Key Takeaways
- D-Wave closed at $12, below the $14.09 per share the Commerce Department paid for its stake in September.
- First-half bookings jumped to $35.5 million, but Q2 revenue was flat at $3.1 million and missed estimates.
- Operating expenses rose 93% to $55 million, and cash fell to $546.2 million.
- The November 10 report will show whether the $40.7 million backlog is converting into revenue.
The U.S. Commerce Department paid $14.09 a share for its stake in D-Wave Quantum (QBTS) in September. Monday’s close was $12, just above the 52-week low of $11.26.
Shares have lost about 41% over the past three months. They now sit roughly 69% below the 52-week high of $38.
D-Wave is hosting Qubits Asia this week, then reports Q3 on November 10.
Its pitch is a growing order book. Revenue has yet to follow.
Washington’s stake is underwater
D-Wave finalized its CHIPS and Science Act agreement on September 8 for up to $100 million in funding. The work targets semiconductor processes for both annealing and gate-model systems, including coherence, error rates and advanced packaging.
Commerce received 7,095,721 shares in exchange, a minority, non-controlling stake. D-Wave then filed a resale prospectus for those shares on September 11.
The rest of the recent news:
- An extended multi-year manufacturing agreement with SkyWater Technology (SKYT), signed October 13.
- A CFO transition, with Greg Golkov serving as acting finance chief.
- A new director, BNP Paribas veteran Bernard Gavgani, on the board and its cybersecurity committee.
Wall Street’s revenue path assumes a steep ramp from here…
Analysts expect revenue to compound about 81% a year over the next two years, so system deliveries carry the whole model.
Orders are piling up faster
Q2 revenue was $3.1 million, flat year over year and well below the $4.02 million consensus. Bookings tell a different story.
First-half bookings hit $35.5 million, up more than 1,120%, helped by a $20 million Advantage2 system sale to Florida Atlantic University. Remaining performance obligations rose 668% to $40.7 million.
CEO Alan Baratz said in the Q2 release that “D-Wave is translating technical leadership into commercial progress.” The revenue line now has to prove it.
Mix is improving, too. Commercial customers made up 62.4% of Q2 revenue, up from 45.1% a year earlier.
Rigetti Computing (RGTI) offers a useful contrast. Its Q2 revenue rose 185% to $5.1 million on system sales, while its gross margin was 43%.
D-Wave still keeps more of each revenue dollar than its closest rival.
D-Wave’s trailing gross margin of 64.2% compares with 34.6% at Rigetti.
TIKR tracks 17 analysts on D-Wave Quantum. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on D-Wave Quantum, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See D-Wave Quantum’s Analyst Ratings
Cash burn sets the clock
Spending is outpacing that progress. Operating expenses rose 93% to $55 million in Q2, pushing the operating loss to $53.3 million.
Cash and investments fell to $546.2 million from $819.3 million a year earlier, mostly due to the January acquisition of Quantum Circuits.
Valuation still assumes a lot. At a $4.3 billion market cap, D-Wave trades at about 58x forward revenue and 306x trailing revenue, while the average Street target of $35 implies roughly 3x upside.
A pending securities class action adds another overhang.
How long does that cash pile last at this pace?
At roughly $50 million a quarter in operating losses, D-Wave has years of runway, and that buys time for bookings to convert.
My take: Bookings and backlog growth are the strongest evidence D-Wave has offered in a while. Still, three straight quarters of revenue misses make me want proof before trusting the ramp. I’d buy the story more easily once Q3 revenue starts drawing down that $40.7 million backlog.
D-Wave reports Q3 on November 10. Watch revenue against consensus, the timing of the Florida Atlantic system, and whether operating expenses finally level off.
So what is D-Wave Quantum stock actually worth?
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Disclaimer:
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