Quantum Computing Inc. Q1 FY2026 earnings call

• Strategic Acquisitions and Integration

• Completed two key acquisitions in Q1 2026: LSI and NuCrypt LLC, advancing the company's strategy to build a vertically integrated photonics and quantum technology platform.
• LSI brings established R&D and manufacturing capabilities for lasers, detectors, advanced packaging, and testing via three subsidiaries: Freedom Photonics (leading semiconductor laser technology), EM4 (cleanroom manufacturing for U.S. government and European defense/space markets), and Opto Gration (low-volume chip production and testing). LSI expands the company's ability to scale from small-batch to higher-volume production.
• NuCrypt brings a leading patent portfolio in quantum optics, RF photonics, and photonic signal processing, with existing customer relationships including NASA, the U.S. Army Research Lab, and global research universities. Its quantum communications product portfolio strengthens the company's technology roadmap and improves the performance, robustness, and scalability of quantum solutions.

• Commercial Deployment and Partnerships

• Announced a strategic partnership with Quantum Corridor that placed a QCi Dirac-3 quantum optimization machine on Quantum Corridor's North American interstate quantum-safe commercial communication network. This marks the first data center installation of a Dirac machine, expanding commercial access to quantum infrastructure for academic and enterprise users.

• Manufacturing Strategy

• The company's flagship Fab One foundry facility in Tempe, Arizona is ramping up small-batch nanofabrication and prototype production, and has begun generating early revenue. Fab One's primary purpose is R&D, innovation, and manufacturing process development to support future large-scale production, not large-scale revenue generation.
• The company is in the planning phase for Fab Two, a much larger second foundry facility designed to support high-volume scalable manufacturing of quantum-powered hardware for widespread commercial deployment.

• Technology and Strategic Direction

• The company's core focus on quantum photonics enables room-temperature operation, which reduces system complexity, footprint, cost, and power requirements relative to competing quantum modalities. The long-term strategic goal is to transition from a technology innovator to a full-scale industrial manufacturer of quantum-enabled products for broad commercial markets.

The company did not report separate financial performance for distinct product segments in the Q1 2026 results. Total consolidated revenue for Q1 2026 was $3.7 million, up from $39 thousand in the prior-year quarter. Acquisitions of Lumina Semiconductor, Inc. (LSI) and NuCrypt LLC completed in Q1 2026 drove the year-over-year revenue growth: excluding these two acquisitions, core organic revenue was $204 thousand, mostly from foundry orders and NASA R&D subcontract work. Foundry revenue from the company's Fab One facility was $120 thousand in Q1 2026, representing a 4-5x increase over 2025, but remains several orders of magnitude smaller than revenue from the LSI acquisition, which had a previously guided $20 million to $25 million annual revenue run rate. Q1 2026 operating expenses totaled $19.8 million, up from $8.3 million in the prior-year quarter, driven by M&A transaction costs, headcount expansion, and increased R&D, sales and marketing, and general and administrative costs. The company reported a net loss of $4.1 million ($0.02 per share) in Q1 2026, compared to a prior-year net income of $17 million ($0.13 per share) which was driven by a $23.6 million noncash mark-to-market gain on derivative liabilities.

• Management did not provide formal full-year 2026 revenue or earnings guidance, but shared qualitative forward-looking expectations:

• Gross margins are expected to improve to a 20% to 30% range as production volume increases at LSI and Fab One, which currently have low utilization that depressed Q1 2026 gross margins. No specific timeline for reaching this margin range was provided.
• Foundry revenue from Fab One is expected to continue growing gradually through the remainder of 2026, but will remain significantly smaller than revenue from the LSI acquisition for the foreseeable future.
• The next generation Dirac quantum optimization machine is in internal testing, and management expects to complete final development and make it available to early users in the near term.
• Management reaffirmed its commitment to begin development of the Fab Two facility in 2026, and will provide updates as planning progresses.

• Low production utilization at newly acquired LSI and the new Fab One facility is currently depressing gross margins, and there is uncertainty around how long it will take to increase volume enough to reach target margin levels.

• Development of the company's first gate-based photonic quantum computer requires achieving extremely strict engineering specifications (including a 5x increase in microring resonator quality factor) that have not yet been consistently met, creating risk of delays to product development timelines.
• Forward-looking statements about product development, commercial deployment, and manufacturing expansion are subject to inherent uncertainties that could cause actual results to differ materially from current expectations, as detailed in the company's SEC filings.

Q: What is the current development status of the next-generation Dirac machine and the company's gate-based photonic quantum computer, and will the company be competitive when other players start delivering gate-based systems?

A: The next Dirac machine is in late internal testing, and management expects to complete final steps and make it available to early users soon. For the gate-based machine, theoretical and core engineering design is complete, and the team is now optimizing manufacturing recipes for the required high-quality thin-film lithium niobate photonic circuits, with prototype development not yet started. Management noted the company's gate-based design is scalable from inception (unlike many proof-of-concept projects from competitors), runs at room temperature, and is fully chip-integrated, so after solving the final engineering hurdle, the company can quickly scale and catch up to earlier entrants.

Q: What technical and financial synergies are expected from the LSI and NuCrypt acquisitions, and how is integration progressing?

A: Technically, LSI's existing capabilities in lasers, optical packaging, and photonic testing fill key gaps in the company's platform, enabling combined development of specialty photonic components purpose-built for quantum applications, a market the company is uniquely positioned to serve. NuCrypt's quantum communications portfolio is complementary to the company's existing technology, creating a full suite of quantum communication solutions. Financially, there is limited redundant back-office capacity for direct cost savings, but scale has brought modest savings on employee benefits and insurance, and the combined entity can pursue larger, more integrated business opportunities that were not available to the separate companies previously.

Q: What is the expected revenue contribution ramp from Fab One, and how does it compare to LSI revenue?

A: Fab One revenue grew 4-5x year-over-year to ~$120 thousand in Q1 2026, and is expected to continue growing gradually as process expertise improves. However, Fab One was strategically designed as an R&D and process validation facility to develop manufacturing knowledge for the future Fab Two, not as a major revenue driver. Its contribution will remain orders of magnitude smaller than LSI revenue for the foreseeable future.

Q: What is the final engineering hurdle delaying the gate-based quantum computer, and what specialty quantum photonic components is the company targeting?

A: The final remaining hurdle is achieving a consistent microring resonator quality factor above 10 million; the company currently reliably hits 2 million, and has the development recipe in place to reach the target with additional process refinement. For specialty quantum photonic components, key requirements unique to quantum applications include ultra-narrow linewidth, zero-phase-noise lasers for entangled photon generation, and ultra-low-loss optical transmission that prevents photon loss, which destroys quantum states.