D-Wave Quantum Inc. (QBTS) Earnings

Management highlights

### Market Position & Strategic Differentiation - D-Wave is the only company offering both annealing and gate-model quantum computing, enabling it to address the full $800B+ global quantum computing market projected by Boston Consulting Group - The optimization market (annealing's core addressable opportunity) is projected to be $100B-$220B, comparable in size to the global semiconductor equipment or cybersecurity markets, and D-Wave is the only dedicated player in this segment - D-Wave's dual-rail gate-model qubit technology acquired from Quantum Circuits combines the speed of superconducting qubits, the high fidelity of ion trap/neutral atom qubits, and a clear scalable path via proprietary on-chip cryogenic control, representing a revolutionary competitive advantage ### Technical Roadmap Progress - Dual-rail gate-model roadmap (built on demonstrated technology, not speculative targets): 175 physical qubits by end of 2028 (to demonstrate error correction and logical operations), 10 logical qubits by 2030, and 100 logical qubits by end of 2032 - New multicolor annealing protocols launched for Advantage 2 systems enable gate-model operations and quantum simulation research that is difficult or impossible to perform with classical systems - Multi-chip processor development for next-generation Advantage 3 annealing systems (targeting 100,000 qubits) is progressing, with prototype chips received and testing set to begin ### Commercial & Operational Highlights - Record Q1 2026 bookings of $33.4 million, driven by two large landmark transactions closed in January 2026: a $20 million system sale to Florida Atlantic University and the industry's first $10 million enterprise QCaaS license - The sales pipeline value more than doubled from Q4 2025, and average deal size also more than doubled; management now expects 2-3 system sales per year, up from the prior expectation of 1 system per year, with at least 2 system deliveries scheduled for 2026 - The joint quantum-classical blockchain testnet with PostBond Labs is live, with over 18,500 participants and 1,600+ nodes; D-Wave's Advantage 2 QPU currently outperforms classical nodes and wins the majority of blocks, with a benchmarking study upcoming - A joint drug discovery AI project with Japanese pharmaceutical company Shinogi delivered a 10x increase in the number of desirable drug-like molecules compared to classical ML, positioning D-Wave as an early leader at the intersection of quantum computing and AI - 100+ active customers in Q1 2026, over 50% commercial enterprises, and commercial revenue accounted for 73% of total Q1 2026 revenue - Acquisition of Quantum Circuits closed in January 2026, funded with $250 million in cash; remaining liquidity of $588.4 million as of March 31, 2026 is sufficient to reach profitability ### Financial Performance - GAAP gross profit was $1.8 million with a 63.6% gross margin; the year-over-year decline is driven by the absence of the large high-margin system sale recorded in Q1 2025 - GAAP operating expenses totaled $56.5 million, a 125% increase year-over-year, driven by $9.1 million in non-recurring acquisition costs, higher R&D and sales/marketing headcount, and non-cash stock-based compensation and depreciation - Net loss for Q1 2026 was $18.4 million ($0.05 per share), compared to a $5.4 million net loss ($0.02 per share) in Q1 2025; the larger loss reflects higher investment spending and lower gross profit, partially offset by a $28.5 million income tax benefit from the Quantum Circuits acquisition

Guidance

- Management maintains its policy of not providing specific full-year financial guidance, but provided directional expectations: Q2 2026 revenue will be modestly higher than Q1 2026, and the majority of 2026 full-year revenue will be recognized in the second half of the year - System sale outlook was revised upward from 1 system sale per year to 2-3 system sales per year, with management confirming high confidence in delivering at least 2 systems in 2026 - Management expects D-Wave to be the first independent public quantum computing company to achieve sustained profitability, and to reach this milestone with substantially less capital than peer companies - D-Wave will host an investor day on June 1 at the NYSE (also available online) to share additional detailed roadmap and competitive analysis

Segment performance

D-Wave generated total GAAP revenue of $2.9 million in Q1 2026, a decrease of 81% from $15 million in Q1 2025, which included a $12.6 million large system sale. 100% of Q1 2026 revenue comes from quantum computing product and service lines: - QCaaS Subscription: $1.8 million, representing 62.1% of total Q1 revenue, with a nearly 15% year-over-year increase - Professional Services: $1 million, representing 34.5% of total Q1 revenue, with a over 26% year-over-year increase Total Q1 2026 bookings hit $33.4 million, a 1,994% increase from $1.6 million in Q1 2025 and a 149% increase from $13.4 million in Q4 2025. Over 31% of bookings came from more than two dozen commercial customers, with the remaining 69% from educational and research institutions (led by the $20 million Florida Atlantic University system sale). As of March 31, 2026, Remaining Performance Obligations (RPO) totaled $42.4 million, a 563% increase year-over-year and 216% increase from Q4 2025; 54% of RPO is expected to be recognized as revenue in the next 12 months, and 71% in the next two years.

Risks & headwinds

- System sales require multi-month site preparation, installation, and calibration, which can lead to variable revenue recognition timing across quarters that differs from initial expectations - Scaling quantum computing (both annealing and gate-model) requires solving complex engineering challenges related to interconnect, I/O scalability, and qubit fidelity, with no guarantee current development timelines will be met - Emerging competition in annealing quantum computing (both from native annealing developers and gate-model providers attempting to run annealing protocols) could erode D-Wave's market share, though management believes current competitive efforts do not threaten D-Wave's advantage - Commercial adoption of on-premise quantum systems outside of research and academia is still in early stages, and emerging applications like blockchain and quantum AI have not yet been fully validated for commercial use - The quantum computing industry overall has a history of missed development milestones and overstated capability claims, which could impact investor and customer confidence in the sector and D-Wave specifically

Analyst Q&A

• Q: What is driving confidence in the upward revision to 2-3 annual system sales, and what is the expected split between annealing and gate-model system sales? /

  A: The sales pipeline has grown dramatically over the past year, and the company is already far along in negotiations for multiple unannounced system deals. Following the closed Florida Atlantic University sale, management has very high confidence in hitting 2-3 sales in 2026 with at least two deliveries. No split between annealing and gate-model was provided in this response.

• Q: How does D-Wave view the competitive landscape for annealing, as the optimization market grows? Will new entrants or gate-model providers moving into annealing erode D-Wave's position? /

  A: BCG's $100B-$220B optimization market size is the industry standard, and there is already early emerging activity from new entrants building small annealing systems and gate-model providers testing annealing protocols on their hardware. However, running annealing on gate-model systems adds significant overhead, and these offerings will never match the speed or problem size of D-Wave's native annealing systems. D-Wave will remain the clear leader in the annealing segment.

• Q: What is the expected split of 2026 system sales between academic/research and commercial customers, and when could commercial on-premise sales become meaningful? /

  A: Management expects 2026 to bring 1 commercial system sale and 1-2 research/academic sales. Commercial demand for on-prem systems remains early, as most commercial users currently access D-Wave systems via cloud. Commercial system sales could grow meaningfully if use cases in blockchain and AI are successfully validated, which is currently in early testing with promising early results. No commercial mass market adoption is expected in the near term.

• Q: What customer interest already exists for D-Wave's new gate-model roadmap, and will gate-model add new customers? /

  A: A small number of customers have already expressed interest in both cloud access and on-prem gate-model systems. D-Wave is currently integrating 8-qubit current-generation gate-model hardware into its Leap cloud service, and expects to have 17 qubits operational by the end of 2026. Customers are already interested in accessing small early-stage systems now, rather than waiting for larger 100+ qubit systems. Preliminary gate-model sales could occur as early as 2026, but are more likely in 2027.

• Q: How does NVIDIA's recent Ising announcement impact D-Wave and its dual-rail technology? /

  A: NVIDIA's Ising project is focused on classical GPU acceleration for gate-model error correction, and is unrelated to the Ising Hamiltonian model used for D-Wave's annealing quantum computing. NVIDIA's work is broadly relevant to all gate-model error correction, but D-Wave's dual-rail technology has far more efficient error correction than standard qubit architectures. While GPUs will still play a role for D-Wave, NVIDIA's specific error correction approach will require modification to work with dual-rail, and is not as directly applicable to D-Wave's technology.