Core Viewpoint - D-Wave Quantum (QBTS) is expected to report a decline in fourth-quarter revenues and losses, but the company is benefiting from increased adoption of its quantum computing solutions and expanding customer base across various sectors [2][4][5]. Financial Performance - The Zacks Consensus Estimate for fourth-quarter revenues is $2.24 million, reflecting a year-over-year decline of 23.16% [2]. - The consensus estimate for loss is 9 cents per share, unchanged over the past 30 days, compared to a loss of 10 cents per share in the same quarter last year [2]. Customer Base and Demand - D-Wave Quantum has broadened its customer base to 132 clients across commercial, government, and research sectors, with significant revenue increases of 66% from government customers and 47% from research customers in Q3 2024 [6]. - The company anticipates improved bookings in Q4 2024 due to rising demand for its quantum computing services [5]. Product Advancements - The completion of the 4,400-qubit Advantage 2 processor is expected to drive customer interest and technology adoption in the upcoming quarter [7]. - Key clients, such as NTT DOCOMO, are moving into production with quantum applications, which is likely to enhance revenues and customer engagement [8]. Stock Performance - QBTS shares have surged 124% over the past 12 months, outperforming the broader Zacks Computer and Technology sector, which returned 5.5% [9]. - Compared to peers like IBM and Alphabet, which gained 29.9% and 19.8% respectively, QBTS has shown stronger performance [11]. Valuation Concerns - D-Wave Quantum shares are currently considered overvalued, with a forward 12-month price/sales ratio of 66.8X, significantly higher than its median of 12.10X and the sector's 5.70X [12]. Partnerships and Innovations - Partnerships with companies like Carahsoft and Zapata Computing are expected to contribute to growth in Q4 2024 [15]. - A recent collaboration with Staque introduced a commercial hybrid-quantum application for optimizing autonomous agriculture vehicles, which may positively impact performance [16]. Competitive Landscape - D-Wave Quantum faces increasing competition from companies like Rigetti Computing, IBM, Google, and IonQ, which are advancing their quantum technologies [17][20]. - The launch of Rigetti's 84-qubit Ankaa-3 system highlights the competitive pressures in the quantum computing market [18]. Market Sentiment - Influential tech leaders express skepticism about the near-term utility of quantum computing, which adds to the uncertainty surrounding the market [20][21].

Core Viewpoint - Wall Street anticipates a year-over-year increase in earnings for D-Wave Quantum Inc. despite lower revenues, with a focus on how actual results will compare to estimates [1][2]. Earnings Expectations - The upcoming earnings report is expected to show a quarterly loss of $0.09 per share, reflecting a 10% improvement year-over-year, while revenues are projected to be $2.24 million, down 23% from the previous year [3]. - The earnings report is scheduled for release on March 13, 2025, and could influence stock movement based on whether results exceed or fall short of expectations [2]. Estimate Revisions - The consensus EPS estimate has remained unchanged over the last 30 days, indicating a stable outlook from covering analysts [4]. - The Most Accurate Estimate for D-Wave Quantum is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -22.22%, suggesting a bearish sentiment among analysts [10][11]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that a positive reading is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank of 1, 2, or 3 [8]. - D-Wave Quantum currently holds a Zacks Rank of 3, making it challenging to predict an earnings beat conclusively [11]. Historical Performance - In the last reported quarter, D-Wave Quantum was expected to post a loss of $0.10 per share but actually reported a loss of $0.11, resulting in a surprise of -10% [12]. - The company has not beaten consensus EPS estimates in any of the last four quarters [13]. Conclusion - While the potential for an earnings beat exists, D-Wave Quantum does not appear to be a compelling candidate for such an outcome, and investors should consider other factors before making decisions [16].

Core Viewpoint - D-WAVE QUANTUM (QBTS) shares are currently overvalued, indicated by a Value Score of F, with a forward 12-month price/sales (P/S) ratio of 90.31X, significantly higher than its median of 14.26X and the sector's 6.49X [1][2]. Company Performance - QBTS shares have surged 554.8% in the trailing six months, outperforming the broader Zacks Computer and Technology sector's return of 13.7% and the Internet - Software industry's appreciation of 38.7% [3][4]. - QBTS has outperformed peers like IBM and Alphabet, which gained 33.2% and 14.2% respectively in the same period, attributed to its expanding clientele and influence in quantum computing [5]. Market Dynamics - The global quantum computing market is expected to grow at a CAGR of 20.1% from 2024 to 2030, indicating a robust growth trajectory for the industry [11]. - QBTS' Quantum Computing-as-a-Service revenues grew 41% year over year, totaling $1.6 million in Q3 2024, driven by higher average revenue per customer [7]. Strategic Initiatives - In January, QBTS launched the Leap Quantum LaunchPad program, offering a three-month free trial of its technology to accelerate quantum application deployment [8]. - QBTS has formed partnerships with companies like Carahsoft and Zapata Computing, which have been significant growth drivers, particularly in the public sector [12]. Customer Base and Revenue Growth - QBTS has a diverse customer base of 132 across commercial, government, and research sectors, with a 66% revenue increase from government customers and a 47% increase from research customers in Q3 2024 [13]. - The Zacks Consensus Estimate for 2025 revenues is projected at $15.42 million, reflecting a 76.22% year-over-year increase [14]. Competitive Landscape - QBTS faces growing competition from companies like Rigetti Computing, IBM, Google, and IonQ, which are advancing in quantum technologies [16]. - Rigetti launched its 84-qubit Ankaa-3 system, enhancing its market position and potentially challenging QBTS [17]. Market Sentiment - Influential tech leaders, including Meta's CEO Mark Zuckerberg, express skepticism about the near-term utility of quantum computing, adding to market uncertainty [18][19]. Conclusion - The stretched valuation and stiff competition are expected to pressure QBTS shares in the near term, with a Zacks Rank 3 (Hold) suggesting a cautious approach for investors [20].

Investment Strategy - The company employs a contrarian investment style, focusing on high-risk, illiquid options and shares [1] - The investment portfolio is split approximately 50%-50% between shares and call options [1] - The investment timeframe typically ranges from 3 to 24 months [1] Stock Selection Criteria - The company targets stocks that have recently experienced sell-offs due to non-recurrent events, particularly when insiders are buying shares at lower prices [1] - Fundamental analysis is utilized to assess the health of companies, including their leverage and financial ratios compared to sector and industry averages [1] - Professional background checks are conducted on insiders who purchased shares after sell-offs [1] Technical Analysis - Technical analysis is used to optimize entry and exit points for positions, employing multicolor lines for support and resistance levels on weekly charts [1] - Trend lines are drawn in multicolor patterns to aid in analysis [1]

Quantum Computing Market Overview - IBM and Google have made significant advancements in quantum computing, with IBM launching its most advanced quantum computers and Google's Willow quantum chip demonstrating exceptional computational efficiency [1] - The global quantum computing market is expected to witness a CAGR of 20.1% from 2024 to 2030, driven by increasing demand for quantum solutions [10] QBTS Performance and Market Position - QBTS shares surged 420.3% in the trailing six months, outperforming the broader Zacks Computer and Technology sector (3.7%) and Internet - Software industry (14.2%) [8] - QBTS' Quantum Computing-as-a-Service revenues grew 41% year over year, totaling $1.6 million in Q3 2024, driven by higher average revenue per customer [9] - QBTS expanded its customer base to 132 customers across commercial, government, and research sectors, with significant revenue increases from government (66%) and research (47%) customers in Q3 2024 [11] QBTS Technological Advancements - QBTS completed the calibration and benchmarking of its 4,400+ qubit Advantage2 processor, marking significant performance improvements over the Advantage system in optimization, AI, and materials science [4] - QBTS successfully completed its second SOC 2 Type 2 audit in December 2024, reaffirming its commitment to customer data security and protection [15] QBTS Partnerships and International Expansion - QBTS' partnerships with Zapata Computing Holdings, Japan Tobacco, and Staque have been major growth drivers [5] - NTT DOCOMO plans to deploy a hybrid-quantum application using D-Wave technology to optimize mobile network performance and reduce signal congestion, expanding QBTS' international footprint [10] Competitive Landscape - Rigetti Computing launched its 84-qubit Ankaa-3 quantum computing system in December 2024, featuring significant hardware enhancements and major two-qubit gate fidelity milestones, potentially challenging QBTS' market position [7] - QBTS faces growing pressure from competitors like IBM, Google, and IonQ, intensifying market pressures with advancements in quantum computing technologies [12] Financial Outlook - The Zacks Consensus Estimate for QBTS' 2025 revenues is $15.42 million, indicating a 76.22% year-over-year increase [17] - QBTS is trading at a forward 12-month Price/Sales ratio of 103.34X, significantly higher than the sector's 7.09X, suggesting a stretched valuation [18]

Group 1: Quantum Computing Industry - Quantum computing is transitioning from a buzzword to a significant business sector, with Rigetti Computing Inc leading the way through its Quantum Cloud Services platform and innovative quantum processors [3][4] - Rigetti's business model is likened to an early-stage Nvidia, positioning it as a foundational player in quantum computing, with a strong cash position that supports further innovation [4] - D-Wave Quantum Inc is also making strides with its Quantum Computing as a Service model, focusing on real-world applications such as supply chain optimization and drug discovery, which has attracted investor interest [14][15] Group 2: Company Performance and Growth - Rigetti Computing has achieved a year-to-date gain of 1,578%, reflecting strong market confidence in its potential [12] - D-Wave Quantum has seen a year-to-date gain of 1,107%, driven by its focus on practical applications of quantum technology [14] - SoundHound AI Inc has experienced a remarkable year-to-date gain of 1,064%, with a 89% revenue increase in Q3 2024, attributed to strategic partnerships that enhance customer interactions [7][9]

Core Insights - D-Wave Quantum's stock price has surged by 500% in a month, driven by advancements in quantum computing technology and significant government funding [1][3]. Company Overview - D-Wave specializes in quantum computing, utilizing quantum annealing technology to solve complex optimization problems, distinguishing itself from conventional binary computing [1]. - The company generates revenue primarily through its Quantum Computing as a Service (QCaaS) offerings, which include access to advanced quantum technologies and tools for building quantum applications [4]. Industry Context - The potential applications of quantum computing span various fields, including financial modeling, drug discovery, and materials science, although the technology is still in a developmental stage [2][5]. - Recent advancements from major players like Google and Amazon have contributed to a rally in quantum stocks, including D-Wave [3]. Financial Performance - D-Wave reported a revenue of $9.4 million over the last twelve months, which is considered trivial in the context of its growth potential [5]. - The company has faced significant operating losses, amounting to $74 million in the last twelve months, indicating the high-risk, high-growth nature of its business model [5]. Market Comparison - D-Wave's stock has exhibited high volatility, with returns of -86% in 2022 and -39% in 2023, contrasting sharply with the performance of the Trefis High Quality Portfolio, which has consistently outperformed the S&P 500 [5].

The quantum computing industry is shaping to be one of the most dynamic investment frontiers, fueled by surging interest from commercial and government sectors. Market forecasts paint a bright future, with the industry expected to expand from $1.16 billion in 2024 to $12.6 billion by 2032, reflecting a remarkable 34.8% annual growth rate.Google’s recent unveiling of its quantum computing chip, “Willow”, has intensified this momentum, marking a significant leap in the field and highlighting quantum computing ...

Revenue and Cost of Revenue - Revenue decreased by $0.7 million (27%) to $1.9 million for Q3 2024 compared to $2.6 million in Q3 2023, driven by a $1.1 million decrease in professional service revenue partially offset by a $0.5 million increase in QCaaS revenue[91] - Revenue increased by $0.7 million (11%) to $6.5 million for the nine months ended September 30, 2024, driven by a $1.7 million increase in QCaaS revenue[100] - Cost of revenue decreased by $0.2 million (20%) to $0.8 million for Q3 2024 compared to $1.0 million in Q3 2023, primarily due to a decrease in non-cash stock-based compensation[92] - Cost of revenue decreased by $0.8 million (24%) to $2.4 million for the nine months ended September 30, 2024, primarily due to reductions in non-cash stock-based compensation and personnel costs[101] Net Loss and Accumulated Deficit - Net loss increased by $6.6 million (41%) to $22.7 million for Q3 2024 compared to $16.1 million in Q3 2023[90] - The company had an accumulated deficit of $540.9 million as of September 30, 2024, with net cash outflows from operating activities of $44.7 million for the nine months ended September 30, 2024[111] Research and Development Expenses - Research and development expenses decreased by $0.8 million (8%) to $8.7 million for Q3 2024 compared to $9.5 million in Q3 2023, driven by decreases in stock-based compensation and fabrication costs[93] - Research and development expenses decreased by $4.4 million (15%) to $25.5 million for the nine months ended September 30, 2024, driven by lower stock-based compensation and personnel costs[102] General and Administrative Expenses - General and administrative expenses increased by $1.3 million (16%) to $9.3 million for Q3 2024 compared to $8.0 million in Q3 2023, primarily due to increases in professional services and credit losses[94] - General and administrative expenses decreased by $4.6 million (16%) to $24.3 million for the nine months ended September 30, 2024, primarily due to reductions in professional fees and stock-based compensation[103] Sales and Marketing Expenses - Sales and marketing expenses increased by $1.3 million (52%) to $3.8 million for Q3 2024 compared to $2.5 million in Q3 2023, driven by increases in personnel costs and stock-based compensation[95] - Sales and marketing expenses increased by $3.4 million (43%) to $11.2 million for the nine months ended September 30, 2024, driven by higher personnel costs and stock-based compensation[104] Interest Expense and Term Loan - Interest expense increased by $0.1 million (14%) to $1.2 million for Q3 2024 compared to $1.0 million in Q3 2023, primarily due to the Term Loan[96] - Interest expense increased by $1.7 million (91%) to $3.5 million for the nine months ended September 30, 2024, primarily due to the Term Loan[105] - The fair value of the Term Loan increased by $1.6 million for Q3 2024 compared to a decrease of $1.7 million in Q3 2023[97] - The fair value of the Term Loan increased by $0.6 million for the nine months ended September 30, 2024, compared to a decrease of $1.4 million in the same period in 2023[106] - Term Loan debt issuance costs decreased by $0.7 million for Q3 2024 compared to Q3 2023, as there were no advances on the Term Loan during Q3 2024[98] Other Income and Expenses - Gain on investment in marketable equity securities increased by $1.5 million for the nine months ended September 30, 2024, due to an acquisition of an investee[108] - Other income (expense), net increased by $1.8 million (5365%) to $1.8 million for the nine months ended September 30, 2024, driven by foreign exchange gains and higher interest income[110] Cash Flow and Liquidity - Net cash used in operating activities for the nine months ended September 30, 2024 was $44.7 million, a decrease of $1.3 million from $45.9 million in 2023[115] - Net cash used in investing activities for the nine months ended September 30, 2024 was $2.2 million, an increase of $2.0 million from $0.2 million in 2023[116] - Net cash provided by financing activities for the nine months ended September 30, 2024 was $34.9 million, a decrease of $57.5 million from $92.4 million in 2023[118] - Proceeds from the issuance of common stock pursuant to the ATM Agreement were $20.7 million for the nine months ended September 30, 2024[118] - The company's liquidity condition raises substantial doubt about its ability to continue as a going concern for one year from the issuance of the financial statements[113] - The decrease in noncash items was primarily due to a $5.6 million decrease in stock-based compensation and a $3.1 million decrease in non-cash interest expense[115] - The increase in cash used in investing activities was primarily due to a $1.0 million purchase of convertible notes and a $1.0 million increase in property and equipment purchases[116] - The decrease in cash provided by financing activities was primarily due to a $29.2 million decrease in proceeds from the issuance of common stock and a $29.0 million decrease in debt financing proceeds[118] - The company may need to obtain additional capital through debt or equity issuance if sufficient capital is not obtained from existing agreements[113] - The company's operating cash flows are significantly affected by research and development, sales and marketing, and general and administrative activities[115] QCaaS Revenue Expectations - The company expects QCaaS revenue as a percentage of total revenue to increase due to more QCaaS agreements driven by professional services engagements and direct Leap cloud service access[84]

Financial Data and Key Metrics Changes - Revenue for Q3 2024 totaled $1.9 million, a decrease of approximately $700,000 or 27% from Q3 2023 revenue of $2.6 million [24] - GAAP gross profit for Q3 was $1 million, a decrease of $500,000 or 32% from Q3 2023 gross profit of $1.5 million [30] - Net loss for Q3 was $22.7 million or $0.11 per share compared to a net loss of $16.1 million or $0.12 per share in Q3 2023 [33] - Adjusted EBITDA loss for Q3 was $13.8 million, an increase of $2.2 million or 19% compared to the adjusted EBITDA loss of $11.6 million in Q3 2023 [34] Business Line Data and Key Metrics Changes - QCaaS revenue for Q3 was $1.6 million, an increase of $500,000 or 41% from Q3 2023 QCaaS revenue of $1.1 million [24] - Professional services revenue for Q3 was $300,000, a decrease of $1 million or 80% from Q3 2023 professional services revenue of $1.3 million [25] - Bookings for Q3 totaled $2.3 million, a decrease of $600,000 or 22% compared to Q3 2023 bookings of $2.9 million [26] Market Data and Key Metrics Changes - Revenue from government customers increased by $800,000 or 66% compared to the previous four quarters [29] - Revenue from research customers increased by $600,000 or 47% compared to the previous four quarters [29] - Revenue from commercial customers decreased slightly by $200,000 or 4% compared to the previous four quarters [29] Company Strategy and Development Direction - The company is focused on expanding its go-to-market organization, having filled 11 positions across various regions [27] - D-Wave aims to be the first independent publicly held quantum computing company to achieve sustained profitability with less funding than competitors [41] - The company is exploring generative AI architectures that utilize quantum processing units for model training and inference [11] Management's Comments on Operating Environment and Future Outlook - Management noted increasing interest in quantum technology and believes that annealing quantum computing is critical for commercial adoption [7] - The company is optimistic about the potential for government funding through the re-authorization of the National Quantum Initiative [50] - Management highlighted the significant progress with NTT DOCOMO and the potential for increased QCaaS revenue as applications move into production [46] Other Important Information - D-Wave has been deemed awardable on the U.S. Department of Defense's Tradewinds buying platform, facilitating easier procurement of their products [17] - The company has nearly $30 million in cash and has paid off a $50 million secured term loan [22][41] - D-Wave's Leap quantum cloud service has consistently exceeded 99.9% availability over the past two years [12] Q&A Session Summary Question: Timing for NTT DOCOMO moving to production - Management confirmed that NTT DOCOMO is planning to move applications into production but has not disclosed a timeline [46] Question: Insights on government business momentum - Management noted significant interest from U.S. government agencies and highlighted the importance of being deemed awardable on the Tradewinds platform [51] Question: Impact of recent research on encryption from China - Management clarified that while the research is interesting, it does not pose a current threat to existing cryptographic systems [58] Question: Potential for government budget tightening - Management indicated that any potential budget tightening would likely impact gate model providers more than D-Wave, which has focused on commercial revenue [94]