different chip node sizes and manufacturing environments ⁵⁹. Canaan has in-house capabilities to produce products at its assembly plant in the PRC and has diversified its supply chain by adding production and logistic resources in Southeast Asia (Q2 2022) and the United States (Q1 2025) ⁶⁰. The company plans to continue making capital expenditures to meet expected business growth ⁶¹. In the first quarter of 2026, Canaan revised the useful life of mining equipment from 1.5 years to 2 years, which is expected to result in a reduction in depreciation expense of approximately $5,788 for the year ending December 31, 2026 ⁶².

Canaan's capital allocation plans include continued investment in research and development to design and develop new or enhanced ASICs for Bitcoin mining applications and to expand its product offering into new application markets requiring high performance and strong computing power ⁶³. The company incurred research and development expenses of $63.1 million in 2025 ⁶⁴. Canaan believes its existing cash and anticipated cash flows from operating activities, fundraising from the capital market, and sales of cryptocurrency will be sufficient to meet anticipated working capital requirements and capital expenditures for the next 12 months ⁶⁵. However, it may seek additional equity and debt financing to enhance liquidity or increase cash reserves for future investments ⁶⁶.

The company acknowledges structural headwinds and execution risks, including the volatility of Bitcoin price and its impact on demand and pricing for its products ⁶⁷. Bitcoin halving events are expected to reduce mining rewards, potentially dampening investment in new mining equipment unless offset by Bitcoin price increases or efficiency improvements ⁶⁸. Increases in energy prices, driven by geopolitical conflicts or other factors, may reduce the economic attractiveness of Bitcoin mining and adversely affect demand ⁶⁹. Macroeconomic conditions, such as changes in interest rates and liquidity, may also affect Bitcoin prices and demand for products ⁷⁰. Regulatory changes, including new legislative frameworks for digital assets, could impose additional compliance requirements or restrict business activities ⁷¹. The company also faces risks related to its reliance on a limited number of third-party foundry partners for ASIC supplies ⁷².

Geographically, Canaan has expanded into global markets, with 58.9% of its total revenues from Bitcoin mining machines and related parts and accessories generated from customers outside the PRC in 2025 ⁷³. This expansion is a response to adverse changes in the PRC regulatory environment, which has actively cracked down on Bitcoin mining and trading ⁷⁴. The company's operations are subject to geopolitical risks, including potential impacts from cross-strait relationships and trade policies between the United States and China, which could affect its supply chain and international expansion ⁷⁵.

Canaan Inc. faces material risks across several categories. Macroeconomic risks include the significant impact of Bitcoin price volatility on the demand and pricing of its products and mining business, with any future significant reductions in Bitcoin price likely to have a material adverse effect on results of operations and financial condition ⁷⁶. Increases in energy prices, potentially driven by geopolitical conflicts, could reduce the economic attractiveness of Bitcoin mining and adversely affect product demand ⁷⁷. Broader macroeconomic conditions, such as changes in interest rates and liquidity, may also negatively influence Bitcoin prices and demand ⁷⁸. Operationally, the company is highly dependent on a limited number of third-party foundry partners for ASIC supplies, and any failure to obtain sufficient capacity could significantly delay product shipments ⁷⁹. Bitcoin halving events are an inherent feature of the Bitcoin protocol that reduce mining rewards, potentially decreasing demand for products unless offset by Bitcoin price increases or efficiency gains ⁸⁰. The company also faces risks from constant changes in its industries, requiring continuous innovation and substantial research and development investments, which may not always yield expected results ⁸¹. Regulatory risks are significant, particularly due to evolving PRC laws and regulations that have actively cracked down on Bitcoin mining and trading, potentially impacting sales to PRC customers and imposing additional restrictions on overseas capital-raising activities ⁸². New legislative frameworks relating to digital assets in various jurisdictions could also impose compliance requirements or restrict business activities ⁸³. Geopolitical tensions, especially between the United States and China, could lead to trade restrictions, supply chain disruptions, and increased costs, materially and adversely affecting the business ⁸⁴.

Management's message emphasizes the company's core strength in providing high-performance computing solutions through proprietary ASICs and its strategic expansion into the Bitcoin mining business as a second growth engine. The company highlights its strong ASIC chip design capability, over ten years of industry experience, and the expertise of its founders and management team ⁸⁵. Management notes the formal commercialization of the Avalon Home series in 2025, marking its entry into the home-use mining machine market ⁸⁶. For the fiscal year ended December 31, 2025, management reported a significant increase in total revenue to $529.7 million ⁸⁷ and a gross profit of $41.2 million ⁸⁸, an improvement from previous gross losses. Despite a net loss of $210.3 million ⁸⁹, management points to the moderation of inventory write-downs as a positive sign, with $18.6 million recorded in 2025 ⁹⁰. The company believes its existing cash and anticipated cash flows, along with recent fundraising activities, will be sufficient for the next 12 months ⁹¹. Key strategic priorities include continued investment in research and development to enhance ASIC designs and expand product offerings ⁹², growing the Bitcoin mining business by increasing deployed computing power and energized hash rate ⁹³, and diversifying the supply chain by adding production and logistics resources in Southeast Asia and the United States ⁹⁴.