D-Wave’s share price has slipped amid a broader pullback in tech stocks.
Tech stocks have been taking it on the chin lately, and D-Wave Quantum (QBTS 5.10%) is no exception. Shares of D-Wave Quantum are down 19% from Aug. 13 to Aug. 21 amid a broader market pullback. However, the stock has soared nearly 1,500% over the past 12 months as investors have piled into quantum computing and other emerging technologies.
D-Wave bills itself as the world’s first commercial supplier of quantum computers, and the company recently unveiled its next-generation quantum processor. Is the pullback in D-Wave Quantum a good opportunity to get in on the ground floor of this promising technology? Let’s take a closer look at D-Wave Quantum and the potential of quantum computing.
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A quantum leap in computing power
Quantum computers have the potential to process complex calculations exponentially faster than traditional computers. When Alphabet unveiled its latest quantum chip last December, it said the chip performed a benchmark quantum computing task in under five minutes. To complete the same task, one of today’s fastest supercomputers would need 10 septillion years — longer than the age of the universe.
Many people believe that the advanced processing capabilities of quantum computing could lead to breakthroughs in areas ranging from semiconductor development and supply chain optimization to weather modeling, machine learning, and drug discovery. With public and private investment surging, and innovation progressing faster than expected, McKinsey & Company recently forecasted that the global quantum computing market could soar from $4 billion in 2024 to $72 billion in 2035.
D-Wave’s quantum computing systems use a process called quantum annealing, which leverages principles of quantum physics to efficiently identify the optimal solutions to a problem. An example of a real-world optimization problem might be determining the most efficient route for a driver to complete scheduled deliveries, or deciding whether to ship a package on Truck A or Truck B.
In May, D-Wave Quantum introduced its sixth-generation annealing quantum computer, the Advantage2. D-Wave CEO Alan Baratz called it “an engineering marvel” that’s designed “to meet industry demands for growing computational processing power while maintaining energy efficiency.” The Advantage2 is built for real-world use cases such as process optimization, materials simulation, and artificial intelligence. A prototype of the Advantage2 has already been put through its paces by the Jülich Supercomputer Center and the Los Alamos National Laboratory, as well as a Japanese tobacco company that used quantum computing to enhance large language models in the drug-discovery process.
D-Wave Quantum faces real-world business challenges
For its second quarter ending June 30, D-Wave reported revenue of $3.1 million, which was a 42% increase over the year-ago quarter. Bookings — customer orders expected to generate future revenue — skyrocketed 92% to $1.3 million.
Over the past four quarters, D-Wave has had more than 100 revenue-generating customers, according to CFO John Markovich. However, the sharp uptick in bookings has been a double-edged sword. While the average transaction size is trending higher, deals are taking longer to close. This is because many potential customers are requesting proof of concepts rather than simply purchasing quantum computing services. Additionally, dealing with larger organizations can involve navigating multifaceted and often rigid procurement processes and documentation requirements.
Another common challenge for a development-stage company like D-Wave Quantum is profitability. D-Wave reported a second-quarter net loss of $167.3 million, compared to a net loss of $17.8 million in the year-ago period. Operating expenses increased 41%, and the company took a $142 million non-cash hit from a recalculation of its warranty liability and realized losses from warrant exercises. Excluding the non-cash charges related to warrants, D-Wave had a second-quarter net loss of $25.3 million, which was $5.3 million larger than the net loss in the year-ago quarter.
Although D-Wave isn’t profitable, the balance sheet is in good shape. D-Wave ended the second quarter with $819 million in cash, a record high for the company, and $149.3 million in liabilities. During the quarter, D-Wave raised $400 million by selling at-the-money (ATM) shares, $99.3 million from exercised warrants, and $38 million from an equity line of credit.
Management made it clear that the cash will be used to accelerate D-Wave’s growth. That likely will involve a merger or acquisition if the right opportunity comes along. D-Wave also plans to ramp up investment in research and development, manufacturing operations, and sales and marketing, which will increase quarterly operating expenditures by an estimated 15%. While D-Wave aspires to be the first independent, publicly held quantum computing company to generate profits consistently, it probably won’t be anytime soon.
Is D-Wave Quantum a buy?
On a trailing-12-month basis, D-Wave Quantum stock trades at a price-to-sales ratio of 173, as of Aug. 20. That’s steep compared to the likes of Alphabet and IBM, although it’s more in line with other pure-play quantum computing companies. Still, it’s trading at a premium valuation.
QBTS PS Ratio data by YCharts
The average analyst estimate for D-Wave’s 2025 revenue is $24.6 million, which would be nearly 180% higher than 2024. If D-Wave can sustain that kind of explosive growth, it would help justify its lofty valuation.
Even so, if you’re thinking of buying shares, consider it a speculative investment and expect plenty of volatility in the near term. Until there’s a clearer path to profitability and mainstream commercialization, the safer move would be to keep an eye on D-Wave Quantum in a watch list of emerging tech stocks for now.
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