Arqit Quantum Inc. (ARQQ) Earnings

Management highlights

### Market Context * Leading quantum and cybersecurity firms have accelerated timelines for when quantum computers will be able to break current widely-used encryption: Google and Cloudflare now advise full migration to post-quantum cryptography (PQC) by 2029, down from prior 2030-2035 targets, based on new research showing far fewer qubits are required to break RSA and elliptical curve cryptography than previously projected. IonQ expects to achieve the logical qubit count needed to challenge RSA 2048 encryption in the 2028-2029 window, creating even greater urgency. * Urgency is heightened by two key factors: 1) the risk of harvest-now-decrypt-later attacks, where sensitive data stolen today will be vulnerable to decryption once large-scale quantum computers are available; 2) PQC migration requires time for analysis, planning, and full organizational execution, so organizations must begin immediately to meet accelerated timelines. ### Product Portfolio Positioning * Arqit offers an end-to-end PQC migration solution, including an encryption intelligence risk analysis tool that provides automated full visibility into existing encryption across an organization's network, identifies quantum-vulnerable weak points, and supports migration planning. Arqit's lightweight, software-based post-quantum encryption solutions are NIST/NSA compliant, cryptographically agile (supporting mixing of post-quantum algorithms and symmetric key cryptography), require no new hardware, can be deployed across all network layers from core servers to small edge devices, and can be implemented in as little as a few days. ### Recent Operational Progress * Encryption Intelligence: Commercial rollout began in January 2026; an active marketing campaign targeting ~450 organizations is underway with strong initial engagement. Arqit secured its first encryption intelligence contract in May 2026 and signed its first partnership agreement for the solution with a European cybersecurity specialist the following day. The sales pipeline is robust, with additional contract wins expected in the second half of FY26. * Software Encryption Solutions (NetworkSecure): Italian Tier 1 network operator Sparkle has launched a commercial Arqit-powered quantum-secure network as a service across 20 Equinix data centers globally, with notable early adoption by financial institutions; Arqit expects Sparkle to upsize its license as adoption grows. Arqit and COLT Technology are delivering a quantum-secure wide area network for AMK Travel Group. The company is in late-stage discussions and demonstrations with multiple additional Tier 1 telecom operators, including one based in the U.S. * Government & Defense: Tangible progress is being made across multiple implementations, including a defense contractor securing communications for a government defense research network and another securing drone control platforms for a European Ministry of Defense. A 90% upsized and renewed contract with a leading aerospace and defense partner was completed in May 2026, and a renewal/upsize of the company's largest U.S. defense contract is imminent. Bid and pipeline activity is at an all-time high, with further progress expected in H2 FY26. ### Go-To-Market Partnerships * Arqit added three new telecommunications-focused partnerships in H1 FY26: a strategic collaboration with 6Wind to deliver scalable quantum-safe VPN business services; a collaboration with RAD to deliver joint quantum-safe encryption solutions for telco site-to-site, cloud, and data center interconnect services; and selection as the first quantum security scale-up partner for Tomorrow Street, a joint venture of Vodafone Group and Technoport that scales solutions across Vodafone's global ecosystem. A fourth partnership for encryption intelligence with a European cybersecurity provider focused on financial services PQC migration was also signed in May 2026. Partnerships act as a force multiplier for lead and bid generation, with new revenue expected to flow from these new agreements. ### Leadership Transition * CFO Nicholas Pointon will step down at the end of May 2026 after 5 years with the company. Rob Russell, a seasoned finance executive with SaaS scaling experience, has already transitioned into the CFO role full-time, with a structured handover completed to ensure continuity.

Guidance

Management reaffirmed that company revenue bottomed out in March 2025, and expects continued sequential revenue growth through the remainder of fiscal 2026. Additional contract wins for both the encryption intelligence and core encryption product lines are expected in the second half of fiscal 2026, with further tangible progress in the government and defense target market expected in H2. Management expects in-the-money warrants expiring in September 2026 to be exercised, providing approximately $13.5 million in additional liquidity. Current cash on hand plus expected warrant proceeds provide sufficient liquidity to meet all commercial objectives through the current period of market growth. The company maintains expectations of continued upward momentum in customer adoption and business growth as demand for post-quantum cryptography increases.

Segment performance

Arqit reports total revenue of $623 thousand for the first half of fiscal 2026, compared to $67 thousand in the year-ago period. The company executed 11 contracts in the period, up from 6 in H1 FY25 and 7 total contracts in full FY25. Of the 11 contracts, 3 were in the telecom sector (27.3% of total contracts) and 8 were with government, defense, and enterprise organizations (72.7% of total contracts). Two of the 11 contracts have already or are expected to imminently renew and be upsized. Total operating expenses (administrative expenses under local GAAP) were $33.9 million, up from $20.2 million in H1 FY25, with a $12.7 million non-cash share-based compensation charge included in the current period, compared to $872 thousand in the prior year. Operating loss was $33.7 million, up from $20 million in H1 FY25. Loss before tax from continuing operations was $33.1 million, compared to $19.5 million in the year-ago period. As of March 31, 2026, cash and cash equivalents totaled $28.9 million, rising to $35.9 million as of May 20, 2026.

Risks & headwinds

Accelerated timelines for quantum computing capability put greater pressure on organizations to complete PQC migration quickly, but customer adoption of PQC solutions has been slower than early projected to date. Government and defense contracts have long sales cycles, which can delay revenue recognition for opportunities in the pipeline. The company is currently operating at a significant operating loss, and cash burn requires continued access to liquidity to fund operations and growth. There is no guarantee that outstanding in-the-money warrants will be exercised, which could impact projected future liquidity. Market adoption of PQC solutions depends on widespread recognition of the quantum threat among organizational decision-makers, which is still emerging, and inflection point in mass adoption has not yet occurred.

Analyst Q&A

• Q: Given the growing urgency around Q-Day (when quantum computers can break current encryption) that you outlined, why has customer adoption been slower than expected to date, and what is your outlook for adoption momentum? /

  A: Major industry players like Google, Cloudflare, and the U.S. government are now aligning on the urgent need for PQC migration, with Q-Day expected within the next 2-3 years per recent projections. Urgency is currently most pronounced among defense, public sector, and core infrastructure providers like telcos and data center operators, which are already moving to upgrade their security posture, while less regulated organizations will follow over time. Arqit's encryption intelligence tool now lets organizations quantify their specific risks and build actionable migration plans, which is accelerating customer engagement and will drive broader adoption.

• Q: What key milestones or catalysts should investors watch for the near-term inflection point in Arqit's business growth? /

  A: There will likely not be a single public event where existing encryption is broken to act as a catalyst; instead, inflection will come from growing organizational recognition that PQC migration is a large, time-intensive project that must start immediately to meet 2029 targets. The market is now moving past general awareness to active planning, starting with infrastructure providers, defense, and regulated industries that have the most urgent need for long-term data protection. For Arqit, the next key milestones are additional contract wins, partnership-driven lead conversion, and upsizes of existing customer licenses, all expected in the second half of FY26.

• Q: Can you discuss Arqit's current cash position, expected cash runway, the share count associated with the $13.5 million in in-the-money warrants, and any other outstanding warrants? /

  A: As of the call, Arqit has over $35 million in cash, translating to more than 14 months of operating runway. Adding the expected $13.5 million from the September 2026 expiring warrants, which are heavily in-the-money, management is confident the company has sufficient cash to meet all commercial objectives as the market develops. The September 2026 warrants correspond to 5.4 million new shares; additional warrants outstanding expire over the next two years, with the last expiring in September 2028, and are detailed in the company's most recent 20-F filing.