Executive Summary / Key Takeaways

• Canaan Inc. is demonstrating a compelling turnaround, leveraging its vertically integrated model encompassing ASIC design, manufacturing, self-mining, and Bitcoin treasury management to drive significant revenue and profitability growth.
• The company's technological edge, particularly with its A15 series and the upcoming A16 series, offers superior energy efficiency and performance, positioning it strongly in the competitive Bitcoin mining hardware market.
• Strategic expansion into North America, coupled with localized manufacturing and disciplined Bitcoin accumulation, is enhancing Canaan's market share and resilience against geopolitical and tariff-related challenges.
• Canaan reported its strongest quarterly results in the current Bitcoin cycle in Q2 2025, with total revenue reaching $100.2 million, a 40% year-over-year increase, and adjusted EBITDA turning profitable at $25.3 million.
• Despite market volatility and U.S. tariff uncertainties, Canaan's Q3 2025 revenue guidance of $125 million to $145 million reflects cautious optimism, underpinned by robust global demand and a favorable Bitcoin price environment.

The Foundation of Decentralization: Canaan's Integrated Vision

Canaan Inc., a pioneer in the Bitcoin ecosystem since its founding in Singapore in 2013, has evolved from delivering some of the industry's first ASIC miners to becoming a vertically integrated powerhouse. This comprehensive strategy encompasses the entire value chain: designing and manufacturing its own cutting-edge ASIC chips and mining machines, operating its own self-mining business, and strategically managing its growing Bitcoin treasury. This integrated approach is not merely operational; it is foundational to Canaan's competitive advantage, enabling the company to lower its cost of acquiring Bitcoins, mitigate operational risks, and maintain strategic flexibility across market cycles.

The company's journey, marked by its NASDAQ listing, has been characterized by a relentless pursuit of innovation and a keen eye on global market dynamics. As the cryptocurrency landscape continues to mature, Canaan's ability to control its technology, production, and deployment positions it uniquely to capitalize on the enduring value proposition of Bitcoin. The broader industry, influenced by Bitcoin's price volatility and the ever-increasing network hash rate, demands efficiency and adaptability, qualities that Canaan has meticulously cultivated.

Technological Leadership: The Avalon Advantage

At the heart of Canaan's investment thesis lies its technological prowess, particularly evident in its Avalon series of Bitcoin mining hardware. The company's commitment to research and development ensures a continuous pipeline of high-performance products that are critical for miner profitability in a post-halving environment.

The current flagship, the A15 series, has already demonstrated significant advancements. Compared to its initial release, the A15 series has seen its overall machine performance improve by 15%, while power consumption has been reduced by 10%, effectively lowering the cost per unit of computing power for miners. The top-tier A15 Pro model delivers 215 terahashes per second (TH/s) of computing power with an impressive power efficiency as low as 16.8 joules per terahash (J/TH). For specialized applications, the A1566I Immersion Cooling Miners offer 249 to 267 TH/s at base clock speeds and have proven their reliability even in extreme heat. These quantifiable benefits directly translate into higher operational margins for miners, fostering strong demand for Canaan's products.

Looking ahead, Canaan's next-generation A16 series represents a significant leap forward. Having successfully completed tape-out in Q1 2025, the A16 series was in the chip packaging and testing stage by Q2 2025, with a full product launch anticipated soon after comprehensive machine testing. This new series is designed to utilize more advanced process nodes, targeting an ambitious power efficiency in the 10-plus J/TH range. The air-cooled A16 machines are expected to approach 300 TH/s, a substantial improvement. Crucially, the A16 series will offer all three cooling options—air, water, and immersion—optimized for diverse market conditions and customer needs. This technological roadmap, with its focus on aggressive efficiency targets, is a cornerstone of Canaan's long-term competitive moat, promising sustained market leadership and enhanced financial performance through superior product offerings.

Beyond industrial-scale miners, Canaan has also innovated with its Avalon Home series, including products like the Nano 3, Nano 3S, Avalon Mini 3, and Avalon Q. These consumer-focused devices combine Bitcoin mining with practical home heating functionality. The Nano 3 alone accumulated 17,000 orders by Q3 2024, with over 10,000 units shipped. The Avalon Q, designed for low noise and compatibility with global voltage standards, exemplifies the strategic intent to make Bitcoin mining more accessible and to convert otherwise wasted energy into additional value, thereby broadening Canaan's customer base and revenue streams.

Operational Momentum and Strategic Expansion

Canaan's operational performance in Q2 2025 underscored the efficacy of its strategic adjustments and product innovation. The company reported its strongest quarterly results in the current Bitcoin cycle and the best in the past ten quarters, with total revenue reaching $100.2 million, a robust 40% year-over-year increase. This growth was significantly driven by product sales, which hit approximately $72 million, marking a 23% quarter-over-quarter and 17% year-over-year increase. The company delivered 6.4 million terahashes per second of computing power at an an average selling price (ASP) of $11.10 per terahash, a new two-year high. The Avalon Home-Use Miner Series was a standout, generating $5.7 million in revenue, a sharp 359% increase from Q1 2025, and contributing over 5% to total revenue with a gross margin of 13% (or 39% as per CFO James Jin Cheng).

North America has emerged as a pivotal market for Canaan, accounting for approximately 40% of its mining machine sales revenue in 2024. The company's commitment to this region is evident in its establishment of a pilot production line in the United States by Q1 2025, which became fully operational in Q2 2025. This localized manufacturing capability, complementing its existing Malaysian facilities, is a direct response to new U.S. tariff policies, enabling Canaan to meet customer delivery needs with only a modest cost increase and fulfill orders from key clients like Cipher Mining (CIFR) and CleanSpark (CLSK).

Canaan's self-mining operations also delivered strong results, producing 284 Bitcoins in Q2 2025, an increase of 9.4% from Q1 2025, and generating a record $28.1 million in mining revenue, up over 15% sequentially. By the end of June 2025, the company's total installed mining capacity reached 8.15 exahashes per second (EH/s), with 6.57 EH/s already in operation. This expansion is part of a broader strategy to reach 10 EH/s deployed in North America and 15 EH/s globally by mid-2025, supported by new agreements in Pennsylvania and Texas expected to add approximately 4.7 EH/s to its North American footprint.

Disciplined Bitcoin Treasury Management

Canaan's strategic approach extends to its Bitcoin treasury, which is managed with a disciplined framework for acquisition, custody, and disposition. The company accumulates Bitcoin through three primary channels: accepting Bitcoin payments for mining equipment, earning Bitcoins from its self-mining operations, and direct open market purchases. This strategy has allowed Canaan to steadily accumulate Bitcoins across all market stages, often at a cash cost lower than the average market price.

As of the end of July 2025, Canaan's Bitcoin treasury reached a record 1,511 Bitcoins, with a market value of approximately $160 million by the end of Q2 2025. This substantial holding is not merely a store of value; it is a strategic asset used to generate liquidity through collateralized financing, enabling access to low-cost capital for high-return projects such as miner production and self-mining expansion. The company also explores placing Bitcoins in short-term interest-bearing accounts and evaluating selective derivative strategies to manage price volatility and capture additional returns. This multi-faceted approach positions Canaan not just as a hardware manufacturer, but as a capable Bitcoin treasury company, enhancing shareholder value through prudent asset management.

Competitive Landscape: Carving a Niche in a Dynamic Market

Canaan operates in a highly competitive and rapidly evolving market, facing both specialized and diversified technology players. Its core competitive advantage stems from its vertical integration and proprietary ASIC technology, which allows it to offer highly energy-efficient and stable mining solutions. This contrasts with broader technology companies like NVIDIA (NVDA) and Advanced Micro Devices (AMD), which primarily focus on general-purpose GPUs and CPUs for AI and high-performance computing. While NVIDIA and AMD dominate in terms of technological breadth and overall financial scale, Canaan's specialized ASICs offer superior efficiency for Bitcoin mining, potentially translating to lower operating costs for its customers.

Against direct mining competitors such as Marathon Digital Holdings (MARA) and Riot Blockchain (RIOT), Canaan differentiates itself as a hardware provider that also operates its own mining facilities. Its ability to design and manufacture its own machines, coupled with a global distribution and service network (26 service stations worldwide), provides a unique value proposition. This integrated model allows Canaan to maintain a tighter control over product quality and cost, which is crucial in a market where efficiency dictates profitability. Furthermore, as a U.S. listed company, Canaan emphasizes its commitment to 100% compliance, a factor that instills confidence in its offerings, especially in a volatile trade environment. This compliance advantage is particularly relevant given recent geopolitical shifts, such as a key competitor being added to the U.S. entities list, which could redirect market share towards Canaan.

However, the competitive landscape is not without its challenges. The imposition of U.S. tariff policies, with estimated impacts of 15% to 25% on import costs, has softened U.S. demand and created supply-demand imbalances. This has forced Canaan to adapt by establishing U.S. manufacturing capabilities, albeit with a modest cost increase. The company also acknowledges the trend of some miners diverting power resources to AI/HPC co-location projects. While Canaan views AI/HPC and Bitcoin mining as complementary—with Bitcoin mining offering flexible power consumption that can stabilize energy supply for AI/HPC—it has strategically discontinued its non-core AI semiconductor business to sharpen its focus on crypto-related operations. This strategic realignment aims to leverage its core strengths while building infrastructure adaptable to future AI applications.

Financial Performance: A Turnaround Story

Canaan's financial performance in Q2 2025 marked a significant turnaround, reflecting the efficacy of its strategic initiatives and a more favorable market environment. Total revenue surged to $100.2 million, a substantial 40% increase year-over-year, and exceeded the company's own guidance. Gross profit rose dramatically to $9.3 million from just $0.6 million in Q1 2025, demonstrating improved operational efficiency and product mix. The operating loss narrowed to $27.1 million, and adjusted EBITDA turned profitable at $25.3 million, both achieving record highs since Q1 2024. These strong results were primarily driven by a higher and stable Bitcoin price, effective response to tariff policies, and the rapid growth of its home-use mining product line.

Looking at liquidity, Canaan ended Q2 2025 with $66 million in cash. The company actively manages its capital, utilizing proceeds from sales and financing to fund wafer supply, production, and its share repurchase program. In Q1 2025, Canaan secured $100 million through preferred shares financing and $42.5 million from ATM financing, though the ATM program was subsequently paused.

The company also authorized a share repurchase program of up to $30 million in May 2025, with the CEO and CFO personally purchasing shares, signaling confidence in the company's undervalued stock.

Outlook and Risks: Powering Through Uncertainty

Canaan maintains a cautiously optimistic outlook for Q3 2025, projecting revenue in the range of $125 million to $145 million. This forecast is underpinned by several key assumptions: a continued strong and stable Bitcoin price, a gradual adaptation by North American institutional customers to the new tariff environment, and sustained active demand from markets outside the U.S., particularly in Asia. The hash price, hovering around $58 per petahash per day in Q2 2025, indicates a favorable "full market" for miners, which is expected to drive further equipment purchases.

Despite this positive momentum, significant risks and uncertainties persist. The U.S. tariff policies remain a primary concern, with their fluctuating nature creating an unpredictable environment for import costs and U.S. customer demand. While Canaan has established U.S. manufacturing to mitigate these impacts, the overall cost structure for U.S.-bound machines remains higher. Bitcoin price volatility continues to be a fundamental risk, directly impacting mining profitability and hardware demand. Furthermore, the increasing total network hash rate can compress mining margins, even with high Bitcoin prices. Geopolitical shifts and regulatory changes, particularly concerning semiconductor supply chains, also pose ongoing challenges, as evidenced by the U.S. BIS rules in early 2025.

Canaan's decision to withdraw its full-year 2025 revenue guidance in Q1 2025, citing "ongoing volatility in the global political and economic landscape," highlights the dynamic nature of these risks. However, the company's strategic focus on vertical integration, technological innovation, and global expansion, coupled with disciplined treasury management, positions it to adapt and capitalize on opportunities as market clarity improves.

Conclusion

Canaan Inc. is charting a compelling course in the dynamic Bitcoin ecosystem, transforming into a vertically integrated powerhouse that leverages technological leadership and strategic market expansion. Its commitment to developing highly efficient ASIC miners, exemplified by the A15 series and the eagerly anticipated A16 series, provides a significant competitive edge in a market where energy efficiency directly translates to profitability. The company's disciplined Bitcoin treasury management and strategic focus on North American expansion, including localized manufacturing, further bolster its resilience against market volatility and geopolitical headwinds.

The strong financial performance in Q2 2025, marked by record revenues and a return to adjusted EBITDA profitability, underscores the effectiveness of Canaan's integrated strategy. While uncertainties surrounding U.S. tariffs and Bitcoin price fluctuations remain pertinent risks, Canaan's proactive adaptations, technological roadmap, and expanding global footprint position it for sustained growth. For discerning investors, Canaan presents a unique opportunity to participate in the long-term appreciation of Bitcoin through a company that is not only a hardware innovator but also a strategic operator and asset manager, poised to capture value across the evolving cryptocurrency landscape.