• The company’s second quarter was impressive, with solid growth in both revenue and profit.
  • Third-quarter guidance was not as optimistic, though.

What’s going on with Canaan stock

The crypto winter may still be here, but Canaan stock is warming. Following the release of the Bitcoin (CCC:BTC-USD) mining equipment maker’s latest quarterly earnings, investors drove its share price up by almost 1%.

Why we care

Canaan Inc. (NASDAQ:CAN) is a company that designs, creates, and sells integrated circuit (IC) final cryptocurrency mining equipment products. It integrates IC products for bitcoin mining and related components, primarily in China. The company also assembles and distributes mining equipment and spare parts worldwide.

Canaan reported second-quarter figures in which it generated revenue of just over $243 million, for a year-over-year increase of 53%. This was because of a nearly 28% increase to 5.5 million Thash/s in total computing power sold–a key metric for the company.

Net income based on generally accepted accounting principles (GAAP) saw a massive increase of nearly 150% across that stretch, rising to slightly under $90 million, or $3.47 per share.

Although Canaan is a pick-and-shovel play on Bitcoin, its success does not lie solely in how successful the coin is. Instead, management attributes the company’s growth to an increase in sales of computing power, as well as its ability to maintain high prices despite a decline in Bitcoin value.

What now

Canaan’s guidance was the cause of the cautious investor response to the otherwise successful second quarter. The firm reasonably expects a more challenging market, owing to both Bitcoin’s depressed price and higher energy expenditures (mining Bitcoin is a highly energy-intensive procedure).

On the other hand, in its most recent quarterly earnings call, Canaan said it expected revenue of $133 million to $162 million for the current (third) quarter. That estimate would represent a decline of 17% to 32% year over year. It did not provide any profitability projections.

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