Canaan Inc. (NASDAQ:CAN), a cryptocurrency mining hardware manufacturer, reported its quarterly numbers on Tuesday. During the three-month period that ended on 31 December 2022, the crypto company achieved a crypto mining revenue of $10.5 million, which was significantly higher than in the previous quarter and the same period in 2021. However, overall revenues turned out to be considerably lower on a quarterly and a yearly basis.
Canaan’s Revenues Going Down in Q4
While mining revenue represented an increase of 16.3% quarter-over-quarter and a staggering 368.2% year-over-year, the revenue for the mining hardware manufacturer continued its 2022 slump.
The revenues in the fourth quarter came in at $56.8 million, translating to 59.9% QoQ and 82.1% YoY decreases. The product revenue also dropped to $46.3 million, representing a slump of 65.1% compared to the product revenue reported in the third quarter of 2022, and a decrease of 85.3% compared to the product revenue reported in the same period of 2021.
The decline in QoQ and YoY revenue was primarily due to the decrease in total computing power sold and the lower selling price due to the decreased value of Bitcoin.
“We went through a tough fourth quarter as the further sinking bitcoin price during the quarter led to lackluster market demand for mining machines as we expected. Amidst the hard time, we delivered topline results of RMB392 million, exceeding our previous guidance range, thanks to our improved mining business operation and our constant exploration of clients’ needs,” Nangeng Zhang, the Chairman and Chief Executive Officer of Canaan, commented.
Canaan’s shares lost 60% of their value in 2022, rebounding currently around 22% from near-record lows. The company’s valuation is a long way from its record high of $40 per share and is at $2.5 per share before Tuesday’s US session starts after falling more than 8% on Monday.
Visibly Lower Gross Profit for Canaan in 2022
2022 was a challenging year for the entire mining industry and equipment manufacturers. Subsequent quarters saw declining revenues, with the increasing difficulty of mining and decreasing Bitcoin prices severely cutting revenue margins. After a record-breaking 2021, last year brought significantly lower income for the industry, declining by $6 billion.
As a result, Canaan reported a significant decrease in revenue and gross profit for the full year of 2022. Gross profit decreased to $253.4 million from $411.2 million reported in 2021.
“Despite the challenging market environment, 2022 was a notable year of milestones for our company. We expanded globally and established overseas supply chains and headquarters in Singapore. Our teams gained experience in operating our mining business in various overseas locations,” Zhang added.
However, it is worth noting that Canaan currently tries to refocus its core business, moving to self-mining rather than selling mining rigs. The overall mining revenue for 2022 was significantly higher than the year before, reaching $31.7 million. Although these figures are still far from the revenue generated from the sale of crypto miners, further positioning in this direction in the coming quarters should result in a clearer diversification of revenue classes.
Hive Blockchain, another publicly-listed crypto company, reported its Q4 2022 results last week, showing a $90 million loss for the period. Moreover, Hive is looking for ways to diversify its revenue, and according to a separate trading update, it was able to earn $180,000 from balancing the grid.