RGTI Q2 Secures Funding Amid Weak Sales: Time to Buy, Hold or Sell?

Core Insights - Rigetti Computing (RGTI) is facing short-term revenue challenges with a second-quarter 2025 revenue of $1.8 million, down from $3.1 million the previous year, and a gross margin decrease to 31% from 64% due to lower-margin government contracts [1][8] - The company raised $350 million through an equity offering, ending the quarter with $571.6 million in cash and no debt, providing financial flexibility for ongoing investments in research and development [1][10] Financial Performance - Revenue for Q2 2025 was $1.8 million, a decline from $3.1 million, with gross margin narrowing to 31% [8] - In 2025, Rigetti is expected to experience a 19.7% decline in revenues, while earnings per share are projected to improve by 86.1% year over year, although still remaining negative [11] Innovation and Technology - Rigetti introduced the Cepheus-1-36Q, the largest multichip quantum computer to date, achieving a two-fold reduction in error rates compared to its predecessor, with a median two-qubit gate fidelity of 99.5% [2][9] - The company aims to deliver a 100-plus qubit chiplet-based system by year-end, focusing on scaling toward quantum advantage [2][9] Competitive Landscape - Rigetti's strategy in superconducting qubits differentiates it from peers like Arqit Quantum, D-Wave Quantum, and Quantum Computing Inc., which are pursuing alternative paths [3] - The company's progress in chiplet technology is expected to improve manufacturing yields and reduce complexity, paving the way for larger, more reliable quantum systems [9] Market Position and Stock Performance - RGTI shares have gained 9.1% year-to-date, outperforming some competitors, while the broader Zacks Internet - Software Industry has advanced 22.9% [4] - Despite the positive stock performance, Rigetti's price-to-book (P/B) ratio stands at 8.74X, higher than the industry average of 7.08X, indicating potential overvaluation [15] Challenges and Future Outlook - Rigetti's financial performance is heavily dependent on government funding cycles, with recent revenue declines attributed to the expiration of the U.S. National Quantum Initiative [14] - To sustain long-term growth, the company needs to broaden its revenue base beyond government contracts and convert technological advancements into recurring commercial opportunities [14]