Is IonQ Stock a Buy?

Tech firm IonQ (IONQ -2.98%) is working on the transformative technology of quantum computers. These machines hold the potential to perform computations beyond the reach of the mightiest supercomputers in existence today.

This kind of innovative technology could be used in myriad ways, such as building more advanced artificial intelligence (AI) systems and developing new medicines. Quantum computers are potent because they harness atomic particles to perform many calculations simultaneously, unlike today's machines relying on transistors that work in a linear fashion.

IonQ is striving to make this powerful new way of computing widely available. Let's review how the company's doing today to help you decide if IonQ stock is a worthwhile long-term investment.

A look at IonQ's technology

Assessing IonQ's tech is a key factor in determining whether to invest in the company. Its quantum computers use atomic particles called ions to perform complex calculations. This approach provides competitive advantages.

For example, a significant challenge with quantum computing is that it's hard to maintain the stability of atomic particles. Some quantum computing techniques used by competitors result in these particles breaking down in less than a second, limiting the time available to execute calculations. IonQ's approach allows its ions to remain intact for an hour.

The company envisions stringing together several quantum computers to perform calculations that require more time to complete. In February, IonQ accomplished the first step toward building such a quantum network by entangling ions with photons, which are subatomic light particles.

Also in 2024, the company achieved its latest technical milestone a year earlier than anticipated. Doing so sets up IonQ to reach its next milestone, which involves a quantum system capable of performing calculations beyond what today's computers can execute, by the end of 2025.

IonQ's financials

The company's technology enabled it to capture business from organizations such as Oak Ridge National Laboratory, which will use IonQ's systems to improve the U.S. power grid. Oak Ridge National Labs is where the world's most powerful supercomputer is housed.

The Air Force Research Lab, the scientific arm of the Air Force, is another IonQ customer. The company is also collaborating with Maryland, South Carolina, and Washington to deliver quantum computing capabilities to these states.

Such successes helped IonQ to grow its first-quarter revenue to $7.6 million, a 77% increase from the previous year's $4.3 million. The company also boasts a strong balance sheet. At the end of Q1, assets totaled $543.9 million versus total liabilities of $64.1 million. Cash, cash equivalents, and marketable securities alone were $375.4 million.

However, IonQ is not yet profitable, exiting Q1 with a net loss of $39.6 million. This is an increase over the prior year's net loss of $27.3 million, indicating its losses are mounting.

Contributing to Q1's lack of profitability is IonQ's rising cost of goods sold, which increased to $3.4 million from $1 million in the previous year. Higher expenses are to be expected since the company must build more quantum computing hardware to achieve revenue growth.

Another contributing factor is the company's Q1 research and development costs, which nearly doubled from $16.2 million in 2023 to $32.4 million in 2024. However, this investment in research is understandable since IonQ is working on complex, cutting-edge technology.

Making a decision on IonQ stock

At this stage in the company's life, IonQ's lack of profitability is not too concerning, so long as revenue continues to rise rapidly. It's common for fast-growing tech companies to prioritize business expansion over profits.

As a result, IonQ is an attractive growth stock. Its technology is successfully capturing an impressive list of customers, and that, in turn, is leading to strong revenue growth. The consensus among Wall Street analysts gives IonQ stock an overweight rating with a median share price of $15.80, indicating a belief in upside for shares.

That said, because IonQ is a young company, having gone public only in 2021, there's not much history to gauge long-term trends in its business. Plus, because quantum computing technology is still in its infancy, it's too early to tell if IonQ's solutions will win out over the long run. For these reasons, IonQ stock is recommended only for investors with a high risk tolerance.