RGTI Stumbles on Weak Q3 and DARPA Phase B Miss: Time to Hold or Fold?

Core Insights - Rigetti Computing (RGTI) has faced renewed pressure with a 14.6% decline in shares over the past month due to weaker revenues, compressed margins, and a miss on DARPA Phase B selection, raising concerns about its commercial momentum [1][2][21] - Despite these challenges, Rigetti is advancing its roadmap with new system sales and R&D partnerships, reaffirming multi-year hardware targets through 2027, indicating ongoing validation from various partners [2][8][10] Financial Performance - Rigetti's Q3 results showed revenues of $1.9 million, an 18% year-over-year decline, attributed to the lapse of National Quantum Initiative funding and inconsistent government contracts [17][18] - Gross margin fell to 21% from 51%, while operating expenses rose to $21 million due to increased R&D spending and other costs, highlighting the company's reliance on government and research-driven projects [18][21] Market Position and Competition - Rigetti's stock is up 85.2% year-to-date, outperforming most quantum peers but lagging behind leaders like D-Wave Quantum (QBTS), which surged 238.6% [4][5] - The competitive landscape in quantum computing is intensifying, with companies like IonQ and Arqit Quantum making significant advancements, which has led to increased investor caution regarding Rigetti's near-term execution [3][21] Strategic Developments - Rigetti secured a three-year, $5.8 million contract with AFRL focused on superconducting quantum networking, alongside $5.7 million in purchase orders for two 9-qubit systems, enhancing future revenue visibility [8][21] - The company is expanding its global and academic ecosystem through collaborations, including a new MOU with India's C-DAC and a deployment at Montana State University, which may lead to future research partnerships [9][10] Technological Advancements - Rigetti is progressing with its chiplet-based architecture, with a current 36-qubit system demonstrating high fidelity and gate speeds, and plans to unveil a 100+ qubit system by the end of 2025 [11][12] - The company aims to deliver a 150+ qubit system in 2026 and a 1,000+ qubit system in 2027, showcasing its commitment to scalability and technological advancement [12][21] Investment Considerations - Rigetti's stock is considered overvalued with a price-to-book ratio of 24.72X compared to the industry average of 6X, indicating high investor expectations [19] - The company remains a high-risk investment in the quantum computing sector, with a Zacks Rank of 3 (Hold), suggesting a cautious approach for investors as it seeks to convert technological progress into stable revenue streams [21][22]