Rigetti Computing Stock Falls After Reporting ‘Lumpy’ Earnings

Rigetti Computing CEO Subodh Kulkarni said the quantum computing industry could be valued at billions of dollars in the long term. (Drew Bird Photography / Rigetti Computing)

At first glance, Rigetti Computing’s latest earnings report appears to be all over the place. That isn’t unusual in the quantum computing industry.

The Berkeley, Calif.-based company logged revenue of $1.8 million in its second quarter, up sequentially from $1.5 million in the previous quarter but markedly lower than the $3.1 million in revenue reported in the same quarter last year.

The company’s operating loss shrank to $19.9 million from $21.6 million last quarter, though that remains higher than the $16.1 million loss posted in the second quarter last year. Meanwhile, its net loss swelled to $39.7 million from just $12.4 million last year. Management noted that the figure included $22.8 million of noncash losses related to the company’s warrants.

While Rigetti sells both physical machines and cloud-based quantum computing power, the company is dependent on revenue from government contracts and milestone-based research and development awards. Management said at the time of the last earnings report that revenue would likely continue to occur in large chunks at irregular times, a phenomenon called “lumpiness” that has been cited by peers.

Shares fell 2.5% to $15.80 in after-hours trading Tuesday. Peers were trading mixed. IonQ rose 0.4% while D-Wave Quantum and Quantum Computing fell 1.4% and 0.7%, respectively.

The quantum computing industry, like other types of emergent technology, has no shortage of loud personalities and bombastic timelines. Former IonQ CEO Peter Chapman once proclaimed that the company would be profitable by 2030, a target the new leadership has distanced itself from. It appears the major players in the space have started to temper their expectations amid increased scrutiny from investors and the scientific community alike.

Rigetti has long subscribed to the mantra of “slow and steady.” Speaking to Barron’s earlier this year, CEO Subodh Kulkarni said he believed the technology had yet to reach its full potential.

“We’re talking hundreds of billions of dollars a year, but in the long term. We’re talking 15 years from now for those kinds of markets,” Kulkarni said. “Looking to the next four to five years, our view is still very much in the R&D stage.”

Investor enthusiasm and interest in the technology have only grown since then. The most optimistic estimates from consulting firm McKinsey suggest the quantum computing industry could be valued at $97 billion by 2035 and $198 billion by 2040. More conservative estimates place the total value at $46 billion and $87 billion, respectively.

Rigetti noted that it had completed a $350 million at-the-market equity offering program in its latest quarter. As of June 30, the company had roughly $571.6 million in cash, cash equivalents, and available-for-sale investments, with no debt. While the company failed to mention its progress toward profitability in the earnings release, management noted that the funds were sufficient to support the commercial scaling of its quantum computers.

Rigetti said it remains on track to release its latest system, which boasts more than 100 quantum bits, before the end of 2025. The company has steadily reduced its error rates with subsequent generations of the technology, a feat that paves the way for the wide-scale deployment of quantum computers.

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