Rigetti Stock Soars 151% in a Year: Is It Still Worth Holding in 2026?

Core Insights - Rigetti Computing (RGTI) stock has seen a remarkable 151% increase over the past year, but recent performance indicates a reassessment of future upside potential due to a weaker third-quarter performance marked by declining revenues and lower gross margins [1][6] - The company has secured new contracts and partnerships, including a multi-year agreement with the Air Force Research Laboratory, while reaffirming its technological roadmap towards larger qubit systems by 2026 and 2027 [2][8][10] Financial Performance - RGTI's revenues for the third quarter fell to $1.9 million, an 18% year-over-year decline, primarily due to a funding gap related to the National Quantum Initiative and inconsistent government contract awards [13] - Gross margins have compressed to 21%, driven by a higher proportion of lower-margin contracts, while operating expenses rose to $21 million due to increased R&D investments and compensation costs [14] Competitive Landscape - Rigetti faces competition from companies like IonQ, which is gaining traction with trapped-ion technology, and D-Wave Quantum, which focuses on enterprise use cases [3] - Quantum Computing Inc. is positioning itself around software and government solutions, presenting a different risk-reward profile compared to Rigetti's hardware-focused strategy [3] Strategic Developments - The company is expanding its ecosystem through partnerships, including a memorandum of understanding with India's C-DAC and the deployment of a 9-qubit Novera system at Montana State University, which may enhance future research collaborations [9] - Rigetti's roadmap includes plans for a 100-plus qubit system with high fidelity metrics, which will be crucial for maintaining investor confidence as the company approaches its 2026 milestones [10] Valuation Concerns - RGTI's stock is considered overvalued, with a price-to-book (P/B) ratio of 22.38X, significantly higher than the industry average of 6.1X, indicating potential concerns regarding its current valuation [15] Investment Outlook - The company is viewed as a speculative investment in the quantum computing sector, with tangible progress on its technology roadmap but an unsettled financial profile [18] - The period leading up to 2026-2027 will be critical for Rigetti, as its ability to convert technological advancements into sustainable revenue growth will be essential for maintaining investor confidence [19]