Canaan Inc. (NASDAQ:CAN) Q4 2025 Earnings Call Transcript

Canaan Inc. (NASDAQ:CAN) Q4 2025 Earnings Call Transcript February 10, 2026

Canaan Inc. beats earnings expectations. Reported EPS is $-0.0123, expectations were $-0.06.

Operator: Ladies and gentlemen, welcome to Canaan Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the 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: Thank you, operator. Hello, everyone, and welcome to our earnings conference call. Joining us today are Chairman and CEO, Nangeng Zhang, and our CFO, James Jin Cheng. Leo Wang, Vice President of Capital Markets and Corporate Development, and Shi Zhang, Senior IR Manager, 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 statements 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 and assumptions. Please refer to the press release and the risk factors and 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. Please go ahead.

Nangeng Zhang: Hello, everyone. This is Nangeng Zhang, CEO of Canaan Inc. Welcome to our earnings call. Together with our CFO, James Jin Cheng, we are calling from our Singapore headquarters to discuss our Q4 2025 business results and latest updates with you. During the first quarter, it comprises experienced significant volatility. In early October, Bitcoin briefly broke above its previous all-time high, reaching approximately $126,000. It then fell below $100,000 in mid-November and dropped to below $90,000 by December. At the same time, the wave of new hash rate that entered the pipeline during the price surge in the first quarter came online, pushing total network hash rate to a record high. This puts strong pressure on miners’ profit margins.

Facing this highly volatile market, we managed our sales pace well at the ‘4. We secured a large order from a major customer in North America, and efficiently mobilized resources to support production and smooth delivery. At the same time, we steadily expanded our self-mining operations and explored diversified mining partnerships, starting several pilot projects. As a result, our total revenue for the quarter reached $196 million, up 30.4% quarter over quarter and 121.1% year over year. This was our highest quarterly revenue in the past three years and exceeded the midpoint of our guidance range of $175 million to $205 million. We achieved a major breakthrough in mining machine sales in this quarter, benefiting from our continued focus on the North American market.

We secured a large-scale order of more than 50,000 A15 Pro models from a leading mining company. This milestone collaboration drove our strong sales performance and underscores the market’s growing recognition of our product performance and delivery capability. To ensure high-quality delivery, our supply chain, production, and operation teams worked closely together to ensure smooth and high-quality execution. This resulted in an all-time high of 14.6 exahash per second in computing power sold during the quarter, up 45.7% quarter over quarter and 60.9% year over year. While average selling price declined slightly due to volume discounts for large-scale orders, the surge in sales volume drove product revenue to $165 million, up 39.1% quarter over quarter and 124.5% year over year.

This marks our highest single-quarter revenue in the past thirteen quarters. We will continue creating value for customers through product upgrades and customized services to deepen our partnerships with global customers. Although the company focused most of its resources on rig sales in Q4, our self-mining operations continued to progress steadily under the principle of resource alignment and efficiency first. In Q4, we steadily expanded and optimized global development. At the end of the fourth quarter, total installed hash rate increased 8.6% quarter over quarter to 9.91 exahash per second, of which 7.7 exahash per second was energized. We mined approximately 300 bitcoins during the quarter, further contributing to our cryptocurrency reserves.

At the end of 2025, our crypto assets holdings were 1,750 bitcoins and 3,951 Ethereum. This holding reflects the combined contribution from our mining and ongoing debt management strategies. In the current market environment, this capital portfolio not only provides liquidity but also offers potential upsides if crypto prices recover. We continue to explore innovative mining applications and promote deeper integration between computing and energy. In October, we partnered with a local energy infrastructure provider in Canada to convert flare natural gas at wellheads into computing power. This project marks our initial step from utilizing stranded energy towards broader participation in energy infrastructure. It demonstrates the value of high-performance computing within emerging energy systems and opens up more space and long-term sustainability for the expansion of our mining business.

In R&D and supply chain management, we maintained our focus on product performance, driving technological upgrades in tandem with capacity optimization. Last October, we officially launched the A16 XP, our flagship next-generation air-cooled model. It achieved breakthroughs across multiple performance metrics by delivering over 300 terahash per second per unit with an industry-leading power efficiency of 12.8 joules per terahash. This showcases our deep technical and R&D expertise in the design of high-performance ASIC chips. As we continue to advance our product generation upgrades, we work closely with our wafer foundry partners to optimize manufacturing processes. These efforts have led to higher yields and lower costs for our A15 series, allowing us to deliver more computing power from the same amount of wafers.

On the supply chain front, our production footprint across Malaysia, the US, and Mainland China allows us to remain compliant with flexibility, adapting to an increasingly complex global trade environment. During the mass delivery of the large-scale order this quarter, our teams across manufacturing, quality control, and logistics worked in close coordination, successfully withstanding the dual pressure of shipment volume and tight timelines. By early January 2026, the entire order had been fully delivered, demonstrating the resilience and execution strength of our supply chain. In summary, 2025 was a challenging year. We navigated a complex international trade environment while continuing to expand our business across multiple dimensions. For the full year, total revenue was $530 million, up 139.6% year over year.

We strengthened our presence in North America, partnered with leading customers, and increased total computing power sold by 40.7% year over year to a record 36.5 exahash per second. In terms of products, we achieved mass production of the upgraded A15 series, launched the next-generation A16 series, and expanded our Avalon series into a multifunctional product lineup, significantly improving revenue growth and brand influence. Our mining business reached a key milestone in 2025, with its full-year revenue exceeding $100 million for the first time. Global installed hash rate rose 82% and energized hash rate grew 61% year over year. We now operate nine mining projects globally, with total power capacity exceeding 250 megawatts. We also expanded into innovative energy scenarios by exploring wind power, stranded gas, and computing-generated heat reuse, driving deeper integration of computing and energy.

We completed the deployment of assembly and production capabilities across Malaysia, the US, and Mainland China, building a flexible and resilient global delivery system. We also established our digital assets treasury management framework, keeping our crypto reserve competitive and providing capital allocation flexibility to support our long-term development. As we enter 2026, the external environment remains highly volatile. Shifts in macro liquidity and risk appetite are making digital asset prices and industry demand more cyclical and phase-driven. We do not base our operations on short-term views of price movements. Instead, we focus on navigating cycles through controllable factors, including product competitiveness, delivery and operational capabilities, inventory and cash flow discipline, compliance, as well as lower-cost and more scalable energy and infrastructure capabilities.

This approach has enabled us to remain resilient and achieve growth in the complex environment of 2025. More importantly, we do not see Canaan’s next stage as being defined merely as an equipment provider or a single-node computing player. We have a clear long-term vision. Computing and energy infrastructure are becoming increasingly integrated. Bitcoin mining and AI HPC colocation may appear to be two different businesses on the surface, but they are highly complementary at the infrastructure level. They share electricity, facilities, power distribution, cooling systems, and human and technical resources for operations and maintenance. By leveraging different workload characteristics, we can improve power utilization efficiency and overall project economics.

At the same time, these applications can interact with the power grid more constructively. They can absorb energy when the power supply is abundant and reduce the load when the grid is constrained, ultimately contributing to a more resilient and dispatchable computing infrastructure. So in 2026, our strategy centers on two core pillars, with execution as our top priority: scaling proven models, streamlining non-repeatable pilots, and laying the groundwork early for long-term capabilities. Our first track focuses on power and computing infrastructure. We are shifting our strategy from securing power resources from an opportunistic asset-light approach to a more systematic upstream development path. To secure reliable and economic power resources and leverage our North American resource base built since 2022, we will prioritize applying for power directly rather than bidding for capacity with existing third-party projects.

We have made significant progress on a robust pipeline to secure direct power capacity in the US. We are confident of securing substantial load by the year-end of 2026, potentially reaching the gigawatt scale. At the same time, we are exploring ways to integrate Bitcoin mining with AI HPC colocation. This approach can improve returns on invested capital while supporting dynamic load management for the power grid and strengthening our existing positive relationships with grid operators. Development of power and infrastructure is not a sprint but a long journey with steady gains. The process spans multiple stages, including site selection, grid interconnection assessments, negotiation with power partners, contract structuring, engineering, construction, and commissioning.

Each step requires careful and disciplined execution. Accordingly, our primary objective for 2026 is to establish a pipeline of executable projects and clear development pathways. We do not intend to pursue one-off large-scale capital outlays. Instead, we will move forward within a framework of capital discipline. We will leverage partnerships and project financing as tools, relying on asset-level cash flows and project-level financing to support expansion. This approach limits unnecessary volatility in our overall financial position. This also means we will prioritize securing high-quality power resources that are well-suited for AI HPC colocation. Second, in the consumer and small to medium-sized business segments, we will take a more systematic approach to building our 2C SMB business in 2026.

Last year, we saw strong potential on both the demand side and the gross margin structure for these products. But we also understand that success in the consumer market is hard. Users expect excellent product experience, stability, and attention to detail and service, and we must treat this market with complete respect. That’s why in 2026, we will continue to improve our product line and launch new models. At the same time, we will raise our standards and take a more cautious approach. Long-term product reputation matters. We will focus on stability, ease of use, noise control, and user experience as our top priorities. Also, we will continue to strengthen our product capabilities while we will also focus heavily on building out our channels.

A key priority of growing our 2C and SMB business, our product experience has shown that in the consumer market, the core competitiveness comes not only from the product itself but also from the strength of our channels and service system. In 2026, we will make systematic investments in this area. This includes partnerships with online platforms, expanding our offline distributor network, improving after-sales services and content operations, and building more efficient user engagement and conversion methods. Our message is clear. Even in areas where we are still catching up, we are committed to putting in real efforts and resources. And for areas that are key to long-term success, we will go in to make sure the business line becomes a more stable and cycle-resistant revenue contributor.

Lastly, I will share our view on the operating pace for 2026 and our preparations. From an operational standpoint, we expect 2026 to show clear stage-by-stage characteristics. Industry demand and pricing may remain under pressure during the first half of this year. Our focus will be on maintaining strong discipline in cash flow and inventory, strengthening product and delivery capabilities, and advancing key practices in power and infrastructure early on. At the same time, we are preparing our supply chain and execution teams for potential demand recovery later in the year. If the industry presents a clear structural opportunity, we will be ready to act quickly with strong execution and a healthy cost structure to capture market share and grow efficiently.

We believe that this strategy centered on execution and long-term capability building will allow Canaan to remain competitive within the Bitcoin mining value chain and gradually become a trusted infrastructure participant within the computing power and energy ecosystem. Our goal is to create more sustainable long-term value for our customers, partners, and shareholders. Before concluding, I would like to note that the outlook above contains forward-looking statements. Actual results may vary due to challenges in macroeconomic conditions, industry cycles, regulations, and market demand dynamics. We will continue to communicate with transparency and respond to market expansions through clear, verifiable execution progress. Given recent global macroeconomic uncertainties, including ongoing monetary tightening, evolving geopolitical developments, and heightened volatility in the digital asset market, we maintain a relatively cautious view about the market environment in 2026.

After global miners have adopted a wait-and-see approach in response to the recent decline in Bitcoin prices, the sale of mining rigs is facing considerable challenges. We expect total revenue for 2026 to be in the range of $60 million to $70 million. This outlook is based on current market conditions and operating assumptions. However, actual results may differ due to policy uncertainty and market volatility. This concludes my prepared remarks. Thank you, everyone. Now I will hand it over to our CFO, James Jin Cheng.

James Jin Cheng: Thank you, Nangeng, and good day, everyone. This is James Jin Cheng, CFO of Canaan Inc. I’m pleased to share our Q4 financial performance with you. To begin my part, I would like to echo Nangeng’s perspective on the fourth quarter industry environment. It was a very volatile quarter for the Bitcoin price. Bitcoin reached a new high in October, hitting $126,000 before dropping below $100,000 in November and below $90,000 in December. During the quarter, network hash rate also reached historical highs, significantly impacting the profitability of miners. Fortunately, our operation was robust in Q4. We successfully secured large-scale orders from key clients in the North American market and globally, and our strong supply chain relationships ensured timely production and delivery.

In our mining operation, we continued our deployment and seized opportunities for new pilot agreements. Overall, we delivered solid quarterly results in Q4 despite the market dynamics. Let’s take a closer look at the details. First, I will highlight our strong top-line results in the fourth quarter and for the full year of 2025. In Q4, we delivered $196 million in total revenue, up 13.4% sequentially and 121.1% year over year. Our total computing power sold also reached a record 14.6 exahash per second. This growth was primarily driven by the massive delivery of our A15 series. Our revenue increased consistently throughout every quarter in 2025. This trajectory peaked at a new quarterly high for Q4. Consequently, our full-year revenue reached $530 million, nearly doubling 2024 results.

Within product revenue, our Avalon home series also delivered exceptional growth in 2025, contributing approximately $25 million in revenue. Notably, our Q4 revenue mainly came from the North American market. Revenue from North American customers reached $125 million, accounting for over 75% of our total product sales. This demonstrates that top-tier institutional miners in North America continue to recognize Canaan as a primary long-term partner. Regarding our mining operations and trade risk strategy, we continued to scale our infrastructure while maintaining a robust asset base. By the end of Q4, our installed computing power reached nearly 10 exahash per second, up 7% from Q3. Our digital asset treasury also remains a core pillar of our financial strategy.

As of December 31, 2025, we held 1,750 Bitcoins and 3,951 Ethereum. At year-end prices, these holdings were valued at approximately $166 million. While we manage through market fluctuations, this robust reserve provides a solid foundation for our balance sheet and long-term liquidity. Mining revenue in the full year of 2025 was $113.2 million compared to $44 million in the full year of 2024. The increase was mainly due to the increased computing power energized for mining, especially the expansion in the United States. On the operational front, we achieved notable gains in efficiency and supported our liquidity through disciplined capital management. Despite our business scaling up, our operating expenses in Q4 were $38 million, decreasing 6% quarter over quarter.

This improvement reflects our efforts to streamline our organization and focus on core strategic projects. Our strong sales and financing activities have also strengthened our cash position. In Q4, we generated approximately $75 million in cash inflow from sales and received approximately $80 million from strategic equity financing and the brief utilization of our renewed ATM. This healthy liquidity funded our Q4 payments of $100 million to secure our wafer supply and $89 million for production and operation. These investments ensure our goal of a flexible manufacturing footprint across Malaysia, the United States, and Mainland China. Consequently, we ended the quarter with a cash balance of $81 million. This aligns with our commitment to strict cash flow discipline, allowing us to navigate market cycles without compromising our strategic roadmap.

Reflecting our strong confidence in the company’s financial position and long-term shareholder value, we have already repurchased approximately 2.8 million ADSs for $2 million under our $30 million stock repurchase program announced in December. We intend to continue executing this plan optimistically as market conditions allow, underscoring our firm belief in the company’s prospects. Turning to our margins, we have taken a proactive approach to address market pressures and de-risk our balance sheet. In Q4, our gross margin was $14.6 million compared to $16.6 million in Q3. This compression was primarily due to three factors. First, we delivered several large-scale institutional orders. These orders are strategically essential for securing our long-term market share in North America.

Second, Bitcoin price softened in the latter half of the quarter. This trend weakened the market demand. These headwinds lowered our average selling price. Last but not least, we prioritized the delivery of industrial machines to strategic customers instead of the Avalon Home series in Q4. Additionally, considering the severe Bitcoin price volatility early in 2026, we recorded inventory write-downs of $13.9 million in Q4. These impairments are based on management’s latest estimates and reflect our cautious expectations under current conditions. Below gross profit, the year-end dip in Bitcoin prices resulted in a $44 million non-cash fair value loss. Another $15 million non-cash fair value loss was recorded for the conversion of the final batches of preferred shares.

There will not be any fair value loss regarding preferred shares conversions for the next quarter. These non-cash items led to an adjusted EBITDA loss of $40.5 million. It is important to note that our cash position remains stable, providing us with sufficient liquidity to fund our operations and R&D plans. Furthermore, our ongoing expansion into the consumer and small and medium-sized business segments is expected to contribute to a more balanced and resilient margin profile over the long term. Finally, I want to outline our cautious yet resilient outlook. We are monitoring the very volatile Bitcoin price in the first two months of 2026. On February 5, the Bitcoin price dropped to $60,000. Low Bitcoin prices triggered machine shutdowns and operations closures for higher-cost miners.

Profitability of existing miners is also under pressure recently, including our own mining operations. Given the headwinds and uncertainties, we are taking a very prudent approach to provide our Q1 guidance. We estimate our revenue will be in the range of $60 million to $70 million. In Q1, our priority is to maintain a healthy cash position and de-risk our balance sheet. We will allocate our capital carefully between power source investments and wafer supply for computing hash rate, and we will prepare to capture the next market recovery. This concludes our prepared remarks. Now we are open for questions.

Q&A Session

Operator: Thank you. We will now begin the question and answer session. As a courtesy to other investors and analysts, please limit yourself to one question and one follow-up. If you have any additional questions after the Q&A session, the Investor Relations team will be available after the call. For the benefit of all participants on today’s call, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 1. 1 again. We will take our first question. The first question comes from Ben Summers from BTIG. Please go ahead.

Ben Summers: So it’s good to hear about strong progress in the supply chain efficiency. Kind of curious how the A16 mass production is progressing and kind of any updates around the timeline there?

Nangeng Zhang: I think you’re asking about our generation rigs. Right?

Ben Summers: Yeah.

Nangeng Zhang: Right now, we are sending the A16 SIP machines to our customers. And I think they’re doing the testing phase. We are moving ahead with mass production preparations right now. And I think the mass production will start after the Lunar New Year holiday. And we expect it to begin volume ramp-up by the end of the first quarter. Currently, we don’t have any issues or anything to broadcast. On the chip side, the chips are already in mass production. And on the production side, our main focus now is refining the product at a system level. And, also, you know, besides the air-cooled version, we will have the liquid-cooled and immersion-cooled models. So now we are working on these different models so we can better match different customer deployment needs and site conditions. I hope this answers your question. Thank you.

Ben Summers: No. Awesome. That was super helpful. And then just kind of I know you touched on it briefly, but just curious for a little bit more color on the difference in the margin profile between the home series, the A15, and kind of how you think this can potentially, you know, help keep margins strong moving forward?

James Jin Cheng: I will take this question, Ben. I think currently we observed market price has some influence from the Bitcoin price. So it seems like the industrial machines’ profitability seems to be under pressure. But it looks like the home series continued without serious competition in the market. So we can still maintain good profitability. But in Q4, on the delivery side, we prioritized the industrial orders because it’s from the strategically important customers from North America. Looking forward, I think we will continue to see the home series play a more important role in our category to generate profit. I don’t know if I answered your questions, Ben.

Ben Summers: No. That was super helpful, and thank you guys for the update.

James Jin Cheng: Thank you, Ben. Thank you.

Operator: Thank you. We will take our next question. The question comes from Nick Giles from B. Riley Securities. Please go ahead.

William Chan: Good morning. This is William Chan speaking on behalf of Nick Giles. Thank you for taking my question, and congratulations on the quarter. It was good to see your heat recovery proof of concept announcement in Canada in early January. So I wonder, can you speak to the size of the TAM for this opportunity, ideally in megawatt terms? And as a follow-up, how scalable is this specific solution? And what are some other ways that you can expand your energy efficiency initiatives going forward?

Nangeng Zhang: Thank you. Hello. Morning. I fully understand the market’s interest in the new energy and ESG-related computing products. I think the core value for these objectives is transforming wasted and concentrated energy into measurable, tradable computing power, and even for cash flow. However, I’d like to be more candid. These opportunities are highly dependent on specific scenarios, such as resource availability, grid connection conditions, and even compliance pathways. And also the operational capacity. I think, you know, we have been working on this for more than one year. So the scale of each individual project typically ranges from a few megawatts to several tens of megawatts. The true total addressable market largely comes from the number of these points.

But we want to caution against overly optimistic calculations like, okay, we have a few megawatts for each site, and there’s thousands of points there, and so there’s a multi-gigawatt business. We believe that is too optimistic because the business model is still relatively fragmented, and the pace of progress must be steady. So over the past year, we have started systematically screening potential sites for several POC projects, and we have already implemented some of them, collecting initial operational data. Not only the Canada one, there are many others. But moving forward, our focus will be on three key areas. First is the data and methodology standardization. The second is productization and the model. We aim to change the POCs into replaceable modular solutions.

And third is replication and expansion. This is a service. I think once we have reached the surface, then we’ll continue to expand similar projects faster. I hope I answered your question. Thank you.

William Chan: Yep. That’s very helpful. Thank you, and continue best of luck.

James Jin Cheng: Thank you.

Operator: We will take our next question. Your next question comes from the line of Mark Palmer from Benchmark. Please go ahead.

Mark Palmer: Yes. Good morning. As you think about Canaan’s manufacturing footprint, from a long-term standpoint, what would that look like, and where would the company’s US manufacturing place, you know, to adjust for the tariff environment, fit into that?

Nangeng Zhang: Yeah. I think over the last year, the external environment has been very dynamic. Tariffs move back and forth. Compliance requirements become tighter in many markets, and it’s very volatile. In this context, computation is not only about the price and the efficiency. It’s also about the compliance, capability, display, and how fast you can adjust. So now the supply chain issue is combined with compliance. But we treat compliance as a baseline. So we keep high standards across sales, delivery, and regional operations. Despite multiple policy changes last year, we did not take any meaningful surprise loss from policy swings. This is not always the case in this industry. More particularly, some peers have a heavier fixed asset exposure in certain regions.

And so when the policy or the market trends quickly, their adjustment cost is higher. We do not have, you know, firstly, our self-mining is 100% outside China. And also, we build multiple region production and assembly setups across Mainland China, South Asia, Malaysia, and even in California, North America. So this really gives us resilience and continuity as regions become less predictable. So, you know, I think for your question, North America is our most important market. And last year, we built thousands of machines from our US manufacturing facilities. So this year, we will carefully review the whole supply chain and make it safer for US customers and expand our US manufacturing. Yeah. Thank you.

Mark Palmer: That’s helpful color. Thank you. Thank you.

Operator: We will take our next question. Your question comes from Kevin Cassidy from Rosenblatt Securities.

Kevin Cassidy: Hi. Yeah. Thanks for taking my questions. I wonder at what point price do your customers break even for Bitcoin mining? I think it had been $90,000. Has that changed?

James Jin Cheng: Thank you, Kevin. I think we have two lines for this breakeven point. One, including the price of the machines, we say it’s the all-in payback level. I think it’s almost like a $100,000 to $110,000 range for Bitcoin price to stay there. And, you know, the hash price should be like $55 per PH per day. Something between that, that’s the all-in payback level. Another interesting metric to measure this is the marginal shutdown level because we only consider the energy cost, the variable cost when we start the operation because the CapEx is already a sunk cost. So in this kind of scenario, it’s quite lower compared to the previous all-in payback level. For various miners, of course, it’s different. If we use our competitor’s machine as a comparison, if the electricity cost is like 6¢ and we use our competitor’s S21+, we see the shutdown price is like $50,000.

And if it’s S19 XP, it’s $66,000. And then look back to ourselves or our mining operation. Our average cost is like 4.3¢ globally. So our shutdown price for the A15 Pro version is like $37,000. When Bitcoin price hits like $37,000, we have to shut down the machine. But, of course, in our mining sites, we do have some older generation machines. So it varies from, you know, like $40,000 to $50,000 to $60,000 in certain cases. So I think that’s the part. If we change that to the A16 series, it’s 12.8 joules power efficiency, and the shutdown price is about $30,000, you know, for Bitcoin price. I think this calculation is based on the latest hash price. It always changes because of the network, the total network hash rate changes, and also the Bitcoin price changes.

So I think in the current stage, we have already observed in December, early January, and early February, some of the operations in the network have been shut down, and the total hash rate moves back to like 900 exahash from previously 1,100 exahash. So we do see a lot of needs in the short term have not been released to the manufacturers. But in the longer term, when the electricity has already been prepared for mining, they will come back asking for better machines, for the latest generation machines. That’s something that happened in the past cycles, no matter bear market or bull market. Kevin, I think this answers your question.

Kevin Cassidy: That was a great answer. Thank you. Yeah. Very good. Thank you. As you get more orders for the leading edge, then what is your foundry availability on the A16, and what’s the cost difference for a wafer versus A15?

Nangeng Zhang: Yeah. I’ll do this one. Since last year, with our assessment of market cycles, we have maintained a fixed price interest strategy with low stock levels. And we secured, but we still secured critical foundry capacity and supply chain resources in anticipation of market recovery this year. Currently, global foundry capacity is indeed very tight, particularly for advanced nodes, which are seeing surging demand for AI-related sectors. But we secured our position earlier and maintained it because we have long-term partnerships. We’re utilizing rolling forecast prepayments and collaborative ramp-up mechanisms. So our access to wafers and key components remains stronger than the industry average. What I can say is, yeah, industry average.

So regarding the cost, we cannot disclose specific product unit costs for A16 faces upwards pressure in wafers, packaging, and certain system components compared to A15. I think it’s for sure. You know, even the metal is rising in price. So our plan is to offset these costs through yield improvements, testing optimizations, and designing more efficient systems. So, overall, what I can say is we expect the unit cost increase for A16 to remain within a manageable range. Ultimately, we measure competitiveness by our customers’ life cycle economics, including power efficiency, returns stability, and delivery certainty. So I think if the market recovers, our cost and our performance can give you an opportunity to have good ASP at that time. Yeah.

Thank you.

Kevin Cassidy: Great. Okay. Thank you.

Operator: Thank you. We will take our next question. Your next question comes from the line of Kevin Dede from H. C. Wainwright. Please go ahead.

Kevin Dede: Hi, Nangeng and James. Thanks for having me on the call. A couple of things for you. One is just I know you spoke to strategic priorities, but I just like to understand the one-gigawatt facility objective and what that pipeline looks like. Maybe you could add some color there, please.

Nangeng Zhang: Yeah. Okay. Hello. Good morning. Yeah. We will share more details when the time comes. But currently, we are quite confident in the gigawatt-level power opportunities, which is based on our results from work at this stage. We have already worked on this for maybe close to one year, I think. Yeah. Second, yes, we believe our goal is to co-locate AI HPC and Bitcoin mining much better. So we are talking about high-quality power resources.

Kevin Dede: Okay. Thanks, Nangeng. James, you mentioned, I think, a cash outlay of $100 million for wafers and $80 million in operating costs, I think, in the fourth quarter. Can you offer more detail on the wafers you secured? And of the 14 exahash sold, you usually give us sort of an average price per terahash, and I was wondering if you could offer some color on that and whether or not that figure would include the home series.

James Jin Cheng: Yeah. Thank you, Kevin. I think we start from the average selling price. I think the Q4 average selling price is $11.3, slightly lower than Q3, but I have explained a little bit on the margin side just because our average selling price for the institutional miners in a big order is usually lower than the small orders for the retail miners. I think that’s the case. And, also, we prioritized the industrial miners in Q4 instead of the home series. Even the margin side, the home series is better. But we have to make sure our strategic partner, the client, feels satisfied to get our delivery on time. So we tried our best in Q4. And, you know, still a few batches were delayed to early January. But we completed most of the deliveries in Q4.

I think that’s very helpful to the client. But not helping our financials. It looks like the profitability part is not as good as we expected for Q4. Just like I mentioned, the $38 million is the total expense for Q4. We did some work, which is slightly lower than Q3, in streamlining the organization. And I think the wafer supply side, the $100 million secured is most likely the wafer delivered to the customers and also some of the inventories carried to Q1. It’s ongoing. We still, but with a smaller volume of payment, continue that trajectory in Q1 to our wafer partner. I think that’s some color I added to this question, Kevin.

Kevin Dede: Thank you very much, James and Nangeng. Appreciate being on the call.

James Jin Cheng: Thank you, Kevin. Thank you.

Operator: Thank you. Once again, if you wish to ask a question, we will take the next question. The question comes from Kevin Dede from H. C. Wainwright. Please go ahead.

Kevin Dede: Hi again, gentlemen. I figured I’d hop on again given the opportunity to do that. Nangeng, can you talk a little bit about your product development? I understand the 12 joules per terahash target for the A16, but you also mentioned chip development that could push you down to maybe five or six joules per terahash. Can you talk about that and whether or not you see a product cycle shortening and when you might think that latest generation chip might be in the market?

Nangeng Zhang: Yeah. I think it’s a very open question. I think for the A16 series, currently, we achieved 12.8 joules for the ASIC XP with manageable cost rise. So our target is to, when the market recovers, you know, currently because of the deep dive for the Bitcoin price, so the whole market is some kind of freezing for a few weeks maybe. And after the market recovers, the competition comes back, we can have very competitive cost and performance to our competitors and give benefits to our customers. And for the next generation, yes, we have already moved to the next generation development for the chips. But, you know, because we are already at sub-nano process nodes, I think the benefits from the process itself are very tightened now.

And, also, the cost for the manufacture of the chips is rising a lot. We are trying different methods to further improve the energy efficiency. But it looks like after, I mean, after the 12 joules stage, when we come to the sub-10 joules product, it’s very, very hard to say that the manufacturing cost is still manageable if we are using today’s standards. We already observed that our competitors’ products have to be priced very high because we know the rough cost for the system. You cannot sell at a loss forever. Right? So, currently, in many different internal meetings, we are continuing to discuss if our target is the best power efficiency, then we may have to pay for, like, twice or triple the cost. How can we avoid this kind of situation?

Because the most important part is to let the TCO for our customers. Yeah. So also, we, you know, we also started the big-scale infrastructure in the US. So I think on the operational side, we are not only the equipment provider, we also got involved in operations. Any pains our customers have previously, we will react to ourselves. So we are thinking about this more and more carefully. Yeah. So, currently, I think in conclusion, I think the development for the new system, we will not accelerate, but also it will not delay. It will just go at a very natural progress. We are sure we will have new products this year. And, yeah, and also, you know, we hope at that time, you know, the AI HPC will not relocate 100% of the semiconductor capacity.

Yeah. And also, we don’t have, like, the DRAM and HBM kind of memories. So sometimes we are in a very good position. Still, we can use the rapid or, you know, sometimes the peak capacity is released from the foundries. We can use this kind of capacity to get one-time deals to fill our inventory. So this is good. We are waiting for this kind of opportunities. Yeah. So, basically, I think the industry is not coming to the end. It’s still going at a normal speed. Yeah. This is my personal view. Yeah. Thank you.

Kevin Dede: Okay. Okay, Nangeng. Yeah. Thank you for the detail there. Does Canaan have a self-mining target for 2026? Congratulations for reaching 10 exahash. I know that was a target in ’25. I was wondering if you thought about and are willing to communicate where you hope to be at the end of this year.

Nangeng Zhang: Yeah. I think our priority is R&D and delivery to our customers first. And because of the current market situation, so we moved the priority to allocate energy resources instead of just putting more rigs on the shelf. So, yeah, the infrastructure will give us the ability to scale it up when the right window opens. Yeah. So, currently, I don’t have a fixed number for this year. We have internal goals for electricity infrastructure. Yeah. So, yeah. And after that, if the window opens, we will rapidly ramp up the hash rate. I think controllable energy resources and facilities will give us more opportunities to try different business models and to provide different kinds of products to our customers. Yeah. I hope, you know, the hash rate sales can come through to our mainstream maybe next year. Yeah.

Operator: Thank you. As there are no further questions now, I’d like to turn the call back over to the company for any closing remarks.

Gwyn Lauber: Thank you for joining the call today, and we look forward to speaking with everyone throughout the quarter. Thanks.

Operator: Thank you. That concludes the call today. Thank you, everyone, for attending. You may now disconnect.