Canaan Q3 2026 Earnings Call Transcript

Canaan (NASDAQ:CAN) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Canaan Inc. reported third-quarter 2026 revenue of $14.5 million, within their guidance range, and a net income of $8.0 million, primarily driven by gains on digital assets.

The company is shifting focus from Bitcoin mining to energy and AI HPC infrastructure, aiming to enhance shareholder value by controlling capital expenditures and focusing on returns.

Canaan is progressing on two 1 GW power projects in Texas, with the Duval County project receiving a conditional study load classification, indicating advancement in grid interconnection.

Cash and cash equivalents totaled $72.8 million as of September 30, boosted by $50 million in restricted cash for energy projects, and the company completed a $1.1 million land purchase in Texas for infrastructure development.

A share repurchase program of up to $100 million over the next 12 months has been approved, with an initial program of $20 million, reflecting the belief that the company’s shares are undervalued.

Despite a recovery in Bitcoin prices, Canaan has not observed a significant recovery in mining equipment demand due to high wafer costs and low investment returns, impacting production decisions.

Operational cost control measures have been implemented, resulting in a 15.5% reduction in operating expenses from the previous quarter.

The company expects Q4 2026 revenue to be between $18 million and $22 million, with no significant recovery anticipated in mining equipment demand.

Full Transcript

OPERATOR

Ladies and gentlemen, thank you for standing by and welcome to Canaan Inc. third quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After management’s prepared remarks, we will have a question-and-answer session. Please note that this event is being recorded. Now I’d like to hand the conference over to your speaker today, Gwyn Lauber, Investor Relations for the company. Please go ahead, Gwyn.

Gwyn Lauber (Investor Relations)

Thank you, operator. Hello everyone and welcome to our earnings conference call. Joining us today are Chairman and CEO Nangeng Zhang and our CFO, Jin James Chang, Leo Wang, Vice President of Capital Markets and Corporate Development, and Xi Zhang, Senior IR Manager. One will also be available during the question-and-answer session. Our CEO will start the call by providing an overview of the company and performance highlights for the quarter. Our CFO will then provide details on the company’s operating and financial results for the period before we open up the call for your questions.

Before we begin, I would like to refer you to our Safe Harbor statement in our earnings press release. Today’s call will include forward-looking statements. These statements include, but are not limited to, our outlook for the company and statements that estimate or project future operating results and the performance of the company. These statements speak only as of today and the company assumes no obligation to revise any forward-looking statement that may be made in today’s press release, call or webcast, except as required by law.

These statements do not guarantee future performance and are subject to risks, uncertainties and assumptions. Please refer to the press release and the risk factors in documents we file with the Securities and Exchange Commission, including our most recent annual report on Form 20-F, for information on risks, uncertainties and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today’s call, we will discuss both GAAP financial measures and certain non-GAAP financial measures which we believe are useful as supplemental measures of the company’s performance. These non-GAAP measures should be considered in addition to, and not as a substitute for or in isolation from, GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results, in our earnings press release which is posted on the company’s website.

With that, I will now turn the call over to our Chairman and CEO, Nangeng Zhang. Nangeng, please go ahead.

Nangeng Zhang (Chief Executive Officer)

Thank you, Gwyn. Hello everyone, this is Nangeng. Thank you for joining today’s earnings call. Over the past few quarters, we have discussed Canaan’s strategic transformation on several occasions. Today, I would like to begin with the changes taking place in our industry, then explain how we are adapting our operations and share the latest progress in our transformation. First, the Bitcoin mining hardware industry is undergoing profound structural changes. Demand remains weak, industry inventories are elevated, and hardware selling prices remain under pressure. At the same time, rapidly growing AI demand is absorbing significant advanced-node chip manufacturing capacity, driving wafer fabrication costs sharply higher and tightening supply. As a result, even higher-performing next-generation mining machines made it difficult to produce at a reasonable cost and generate adequate commercial returns.

We expect these factors to constrain the production and deployment of new mining machines over the next few years, making it difficult for Bitcoin network hash rate to sustain its past pace of growth. For operators with low-cost power and existing equipment, this could improve long-term mining economics. In response, Canaan is adjusting its approach to R&D, manufacturing and capital investment. Over the past two quarters, several of our next-generation mining ASIC development projects have been completed or are substantially complete. We have received some engineering samples with test results meeting our design expectations and additional samples continue to arrive. We believe these technological advances are sufficient to meet market needs over the next several years.

This enables us to significantly reduce ongoing R&D spending on new products while retaining the ability to begin mass production when commercial conditions are appropriate. We will continue to pursue economically attractive opportunities in mining hardware sale and Bitcoin mining, but we will no longer rely on sustained large-scale investment and successive product generations to drive the company’s growth. Canaan’s long-term focus is shifting towards energy and AI HPC computing infrastructure. This transformation rests on a clear business foundation. Through years of Bitcoin mining operations in North America, we have developed expertise in power procurement, site development, equipment development, deployment and operations management while building long-term relationships with utilities, local communities and partners. Since 2025 we have applied these capabilities to developing power resources on a large scale.

As demand for AI infrastructure grows rapidly, land and infrastructure with reliable access to power are becoming critical to the industry’s development. Today I’m pleased to share an important milestone. Our 1 GW large load project in Duval County, Texas recently received a conditional study load classification under ERCOT’s Batch 0 process. This achievement reflects our team’s sustained development efforts and investment and marks a substantive step forward in the grid interconnection process. We are continuing to advance the remaining grid interconnection procedures.

On the commercial development side, we are engaging in deep discussions with a U.S. institution with an investment grade credit profile regarding a potential strategic partnership. We believe partners with strong capital resources, credit support and the ability to deliver large infrastructure products can help tenants participate more efficiently in major energy infrastructure developments. This is particularly important for a company of our size.

By drawing on our expertise, we can play a meaningful role in the value chain of large projects while controlling our capital commitments and the risk and earn returns. With our contribution, we aim to build this collaborative development model into a sustainable business over the long term. The significance of this progress extends well beyond a single project. AI data center infrastructure represents a substantial market opportunity, but it also requires significant capital, specialized expertise and long development and construction timelines. Bitcoin mining, another form of high-density computing application, offers greater flexibility. It can help the grid balance peak and off-peak power demand and provide additional value to local communities through heat recovery and other uses over the long term.

Canaan’s power resources can serve different purposes. For projects suited to AI HPC, we will prioritize the corresponding development and partnership opportunities. For lower-cost power resources that are better suited to Bitcoin mining, we are also open to prioritizing Bitcoin mining. We will assess the economics and development conditions of each project and flexibly select the business model that creates the greatest value. In addition, Canaan has historically adhered to a philosophy of developing jointly with partners across the ecosystem.

We believe this approach should remain equally applicable to today’s AI HPC development projects and can help the company go further and more steadily. At the same time, we are advancing another 1 GW power resources project in Zapata County, Texas. This project is in early-stage development with preparations for grid studies underway. The milestone in Duval and our continued progress in Zapata demonstrate that we are gradually building both a pipeline of power resources projects and an ongoing development capability in North America. We aim to translate the industry relationships and execution experience we have accumulated over the years into an infrastructure business that creates sustained value.

Finally, let me turn to capital discipline. We are taking firm action to control operating expenses, further reduce administrative costs and R&D spending, and strictly manage new production commitments and capital investment for large infrastructure projects. We will prioritize structures that draw on our expansion expertise, bringing in partner capital and allocating risk appropriately. Our goal is to use less of our own capital to participate in higher-value projects while gradually improving shareholder value and capital efficiency.

I want to emphasize that Canaan’s transformation goes beyond the shift from Bitcoin mining to AI HPC data centers. More fundamentally, we are shifting our focus from capital expansion to generating returns on capital and ultimately enhancing shareholder value. This requires us to apply strict capital discipline to our treasury policy, R&D spending and capital investment planning, allocating capital only to opportunities that can clearly create shareholder value at a manageable level of risk.

We must be equally disciplined about taking on debt or diluting shareholders. We will pursue growing only when it compounds shareholder value and strengthens our P to institutional investors. The operating environment remains challenging, but Canaan’s transformation is moving from strategy to its future. Building on years of technological development, we have completed a major phase of R&D and began to make tangible progress in energy infrastructure.

Our business priorities and path forward are becoming clear and I am confident in this direction. We will remain focused on project execution, capital efficiency and commercial returns, demonstrating the value of this transformation through sustained operating results. Thank you everyone. Now I will turn the call over to James to review our quarter three financial results.

James

Thank you, Angie, and hello everyone. This is James speaking in our Singapore headquarters just now. Angie described the two shifts underway at Canaan: first, from bitcoin mining toward energy and AI HPC infrastructure, and more fundamentally from capital expansion toward capital returns and shareholder value. My remarks today will show how both are reflected in our numbers this quarter: first the capital we have committed to our energy projects, then our treasury and shareholder actions, and finally our third quarter results and outlook.

The clearest example this quarter is our Duval County project. As of September 30, we held $50 million in cash collateral for a letter of credit in relation to power projects. This is a concrete commitment of capital behind the milestone energy just disclosed. The funds remain on our balance sheet as restricted cash. Cash and cash equivalents were $22.8 million as of September 30th. The decline from the end of June mainly reflected the funds we moved into the collateral account.

Including the $50 million collateral, our total cash position was $72.8 million, up 10.3% from the end of June. Beyond the collateral, we had approximately $3.3 million in project prepayments as of September 30th. Related to our infrastructure plans, in October we also completed approximately $1.1 million power-related land purchase for our 1 gigawatt power resource project in Zapata County, Texas. Securing suitable land is one of the core development capabilities.

This piece of land gives us a base for application for power interconnection and reflects our commitment to building a lasting presence in the United States for large infrastructure projects. We intend to bring in capital from partners and minimize development uncertainty so that we can participate in high-value projects with less of our own capital. The same discipline guides how we manage our treasury. N.G. also emphasized discipline in our treasury policy. During the third quarter, we monetized our Ethereum holdings and a portion of our Bitcoin holdings, generating approximately $40 million in cash. The average selling prices were approximately $79,000 per Bitcoin and $2.4K per Ethereum. Of these proceeds, we used $5.4 million to repurchase 13.6 million ADSes. We regularly review our treasury strategy, weighing the potential returns from holding digital assets, investing in our businesses, and repurchasing our shares.

We believe our shares are undervalued relative to our long-term value, so we are prepared to allocate a portion of our capital to buybacks. We believe our current share price does not fully reflect our long-term value, and share repurchases are an important capital allocation priority for us. Our Board has approved a new share repurchase authorization of up to $100 million over the next 12 months, under which we are launching an initial program of up to $20 million.

As our available funds grow, we intend to pursue repurchases more actively. The pace and scale of repurchases will depend on our financial position, market conditions, and applicable regulations. We are also planning an ADS ratio change. The change is designed to preserve the overall economic interest represented by investors’ ADS holdings. By increasing the per ADS trading price, we believe it could make our ADS more accessible to institutional investors whose investment policies limit holdings of lower-priced securities. As our business increasingly centers on energy and computing infrastructure where progress is measured over quarters rather than months, we have discontinued our standalone monthly mining report.

Key mining metrics will be included in our quarterly results. We will continue to announce material developments separately when timely disclosure is required under applicable rules. During the third quarter, we appointed KPMG in Singapore as our auditor, succeeding KPMG in Beijing. I would like to thank the KPMG Beijing team for their professionalism and support and welcome the KPMG Singapore team. The change aligns our audit arrangements more closely with our increasingly international operations.

Now let me turn to our third quarter results. For the third quarter we reported revenue of $14.5 million, within our guidance range of $11 million to $15 million. Net income was $8.0 million, driven primarily by $51.9 million in fair value gains on digital assets and related financial derivatives, reflecting the recovery in Bitcoin prices during the quarter. Adjusted EBITDA was $22.4 million and also benefited from these gains. If Bitcoin prices continue to trend upward, the appreciation of our accumulated digital assets could further contribute to our profitability.

This aligns to our digital assets treasury strategy. Our mining gross margin improved significantly to close to 30% in the third quarter, up from about 20% in the second quarter. We generated 133 Bitcoin during the quarter. Even after monetizing a portion of our holdings, we held approximately 1,875 Bitcoins as of September 30th. By maintaining a substantial Bitcoin treasury through the downturn, we were able to participate in the subsequent price recovery, and the increase in the value of these holdings made an important contribution to our results this quarter.

Total operating expenses were $34.2 million, down 15.5% from the prior quarter. As Eunji mentioned, several of our next-generation mining ASIC projects have been completed or are nearly complete, and we believe these results can support market demand over the coming years. As a result, we no longer need to heavily rely on continuous large-scale R&D investments to drive growth, which allows us to continue managing our operating expenses prudently.

Our inventory declined to $119 million on September 30, marking its lowest level in the past five quarters. Given the demand environment and the rising wafer costs, we are carefully managing new production commitments and aligning purchases with actual customer demand. For Project ABC, we recognized $1.6 million in equity investment income during the quarter. This gain was non-cash and included acquisition-related accounting adjustments. In cash terms, we received $1.9 million from ABC, comprising $1.2 million in distributions and $0.7 million in sales proceeds. For us, these cash receipts are the meaningful measure. Our focus remains on ABC’s operating performance and its ability to generate real cash returns over time.

Beyond our own mining operations, we are also expanding the applications of our mining equipment to help customers get the most value from every megawatt. In Northern Europe, an 8 megawatt heating project repurposes waste heat from liquid-cooled computing equipment to provide heating for approximately 2,800 households. We are also exploring greenhouse heating in Canada, home heating through Avalon Home, and using associated gas from oil fields that would otherwise be flared.

In summary, this quarter is a profitable quarter with committed capital to our energy strategy, return of capital to shareholders, and tight control over costs, expense, and inventory. As Angie said, our transformation is moving from planning to execution. On the financial side, we will continue measuring the progress by capital efficiency and returns. We will remain disciplined in our use of capital and pursue growth only where it compounds value per share.

Turning to our outlook, we expect total revenue for the fourth quarter of 2026 to be between $18 million and $22 million. This outlook reflects our current assessment of the market and the operating conditions. Actual results may vary with changes in Bitcoin prices, industry demand, and other market conditions. Thank you, operator. We are now ready to take questions.

OPERATOR

Thank you. We will now begin the question-and-answer session. As a reminder, if you wish to ask a question, you will need to press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press Star 11 again. Once again, if you wish to ask a question, please press Star 11 on your telephone. We will take our first question. Your question comes from Kevin Dede from Jones Trading. Please go ahead. Your line is open.

Sky Moore (Analyst at Jones Trading)

Hey guys, thanks for taking my questions. This is Sky Moore calling in for Kevin Dede. My first one is, with the next ASICs after A16 largely complete, what specific market conditions would lead you to start mass production? Where should R&D spending settle, and how do you plan to work down the remaining inventory?

Nangeng Zhang (Chief Executive Officer)

Hi, Sky. Yeah, I think over the past two quarters we have completed or substantially completed several next-generation mining ASICs development, and during this quarter we have received some of the engineering samples and we have tested them, and the test results meeting our design expectations, and additional samples are arriving. So I think this technology portfolio can support the market demand over the next several years. Our next step is to determine when commercial conditions are justified bringing these technologies into volume production.

Advanced node wafer costs have risen significantly while mining equipment demand remains very weak. So we will therefore consider customer demand, production cost, and expected returns when setting the production schedule. So I think this technology portfolio allow us to substantially reduce ongoing mining R&D spending while retaining the ability to launch new products where appropriate. So that is consistent with us broader transition: continue to pursue economically attractive mining equipment opportunities while directing more resources towards energy and AI HPC infrastructure.

Yeah, thank you.

Sky Moore (Analyst at Jones Trading)

Great. Thanks for all that. My next question would be, with most of the Bitcoin pledged against loans and unrestricted cash floating around, what, $23 million, how do you guys plan to fund that $20 million buyback alongside the Duval buildout, and what would lead you towards the full $100 million?

James

I think we believe current share price does not fully reflect the company’s long-term value, so buybacks are a very important capital allocation priority for the company. After providing normal operations and also committed projects’ funding needs, we would like to become more active in repurchasing shares. I think we have already taken action. In the third quarter we generated approximately $14 million in cash from monetizing Ethereum and a portion of our Bitcoin holdings and used already $5.4 million of those proceeds to repurchase shares.

So recently our Board approved a new program of up to $100 million over the next 12 months. So we started from a $20 million program, and I think our direction is very clear. As long as we continue to see the attractive value in the shares, buybacks will be one of the priority uses of additional available funds. I think the timing and the size of repurchase will reflect our funding position, market conditions and, you know, applicable regulatory requirements.

So we will take pace and we will, you know, consider the market situation and step by step do this stock repurchase program. Hope that answers your question.

Sky Moore (Analyst at Jones Trading)

Yes. Thanks so much.

OPERATOR

Thank you. Thank you. We will take our next question. Your next question comes from Ben Summers from BTIG. Please go ahead. Your line is open. We will take our next question. Your next question comes from Kevin Cassidy from Rosenblatt Securities. Please go ahead. Your line is open.

Kevin Cassidy (Analyst at Rosenblatt Securities)

Yes, thanks for taking my question. You know the midterm elections are top of mind for investors and I just want to understand how Canaan is set up for the Clarity Act, and you know it doesn’t look like that would pass, and whether you have a—there’s a Plan B on digital assets. Okay, thanks. And maybe as long as you’re mentioning energy and you have these facilities in Texas, are you expecting any issues with the change in the government in Texas? The governor.

Okay, understood. Thank you.

OPERATOR

Thank you. We will take our next question. Your next question comes from Nick Jars from B. Riley Securities. Please go ahead. Your line is open.

Nick Jars (Analyst at B. Riley Securities)

Thank you, operator. Hi guys. Good to see some continued progress at these Texas sites. I just was curious if you could outline some of the next steps before the classification becomes final at Duval and how we should think about the ultimate timing of energization there and how much power you think would be available initially.

Angie

Yeah, I think you know we are advancing two 1 gigawatt power projects in Texas. The Duval County project has received a conditional started load firm classification in the ERCOT’s Batch 0 process, and we are progressing the subsequent grid procedures. And the Pata County is in early stage development and the preparation for grid, that means it will be a few months later than Duval. So for timing we encourage investors to follow ERCOT’s announcements for the next stage of grid studies and the capacity allocation as well. We are currently looking forward towards 2027, with the specific schedule subject to ERCOT’s subsequent update. And thank you.

Nick Jars (Analyst at B. Riley Securities)

Okay, makes sense. Thanks, Angie. Maybe just next, with Bitcoin up about 30% since the end of the second quarter, what kind of visibility do you have on demand as we look to 2027? And then what’s driving the step up in revenue in the fourth quarter? Thanks. Okay, makes sense. Well, I appreciate the update nonetheless and continue. Best of luck.

OPERATOR

Thank you. We will take our next question. Your question comes from Ian Generous from Compass Point Research and Trading. Please go ahead. Your line is open.

Ian Generous (Analyst at Compass Point Research and Trading)

Hi everyone, this is Ian Generous calling in for Michael Donovan. Thanks for taking our questions. And so firstly just looking on inventory, how Canaan is positioned today including finished miners, chips and wafers on hand, and then any outstanding purchase commitments. Thank you, that’s helpful. And then looking at demand for mining rigs across North America and the rest of the world, are customers—do you see—are they pausing orders and how are they financing their purchases?

That sounds great. Thank you very much.

OPERATOR

Thank you. I’d like to turn the call back over to the company for any closing remarks.

Gwyn Lauber (Investor Relations)

Thank you, operator, and thanks everyone for joining us today. If you have any additional questions, feel free to reach out to us and we look forward to speaking with you throughout the quarter. Thanks very much.

OPERATOR

This concludes today’s conference call. Thank you for participating. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.