The quantum computing industry stands at a fascinating inflection point. While widespread practical applications remain years away, investors have substantially bid up quantum computing stocks in 2024. Industry peer IonQ has gained 206%, while Rigetti Computing is up 344.7% year to date, suggesting broad optimism about the industry's future.
Among these quantum computing players, D-Wave Quantum (NYSE: QBTS) has captured particular attention from both institutional investors and the broader market. The stock has surged an eye-catching 474.9% in 2024. Yet with a market capitalization of $1.2 billion and modest current revenues, investors must carefully weigh the company's pioneer status against its rich valuation. Here's what you need to know before buying shares.
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An early commercial leader
D-Wave Quantum is the first company to deploy quantum computers in production environments. The company's quantum annealing systems specialize in optimization problems, with real-world applications ranging from network performance and drug discovery to logistics and resource allocation.
Recent customer wins demonstrate this practical value. Japan's largest mobile operator, NTT DOCOMO, plans to deploy D-Wave's technology to reduce network signal congestion and equipment costs. The company also announced a collaboration with Japan Tobacco Inc. to accelerate drug discovery through quantum-enhanced artificial intelligence (AI) applications.
Growing institutional interest
Major investment firms have taken notice of D-Wave's progress. Vanguard, BlackRock, and Goldman Sachs all increased their positions significantly in the second half of 2024. The company has also gained traction with government customers, receiving "awardable" status on the U.S. Department of Defense's Tradewinds procurement platform.
D-Wave continues expanding its research and development capabilities. The recent calibration of a 4,400-qubit Advantage2 processor marks a significant milestone, featuring nearly four times the processing power of its previous prototype. The company also joined the Chicago Quantum Exchange to advance materials science research and practical optimization applications.
Market position and competition
According to Fortune Business Insights, the global quantum computing market reached $885.4 million in 2023. Industry projections suggest it could grow to $12.6 billion by 2032, representing a compound annual growth rate of 34.8%.
Despite this sizable market opportunity, D-Wave faces stiff competition from well-funded rivals and major technology companies. However, its focus on quantum annealing technology for optimization problems provides a unique market position. The company recently introduced industry-first, service-level agreements for its Leap quantum cloud service, demonstrating confidence in its commercial readiness.
Financial realities
Despite the stock's dramatic rise, D-Wave's current financials paint a more sobering picture. Third-quarter 2024 revenue declined 27% year over year to $1.9 million. While quantum computing as a service revenue grew 41% to $1.6 million, professional services revenue fell 80% to $0.3 million.
The company's net loss widened to $22.7 million in 2024's Q3, though management maintains an optimistic outlook, guiding for improved revenue and bookings in Q4.
Looking further ahead, Wall Street analysts expect D-Wave's revenue to reach $14.8 million in 2025, which would represent nearly 70% growth, yet still reflects the early stage of commercial quantum computing adoption.
Is D-Wave stock a buy?
At over 93 times trailing sales, D-Wave's valuation demands significant future growth to justify current prices. The global quantum computing market shows promise, with substantial growth projected through 2032, but near-term revenue remains modest.
Most experts believe commercially useful quantum computers requiring several million qubits won't arrive until 2035 to 2040. While D-Wave's early commercial deployments and growing institutional backing suggest leadership potential, its current $1.9 million quarterly revenue and widening losses make this quantum computing stock suitable only for investors with a high-risk tolerance and a very long-term horizon.
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George Budwell has positions in BlackRock and IonQ. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
