Rigetti Computing (RGTI 5.14%), one of the early movers in the nascent quantum computing market, posted its first-quarter earnings report on May 12. Its revenue plunged 52% year over year to $1.47 million and missed the consensus forecast for an 8% decline. But it generated a net profit of $42.6 million, compared to its net loss of $20.8 million a year earlier, and its EPS of $0.13 easily exceeded the consensus forecast by $0.18. Let's unpack those confusing numbers.
Rigetti's revenue dropped as it recognized fewer milestone payments, faced tougher competition from other quantum computing companies, and struggled to secure bigger contracts in a challenging macro environment. Meanwhile, its abrupt net profit growth was driven by a $62.1 million noncash gain related to the revaluation of its warrants and earn-out liabilities, so investors shouldn't assume that it will remain profitable for the rest of the year. Excluding those one-time gains, it would have only slightly narrowed its net loss year over year to $19.5 million.
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After investors digested those messy results, Rigetti's stock plunged 12% during the after-hours session. Does that pullback represent a buying opportunity for patient investors?
Understanding Rigetti's quantum business
Quantum computers can store bits of zeros and ones simultaneously in qubits. That's a big upgrade from traditional computers, which store zeros and ones separately in binary bits. So whereas traditional computers can try to open a lock with a single key at a time, quantum computers can try out all the possible keys at the same time.
That difference enables quantum computers to process large amounts of data at a much faster rate than binary computers. But those systems are still larger and more expensive, and output a higher ratio of errors than their binary counterparts. As a result, quantum computers are still mainly used for niche research projects instead of mainstream computing applications.
Rigetti develops quantum processing units (QPUs), builds full systems, and provides a cloud-based platform called Forest that lets developers build their own quantum applications. That full-stack approach makes it a "one-stop shop" for quantum computing -- and it's expanding its portfolio with cheaper commercial systems, as well as modular systems that merge multiple systems.
NASDAQ: RGTI
Key Data Points
How does Rigetti compare to other quantum computing companies?
Rigetti already serves big customers like the Superconducting Quantum Materials and Systems Center, the Air Force Research Lab, and the Horizon Quantum Computing in Singapore. Like most other quantum computing companies, it measures its total computing power in qubits.
Rigetti recently launched its Novera QPU, a smaller 9-qubit computer for commercial customers that costs $900,000, and its 84-qubit Ankaa-3 quantum computing system, which is designed for higher-end government and research clients. It also plans to launch a modular system that merges four of its 9-qubit chips into a 36-qubit system this year. It aims to launch a nonmodular 100 qubit system in 2026.
However, Rigetti still faces a lot of competition from bigger competitors like IBM Quantum, which deployed its 1,121-qubit Condor chip in 2023; and Alphabet's Google Quantum AI, which introduced its 105-qubit Willow chip in 2024.
Yet Rigetti is still securing new deals in this challenging environment. During the first quarter, it secured a $5.5 million grant by the U.S. Air Force, was granted three separate awards from U.K. government agencies, and partnered with Taiwan's Quanta Computer to develop new quantum systems. It also sold its first QPU to Montana State University, marking its first QPU sale to an academic institution, and remains in the running for a new DARPA contract.
But can Rigetti grow into its sky-high valuations?
Analysts expect Rigetti's revenue to rise 30% to $14 million in 2025 before surging 140% to $33.6 million in 2026. But as we saw in the first quarter, the milestone payments from its existing contracts have been uneven -- and its future revenue growth can be unpredictable. It also isn't expected to generate consistent profits for the foreseeable future.
With a market cap of $3.32 billion, Rigetti already trades at 237 times this year's sales and 99 times its projected sales for 2026. Those lofty valuations could limit its near-term gains, even as it locks in more customers and its quantum computing power continues to increase.
If you're investing in Rigetti for the next few decades, it might be smart to nibble on this stock after its latest pullback. But it could still be cut in half and still be considered expensive -- so investors should brace for a lot of volatility and be wary of its sky-high valuations.
