Canaan Inc. Annual Report - How They Did This Year

I’m writing this guide to help you understand how Canaan Inc. performed this year. Instead of digging through dense legal filings, we’ll break down the business so you can decide if it’s a company you want to follow.

1. What does this company do?

Canaan designs high-performance chips and builds the AvalonMiner machines used to "mine" Bitcoin. Think of them as the "pickaxe and shovel" sellers in the modern-day gold rush. They use a "fabless" model, meaning they design the technology but hire third-party factories like TSMC to build the hardware. This avoids the cost of owning factories, but it leaves them vulnerable to supply chain delays and factory capacity limits.

2. Financial performance: A tale of two stories

Canaan is in a "growth and survival" phase. While they are selling more than ever, the company still struggles to turn a final profit.

• Revenue Surge: Total revenue nearly doubled, jumping 96.7% to $529.7 million in 2025. This came from selling more machines and a massive increase in their own Bitcoin mining income, which hit $113.2 million.
• From Gross Loss to Profit: For the first time in years, they made money on the goods they sold. They recorded a $41.2 million gross profit, a major turnaround from the $84.3 million loss in 2024. This reflects better control over manufacturing and shipping costs.
• The Bottom Line: Despite higher sales, the company still lost $210.3 million in 2025. While this is an improvement from the $249.8 million loss in 2024, they still spend heavily on research and administration, which totaled $185.4 million.
• Cash Position: The company ended 2025 with $96.5 million in cash, up from $80.8 million. However, they still rely on selling more shares to fund operations because they spend more cash than they bring in.

3. Major wins and challenges

• Inventory Management: A huge win this year was clearing out unsold machines. Inventories dropped from $180.8 million in 2024 to $94.6 million in 2025. They are successfully matching production to market demand.
• Share Dilution: The number of shares increased from 4.3 billion to 9.7 billion. The company issued these new shares to raise cash. This reduces your ownership percentage, meaning your slice of the pie gets smaller even if the company grows.
• Debt Levels: Total debt decreased from $196.8 million to $165.5 million. This is a positive sign that they are paying off suppliers and managing short-term bills.

4. Governance and Risks

• Bitcoin Dependency: If Bitcoin’s price crashes, demand for their machines will likely drop. Because Canaan holds the Bitcoin they mine, they also face losses if the value of their holdings falls.
• The "Boss" Factor: CEO Nangeng Zhang holds 100% of the Class B shares, which carry superior voting rights. This gives him absolute control over major decisions. Retail shareholders have almost no say in how the company is run.
• Tax & Regulatory Risks:
  • PFIC Status: U.S. investors face complex tax rules. Canaan does not provide the documents needed to simplify these taxes, which can lead to higher tax rates for U.S. taxpayers.
  • Depositary Fees: If you own their American Depositary Shares, the bank charges annual fees for administrative services. These fees are often taken directly from your account, which can eat into your returns.

Final Thoughts for Investors

Canaan is a high-risk, high-reward play tied directly to the Bitcoin market. While they have made significant progress in clearing inventory and improving their gross margins, the company is still burning cash and diluting shareholders to keep the lights on. Before investing, consider whether you are comfortable with the CEO’s absolute control and the potential tax complexities associated with their share structure.