IonQ, D-Wave Stock Are Falling. How to Look at Quantum-Computing Earnings.

IonQ posted revenue of $20.7 million in its second quarter, up from $7.6 million sequentially. (COURTESY IONQ)

IonQ CEO Niccolo de Masi caused a stir in May when he remarked that he saw his company becoming “the Nvidia player” of quantum computing. But IonQ’s second-quarter print paints a more complicated picture of the realities facing the industry.

The College Park, Md.-based company posted revenue of $20.7 million in the second quarter, 15% above the top end of its previous guidance range, and up from first-quarter revenue of $7.6 million.

While the sequential surge in revenue may seem odd, it’s part of a pattern for quantum-computing companies. Revenue and bookings are typically lumpy, or occurring in large chunks at irregular times, ahead of broad commercialization.

IonQ’s net loss swelled to $177.5 million from $32.3 million a quarter ago, while its adjusted Ebitda loss widened slightly to $36.5 million from $35.8 million. While it could be seen as a sign of continued investment in its technology, a widening loss isn’t particularly encouraging as IonQ embarks on the path to profitability.

Cash, cash equivalents, and investments totaled $656.8 million as of June 30, and $1.6 billion pro-forma as of July 9. The balance increased due a $1 billion equity financing in July, and compares to $697.1 million as of the end of March.

Since quantum-computing companies have yet to turn a profit, investors are forced to turn to other metrics to gauge business health. The most encouraging sign of progress, in IonQ’s case, was a boost guidance range.

Management now projects full-year revenue of $82 million to $100 million, indicating roughly 112% growth year-over-year at the midpoint. That compares to an earlier range of $75 million to $95 million.

In short, investors must take the good with the bad. Quantum technology is nascent and deeply rooted in science, and developers are still working out the kinks related to scaling and error correction that impede its growth.

Not to mention, the field is deeply misunderstood. The quantum mechanics on which the technology is based are highly technical, and considering IonQ and peers trade almost entirely on headlines and sentiment, investors can sometimes miss the bigger picture.

Sometimes analyzing the industry means curbing enthusiasm. On the heels of IonQ’s latest report, D.A. Davidson’s Alexander Platt downgraded shares to Neutral from Buy, and maintained a $35 price target.

The firm had initiated coverage of IonQ stock at Buy in December 2024 and remained bullish until now. The downgrade comes as D.A. Davidson is “moving to the sidelines based on various moving pieces and limited visibility,” Platt wrote in a report.

The lack of visibility should come as no surprise to anyone following the space. Platt noted that, for now, quantum computing remains “heavily constrained by limited applied research and external investment in the space.”

While the re-rating signals more caution, “we continue to believe that as more computationally complex workloads arise in the near-to-medium term, quantum systems will have an increasingly larger role in how we tackle these problems,” Platt added.

Others remained upbeat. Needham analysts maintained a Buy rating on IonQ stock with a $60 price target, stressing the hike to guidance as well as the company’s recent $1 billion equity raise, which “enables increased investments.”

Benchmark analyst David Williams reiterated a Buy rating on IonQ stock with a $66 price target. Contrary to D.A. Davidson, Williams believes clarity on IonQ’s pathway to commercialization “continues to develop.”

IonQ’s quarterly report, released after the closing bell Wednesday, came ahead of second-quarter results from D-Wave Quantum on Thursday.

D-Wave reported second-quarter revenue of $3.1 million, a 42% increase from a year ago. While revenue in the latest second quarter was down markedly from $15 million in the first quarter, this makes sense. The sale of a D-Wave Advantage2 system was an outsized contributor to first-quarter revenue.

Second-quarter bookings came in at $1.3 million, up 92% from the same period last year, but down sequentially from $1.6 million. Bookings are a metric representing customer orders received that are expected to generate net revenues in the future.

D-Wave’s net loss for the second quarter grew to $167.3 million, wider sequentially as well as year over year. The increase was driven by $142 million in non-cash, non-operating charges related to the “significant price appreciation” of the company’s warrants.

In an interview with Barron’s, CEO Alan Baratz emphasized the company’s product deliverables in the quarter, including the general availability of its Advantage2 quantum computer and an open-source quantum AI toolkit.

“People who are investing in quantum stocks are investing in the promise,” Baratz said. “They know that it’s going to take time to get there, which is why the stock trades more on product deliverables than it does on financial metrics.”

He conceded that the timeline for a larger, fault-tolerant quantum computer was murky at best, between five and 10 years. “There still are problems to be solved and we’re all trying to figure it out,” Baratz said, nodding to D-Wave’s industry peers. “But I think we’ve got a good road map and a good path.”

In the meantime, D-Wave has steadily been expanding its customer base. Baratz noted that D-Wave’s systems were attracting interest from customers in the aerospace sector, much to his surprise.

“We always thought manufacturing and supply chain logistics were low-hanging fruit, the kind of problems we could solve,” the CEO said. “Aerospace is starting to become very important to us.”

D-Wave stock fell 2.3% to $17.17 on Thursday. Shares have gained 104% this year and more than 2000% over the past 12 months.

IonQ stock ended the session down 1.8% at $40.49. Pure-play peers Rigetti Computing and Quantum Computing were down 2.1% and 2.5%, respectively.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com