Artificial intelligence has proven to be a transformative technology, yet quantum computing could be bigger. Quantum computers harness the properties of quantum mechanics to perform calculations in a way that's entirely different from classical computers. Because of this, these machines could, in principle, rapidly solve certain types of extremely complex problems that would take even a traditional supercomputer a prohibitive amount of time.
Two companies working to develop reliable quantum computers for commercial use are IonQ (IONQ 0.15%) and International Business Machines (IBM 0.56%). The former was the first pure-play quantum computing company to go public, with an IPO in 2021. The latter is a tech icon, and back in 2016 became the first company to put a quantum computer in the cloud.
The fundamental unit of every quantum computer is the qubit -- one qubit stores a single point of data. Manipulating that data is how the machines perform calculations. And interestingly, IonQ and IBM are building their qubits using two entirely different technologies. Does that make one or the other a better way to invest in this burgeoning field? Or might other factors prove more important to their paths forward?
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IonQ's pros and cons
IonQ uses individual ions (charged atoms) to make its qubits. The approach has advantages over other methods being pursued -- and one of the biggest is that it enables the company's devices to operate at room temperature. By contrast, IBM's superconducting quantum computers require special cryogenic equipment to keep their qubits at temperatures close to absolute zero. Keeping something that cool uses a lot of energy.
Since its IPO, IonQ's sales have nearly doubled on an annual basis each year. This shows that clients are finding its offerings compelling. Management predicts that sales trend will continue in 2025: It's guiding for revenue between $82 million and $100 million for the year, compared to $43.1 million in 2024. Through the first half of 2025, it booked $28.3 million in revenue, up from $19 million in the prior-year period.
IonQ has also been on an acquisition spree as it seeks to quickly expand its technology. Its goal is to lead the construction of a quantum computing-based internet. It even acquired satellite specialist Capella Space to extend its reach into orbit.
But those acquisitions added to IonQ's operating expenses. Consequently, in Q2, it booked an operating loss of $160.6 million, a substantial increase from its loss of $48.9 million a year earlier. The sustainability of IonQ as a business could be in jeopardy over the long run if its costs continue to skyrocket.
Recognizing this, the company conducted a $1 billion secondary equity offering in July. After that step, it had cash, cash equivalents, and investments of $1.6 billion on its books. This should be enough to sustain the business for a while, but eventually, IonQ will need to get its costs under control.
NYSE: IONQ
Key Data Points
IBM's quantum computing progress
IBM's quantum computers use superconducting qubits, which are a comparatively mature technology, and one that is employed by numerous other businesses working in the field, among them Rigetti Computing and Google parent Alphabet.
One advantage of this method is that superconducting qubits can be fabricated with the same infrastructure used to make traditional semiconductor chips. This compatibility enables mass production capabilities, making the tech more scalable at this point than IonQ's approach.
IBM brings strong technological chops to the quantum computing field. Its AI and cloud computing offerings are doing well, and its overall second-quarter revenue rose 8% year over year to $17 billion. Its generative AI book of business stood at $7.5 billion at the end of Q2, up from just $2 billion in 2024.
Thanks to this growth, Big Blue expects its 2025 free cash flow (FCF) to exceed $13.5 billion compared to 2024's $12.7 billion. FCF is an indicator of IBM's ability to cover its dividends, pay down debt, and invest in its business, including its quantum computing aspirations, so rising FCF is a good sign.
But perhaps the most exciting aspect of investing in IBM is that it's predicting that its "quantum advantage" will arrive by the end of 2026. Quantum advantage is the point at which a quantum computer can outperform classical computers in solving real-world computational problems, as opposed to the research-related computations they have primarily been tasked with solving so far.
NYSE: IBM
Key Data Points
Weighing whether to invest in IonQ or IBM
Quantum advantage will mark the start of the period when quantum computers begin to supplant classical machines for some types of tasks. However, there are technological hurdles for these companies to leap before this transition can happen -- among them, reducing the amount of errors quantum computers produce.
As a result, some forecasts predict that widespread commercial use of quantum computers won't happen for years, and perhaps not until 2040. That long time frame could be a particular problem for IonQ if it doesn't get a handle on its operating costs, and makes its stock an even riskier investment. By contrast, IBM, with its consistent FCF, should have little trouble maintaining funding for its quantum tech aspirations.
IBM also offers investors a robust dividend, which sports a forward yield of 2.7% based on the Sept. 12 share price. Big Blue has paid dividends every year since 1916, making its stock a stable source of passive income. IonQ does not pay a dividend.
These factors suggest that IBM is a superior quantum computing investment to IonQ. And if Big Blue can achieve quantum advantage next year, it's poised to be at the forefront of this exciting field.
