On November 10, Canaan Inc. (NASDAQ: CAN) released its third-quarter 2026 results.

On paper, it made an $8 million profit. But none of that came from selling mining rigs or crypto mining. It was driven by a rebound in Bitcoin’s price at the end of the quarter.

The more consequential figure is elsewhere: $50 million in cash has been locked up as collateral for a letter of credit, backing a 1 GW project waiting at the gates of the Texas power grid.

Weak Mining Rig Sales Are an Industry-Wide Problem

Canaan generated $14.5 million in third-quarter revenue, down 90% from $150.5 million a year earlier.

Mining rig revenue was just $4.8 million on sales of 1 million TH/s, or 1 EH/s, compared with $118.6 million a year earlier. That works out to less than $5 per TH/s.

CEO Nangeng Zhang laid out the economics on the earnings call: mining revenue currently runs at about $0.023 per TH/s per day, while electricity costs roughly $0.015, leaving a margin of less than one cent. At those returns, customers can afford to pay about $6 per TH/s for a mining rig, below the cost of any inventory batch in the industry.

So even as Bitcoin rose, orders did not return. Customers are calculating payback periods, and when the numbers do not work, they do not buy new machines.

At the same time, AI demand is competing for wafers made on advanced process nodes, pushing wafer prices higher. Even if next-generation mining rigs are more energy-efficient, manufacturers will struggle to build them at prices customers are willing to pay.

Zhang gave a clear account of the R&D situation on the call. Over the past two quarters, several next-generation mining-rig ASICs have been completed or are nearly complete. Engineering sample tests met targets, and additional samples are still arriving. He said the technology should be sufficient for the next several years, allowing Canaan to sharply reduce ongoing spending on new-product development while retaining the ability to begin mass production when commercial conditions improve.

The next question is when conditions will justify moving these designs into mass production. Wafer costs on advanced process nodes have risen significantly while demand for mining rigs remains weak, so timing will depend on customer demand, manufacturing costs and expected returns. Canaan is also delaying delivery of some wafers that were secured earlier at relatively low prices, with support from its suppliers.

The designs are finished and the samples have arrived, but mass production is on hold. The issue is not whether the products can be made. At current wafer prices, the economics simply do not work.

Computing Power Heart understands that Canaan is not alone. WhatsMiner is in the same position: its chip design is complete, but it is holding off on tape-out for now. The main constraint lies with foundries. Samsung’s production lines are already close to full capacity, and the company is still seeking price increases. Once wafer prices rise, even more energy-efficient new machines become difficult to produce at prices customers will accept.

Not every manufacturer is cutting production, however. Computing Power Heart understands that Bitmain may maintain output to preserve its production capacity at TSMC, with shipments next year potentially remaining level with this year.

The $8 Million Profit Came From Bitcoin’s Quarter-End Price

The income statement makes the picture clear.

Canaan recorded a gross loss of $8.6 million. Its product business generated $4.8 million in revenue against $13.6 million in costs, including an $8.2 million write-down. Operating expenses totaled $34.2 million, including $13.1 million in R&D, $14.1 million in general and administrative expenses, and $5.7 million in impairment charges for fixed assets and software. Its operating loss widened to $42.9 million from $23.9 million a year earlier.

Two fair-value gains pulled the bottom line back into positive territory: $20.1 million from cryptocurrencies and $31.9 million from financial derivatives, for a combined $51.9 million. The CFO described this as a “fair-value gain on cryptocurrency holdings,” although the official financial statements list it as two separate items.

Both gains had the same underlying cause: Bitcoin was worth more on September 30 than on June 30. When Bitcoin performs well, reported profit naturally rises.

Adjusted EBITDA looked stronger at $22.4 million, but that measure did not exclude the fair-value gains, meaning it also included the benefit from Bitcoin’s price. The CFO acknowledged that this noncash gain was separate from operating performance.

Taken as a whole, crypto mining was the company’s only business still generating ordinary profits. Canaan mined 133 Bitcoin in the third quarter, producing $9.5 million in revenue and a pre-depreciation gross margin of about 30%, up from 20% in the second quarter. Its blended electricity price was about 4.3 cents per kWh, low by industry standards.

But mining revenue also contracted, falling by nearly half from the previous quarter because less computing power was online. Canaan mined 267 Bitcoin in the same quarter last year, compared with 133 this time.

Only $22.8 Million in Cash Is Available for Use

At the end of the third quarter, Canaan held $72.8 million in cash and restricted cash. Of that amount, $50 million was restricted as collateral for a letter of credit tied to “certain long-term infrastructure-related contractual arrangements.”

In other words, the company had only $22.8 million in cash it could actually use.

The restricted cash remains on the balance sheet, but it cannot be used to pay salaries or repurchase shares. The financial report does not identify the beneficiary of the letter of credit or specify what it guarantees. On the earnings call, the CFO discussed it alongside the Duval project, calling it a “tangible capital commitment behind the milestone.”

Industry speculation is that the money is likely a financial guarantee required by the Texas grid interconnection process. Under ERCOT rules, when specific upgrade costs cannot be calculated, the default guarantee is $50,000 per MW. For a 1 GW project, that comes to exactly $50 million.

Canaan’s Bitcoin holdings also require a closer look. Of its 1,875.5 Bitcoin, only 517.5 are freely available to the company. Another 1,258 have been pledged against term loans, while 100 are held in fixed-term products. Short- and long-term borrowings on the balance sheet total about $68.4 million.

During the third quarter, Canaan also sold all of its Ether and part of its Bitcoin holdings at an average Bitcoin price of roughly $79,000. It used $5.4 million of the proceeds to repurchase 13.6 million ADSs.

The board then approved a new repurchase program of up to $100 million over 12 months, with an initial $20 million tranche.

Canaan has $22.8 million in unrestricted cash, a $20 million initial repurchase plan and further spending ahead for Duval. That prompted the question analysts asked on the call: where will the money come from?

The CFO said Canaan would repurchase shares aggressively only after funding operations and projects to which it had already committed. The pace of buybacks will depend on how much more cryptocurrency it can sell and whether it can find outside financing for the Texas project.

The 1 GW Texas Project Is Still Far From Energization

On November 10, 2026, Canaan announced that its 1 GW project in Duval County had received a conditional “Studied Load-Firm” classification under ERCOT’s Batch Zero process.

ERCOT operates the Texas power grid. Batch Zero is a one-time, group-based study process it introduced in 2026 for large-load projects above 75 MW. “Studied Load” means the project has been included in the grid study, while “Firm” refers to a technical path that is not interruptible and does not rely on on-site generation. The amount of electricity ultimately available to the project will depend on ERCOT’s study results. Canaan currently lists the Duval project’s planned capacity at 1 GW, but its final power allocation has yet to be confirmed.

There are still two layers of conditionality.

On August 3, the Texas governor ordered reviews and audits of every data center in the interconnection queue. That same day, ERCOT suspended energization approvals for new data centers and crypto mining farms above 75 MW, delaying final classifications until December. The review report is due to the Public Utility Commission of Texas on December 10. In a November notice, ERCOT said common problems included an inability to prove site control and verify guarantee amounts. ERCOT has not said how long the study, originally scheduled for completion in April 2027, will now be delayed.

The significance of this step is that Canaan has secured a place in the queue. The project remains far from receiving power. Management’s own timeline is “looking toward 2027,” subject to ERCOT’s subsequent schedule.

Another 1 GW project in Zapata County remains in the early stages of development and preparation for an interconnection study. The CFO said on the earnings call that the land acquired for $1.1 million in October was intended for the Zapata project.

As for the development model, Canaan said it was discussing a strategic partnership with a U.S. institution carrying an investment-grade credit rating, with details remaining confidential. Zhang was direct: given Canaan’s current scale, it does not intend to build a large AI data center by itself. Instead, it aims to earn a share of the returns from major projects by contributing its early-stage capabilities in securing power, acquiring land and navigating grid interconnection. Those are the capabilities it has genuinely built through operating mining farms.

For now, however, investors have only a conditional classification. The identity of the partner, the economics of the arrangement and the source of construction funding have yet to be put on paper.

Canaan guided for fourth-quarter revenue of $18 million to $22 million, slightly above the third quarter. Zhang specifically cautioned that this did not mean demand for mining rigs had returned.

Shares at $0.1634, With Another 25-for-1 Consolidation Ahead

At the U.S. market close on November 10, 2026, or 5 a.m. Beijing time on November 11, Canaan’s ADSs stood at $0.1634, down 19% for the day. As of that date, the shares had fallen about 76% in 2026 and had lost more than half their value since the September 30 close.

Based on roughly 691 million ADSs, Canaan’s market capitalization was about $110 million. At approximately $74,000 per Bitcoin, its roughly 1,875 Bitcoin were worth about $138 million.

Of those Bitcoin, 1,258 have been pledged and 100 are held in fixed-term products. Canaan also has $50 million in restricted cash and $119 million in inventory. Management has warned of further inventory write-down risks.

The company also disclosed an adjustment to its ADS ratio. Around December 4, 2026, the number of ordinary shares represented by each ADS will increase from 15 to 375, equivalent to a 25-for-1 ADS consolidation. The move relates to Nasdaq’s $1 minimum bid-price requirement and will also affect investment restrictions imposed by some institutions on low-priced stocks. Shareholders’ ownership percentages will remain unchanged after the consolidation.

Four Questions to Watch

Canaan’s main third-quarter developments fell into three areas. Mining rig revenue declined to $4.8 million, while inventory stood at $119 million. The pre-depreciation gross margin for crypto mining recovered to 30%, while quarterly Bitcoin production fell to 133 from 267 in the same period of 2025. Net income was $8 million, with combined paper gains of $51.9 million from cryptocurrencies and financial derivatives. Canaan had $22.8 million in freely available cash, plus $50 million pledged as collateral for a letter of credit.

The Duval project in Texas has entered the grid-study stage, with its final power allocation pending ERCOT’s findings. The Zapata project remains in early preparation, while details of the strategic partner and construction financing have yet to be disclosed.

Four issues will shape the next round of disclosures: the beneficiary, specific purpose, draw conditions and release terms of the $50 million letter of credit; the amount of firm power allocated to Duval after the final classification is announced in December 2026; Canaan’s ownership stake, development fees or power-related revenue arrangement after a strategic partnership is reached, along with the source of construction funding; and the share of older mining rig models in its $119 million inventory and the scale of further write-downs.

Canaan cannot sell many mining rigs, its crypto mining business is shrinking, and its profit depends on Bitcoin’s price. What it does have is a place in the queue for the Texas grid. The direction of its transition makes sense, but financing is the challenge: with just over $20 million in unrestricted cash, it must fund operations, share repurchases and further investment. Its main resources are 517 freely available Bitcoin and a prospective partner that has yet to sign an agreement.

Over the next six months, Canaan’s valuation will hinge on ERCOT’s final classification in December and whether it can sign the investment-grade partner. Mining rigs and Bitcoin’s price can only buy it more time.