Near $100 Million Loss in a Single Quarter, Cash Reserves Up 52%: Canaan's Struggle for Survival

In the volatile arena of cryptocurrency assets, the harshest reality is not the plummeting prices, but the realization by tool sellers that their downstream customers can no longer afford even the tools.

Canaan Technology's second-quarter report is indeed strikingly grim, with quarterly revenue plummeting by nearly 70% and a net loss soaring to $97.6 million. However, this hardware giant, pushed to the edge of a cliff, did not sit idly by during the winter.

It quickly shed the image of a "hard tech tool seller" and jumped into the fray, even managing to increase its cash reserves by 50% through aggressive cost control and self-rescue measures...

1. Gritting Teeth to Mine Gold

The most dramatic change in Canaan's financial report this quarter is that its "bread and butter" has completely shifted.

In the second quarter, Canaan earned $17.66 million from self-operated mining, surpassing the $13.63 million from selling mining machines for the first time in history.

Transforming from a hardware manufacturer reliant on chips and manufacturing to a "practical miner" with over half of its revenue dependent on the roar of mining machines may not seem appealing in the capital market, but from a survival perspective, the execution is remarkably impressive.

Faced with unsold machines, Canaan did not let its computing power gather dust in the warehouse but pushed them to the front lines as quickly as possible.

Throughout the second quarter, Canaan ramped up its self-operated computing power to 10.05 EH/s, mining 243 bitcoins over three months. More crucially, it managed to reduce its average electricity cost to $0.043 per kilowatt-hour—this level of industrial power management is not something ordinary small and medium-sized mines can match, especially given the current high difficulty of network computing power.

In its 49%-owned Project ABC joint mining facility, as of the end of July, 4.85 EH/s of computing power had been installed, with 4.20 EH/s operational.

Of course, the pragmatism of seasoned players is also reflected in asset liquidation. On paper, Canaan holds 1,915.5 bitcoins, indicating a substantial foundation. However, only 698.5 bitcoins are freely available, as 1,117 have long been pledged to lenders for cash flow, and another 100 are locked in fixed-term financial products, with $70.9 million tied up in cryptocurrency receivables.

By late August, Canaan decisively sold 3,952 ethers and 54 bitcoins in the secondary market, bringing in about $13.9 million in cash, replenishing liquidity while repurchasing stock. They quickly turned mined coins into ammunition for winter, showing no attachment to paper wealth and responding to the situation as it arose.

2. Cutting Losses to Preserve Cash

Canaan's relentless mining efforts stem from the realization that the upstream hardware freeze is far longer than anticipated.

In the second quarter, mining machine sales dropped to $13.63 million, with only 2.5 EH/s of computing power sold over three months. With machines unsold, the warehouse became a bleeding wound.

Confronted with reality, Canaan chose not to bury its head in the sand but decisively wrote down $25.3 million in inventory impairment, clearing the valuation burden of old machines in one go.

Even though the remaining inventory still has a book value of $128.8 million, shareholder equity shrank by 33% within six months, accumulating losses of $847 million, the management's defenses did not collapse.

On the contrary, in this extremely adverse environment, Canaan demonstrated remarkable resilience in cash management.

By the end of the second quarter, the company's cash reserves were forcefully pulled back to $66 million, a staggering 52% increase quarter-on-quarter. As the stock price plunged to freezing point, Canaan had spent a total of $7.4 million in real cash by September 8, repurchasing 16.4 million ADS to stabilize morale.

Even with R&D spending compressed to $14.9 million year-on-year, it continues to push forward with the next-generation A16 mining machine, even planning a home mining machine, Avalon Home, that can mine while providing heating.

Although the official forecast for third-quarter revenue remains low, between $11 million and $15 million, the bottom line is clear. Even if the main business is frozen at the bottom, R&D must continue, and cash flow cannot be interrupted.

3. Market Value Falls Below Asset Value

If we look solely at the balance sheet, the capital market's pricing of Canaan is extremely harsh. As of early September 2026, Canaan's hard assets totaled $184 million (including $66 million in cash and $118 million in cryptocurrency assets and receivables). Yet, its total market value on the US stock market had plummeted to around $250 million. The stock price fell from a high of $2.22 to about $0.32, an 85% drop from its peak, trading almost at the net asset level. The management might feel aggrieved, as $97.6 million of the losses in the second quarter stemmed from "paper accounting" of inventory, equipment impairment, and token fair value losses, rather than an instantaneous evaporation of cash. However, the concerns of the capital market are equally real, as the cash-generating machine is still under heavy pressure.

In the second quarter, Canaan's adjusted EBITDA still recorded a loss of $74.9 million, with a negative gross margin. To fund its massive self-rescue plan, the company's total share capital was diluted from 5.99 billion shares to 10.85 billion shares, significantly diluting the equity of existing shareholders. The market is not blind to that $184 million in hard assets and 10 EH/s of substantial computing power; it is calculating whether the existing foundation can sustain until the dawn of the next super cycle.

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The semiconductor and mining machine industries have historically undergone countless rounds of brutal reshuffling. Each cycle's bottoming script is strikingly similar: downstream demand freezes, assets depreciate wildly, and companies are forced to lower their stance and self-rescue.

Canaan's transformation from "tool seller" to "gold miner" may seem to shed the halo of a pure hard tech company, but for a hardware giant deeply mired in an industry winter, surviving is a thousand times more important than maintaining an appealing posture.

With $184 million in hard assets, extreme electricity cost reductions, and ongoing advancements in next-generation chips, Canaan clearly has no intention of leaving the table.

However, whether this strategy of "self-operated mining to hedge against hardware winter" is a lifeboat to carry it to spring or a shackle that accelerates the depletion of its foundation remains to be seen. The true answer can only be revealed by the next cycle's bell.

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