Rigetti Stock Plunges 23% YTD: Buy or Hold After Roadmap Reset?

Core Insights - Rigetti Computing (RGTI) shares have decreased by 23% year to date, reflecting investor caution after the company adjusted its near-term expectations [1][4] - The company reported declining revenue, compressed gross margins, and ongoing operating losses, with the launch of its 108-qubit Cepheus system delayed until early 2026 [1][17] - Despite these challenges, Rigetti has secured significant orders, including an $8.4 million contract from India's C-DAC, which supports its medium-term revenue outlook [2][9] Financial Performance - In the third quarter, Rigetti's revenue fell by 18% year over year to $1.9 million, attributed to a pause in U.S. National Quantum Initiative funding and the timing of government contracts [17] - Gross margins decreased to 21%, influenced by a higher proportion of lower-margin agreements, while operating expenses rose to $21 million due to sustained R&D investments [18] - The company is projected to experience a 234.7% revenue improvement in 2026, although earnings per share are expected to remain negative but improve by 74.3% year over year [13] Strategic Developments - Rigetti is focusing on a chiplet-based architecture, aiming for a 150-plus qubit system by 2026 and a 1,000-plus qubit system by 2027 [2][12] - The company has deepened its presence in on-premises quantum systems and continues to attract government and research-oriented orders, which help underpin its medium-term revenue outlook [8][10] - Partnerships with entities like India's C-DAC and academic institutions are expanding Rigetti's ecosystem and enhancing its credibility in the quantum computing space [10][11] Competitive Landscape - Rigetti faces competition from companies like IonQ, which is gaining momentum with its trapped-ion platform, and D-Wave Quantum, which is focusing on near-term enterprise adoption [3] - The competitive environment complicates Rigetti's outlook, as uneven execution and a modest revenue base continue to impact investor confidence [3][22] Market Valuation - Rigetti's stock is currently trading at a price-to-book (P/B) ratio of 15.06X, significantly higher than the industry average of 5.4X, indicating potential overvaluation [19]