Amid the wild swings on Wall Street this year, quantum computing remains one of the hottest stock market investing themes. D-Wave Quantum (QBTS 11.61%) has emerged as an industry leader, capturing strong demand for its cutting-edge technology with a growing number of commercial use cases. Accelerating sales have powered the stock to a staggering 705% return over the past year as of this writing, with optimism building among investors toward the company's outlook.
Can the rally keep going? Let's discuss where D-Wave Quantum stock might be in one year from now.
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A record start to 2025
Quantum computers promise to solve complex problems in areas like optimization, cryptography, and simulations at speeds far surpassing classical computers. This potential stems from quantum mechanics where quantum bits, or qubits, can exist in multiple states simultaneously, enabling exponential computational processing. Recent advancements have moved these concepts from the realm of theory into real-world applications.
D-Wave Quantum distinguishes itself with its quantum annealing technology, which excels at solving optimization problems in fields like logistics, drug discovery, and financial modeling. The company published a paper demonstrating that its fifth-generation Advantage2 system solved a simulation in minutes that would take a classical supercomputer nearly 1 million years.
This demonstration underscores the company's edge in offering practical quantum solutions today. As quantum systems scale to harness more qubits with improved stability, they are expected to transform multiple industries.
D-Wave Quantum counts 133 current customers, including major diversified commercial organizations, research institutions, and government entities. The company offers access to its quantum computers through a flexible, cloud-based quantum computing as a service (QCaaS) platform, as well as an option for on-premise system installation. Additionally, D-Wave monetizes its Ocean software development toolkit, enabling customers to develop and deploy quantum applications.
The model is proving to be highly successful. In the first quarter (for the period ended March 31), revenue of $15 million soared by 509% year over year, primarily reflecting the delivery of an Advantage system. While D-Wave is not yet profitable, the sales momentum helped narrow the quarterly net loss to $5.4 million compared to $17.3 million in the prior-year quarter.
According to Wall Street estimates, the company is projected to reach targeting full-year revenue of $24.4 million, representing a 176% increase from the $8.8 million revenue in 2024. Management believes its balance sheet cash position in excess of $300 million provides it with ample liquidity to fund its operations and pursue its expansion strategy.
Looking ahead, D-Wave sees a path to continue refining its annealing technology to over 100,000 qubits and expanding its customer base into the next decade and beyond.
Reasons for caution
The operating trends D-Wave presents are impressive, yet there are plenty of reasons for investors to proceed with caution beyond making the quantum leap and buying the stock.
The rapidly evolving quantum computing market is highly competitive with numerous companies pursuing diverse quantum architectures, each offering unique strengths and potential benefits. This includes specialized quantum companies like Rigetti Computing and IonQ targeting similar commercial opportunities. Tech giants such as Alphabet and Microsoft are also investing heavily in quantum capabilities, benefiting from their extensive resources and cloud platforms to advance research and development.
It's unclear which quantum architecture will ultimately prove superior and whether D-Wave can manage to stay at the forefront of innovation in the long run.
Another concern is D-Wave's extreme valuation. At the current market capitalization of $3.2 billion, the stock is trading at 132 times its estimated 2025 revenue as a forward price-to-sales (P/S) ratio, suggesting investors are paying a steep premium for its growth potential far into the future, which is far from certain. While this metric alone doesn't necessarily mean the stock will sell off anytime soon, it does highlight the risk for investors to balance in a scenario where results disappoint, especially given the company's ongoing financial losses.
My prediction for D-Wave Quantum stock
There's a lot to like about D-Wave Quantum, recognizing the company's significant long-term potential. That being said, I believe the stock is too speculative and expensive to buy with conviction. While further upside is possible over the next year, I predict shares will remain volatile. Patient investors may find a more attractive entry point at a lower price during the next correction.
