D-Wave Quantum wins price target raise at Roth

D-Wave Quantum (D-Wave Quantum Stock Quote, Chart, News, Analysts, Financials NYSE:QBTS) flew past expectations in Q1 2025 with a surge in revenue, driven by its first major hardware sale and growing demand for its quantum computing services.

The company brought in $15-million for the quarter, more than five times last year’s total for the same period, thanks mainly to the inaugural shipment of its Advantage quantum computer to a key customer.

Analyst Suji Desilva of Roth Capital maintained a Buy rating on D-Wave Quantum and raised the 12-month price target from $10 to $12. He cited the substantial Q1 revenue boost from the hardware sale, growing traction in the quantum computing-as-a-service (QCaaS) segment and increasing commercial interest, particularly from large Global 2000 companies, as reasons for the more optimistic valuation.

D-Wave develops and supplies quantum computing technology, specializing in annealing and gate-model quantum computers. Based near Vancouver, Canada, with U.S. operations in Palo Alto, the company focuses on real-world applications in logistics, AI, materials science, and more. Founded in 1999, D-Wave serves major clients like Volkswagen, Lockheed Martin, and NEC and employs about 200 people, 70% of whom are in R&D.

“We are encouraged by steady improvement in QCaaS service and professional services where combined revenue increased mid-single digits q/q,” Desilva said in his May Q1 earnings analysis. “1Q25 bookings of $1.6m remain consistent with levels seen excluding 1Q elevated hardware system booking driven level. Gross margin of 93.6% expanded significantly sequentially with strong contribution from the company’s Advantage hardware sale but are sustaining a 70+% level excluding hardware.

“QBTS reported 1Q25 adjusted EBITDA of $(6.1m) and break-even EPS boosted by the large hardware sale but sustainable profitability remains an intermediate-term target. With the benefit of recent funding activities, we estimate QBTS’s cash balance today exceeds $300m supporting business operating plans to achievement of break-even cash flow levels.”

Desilva thinks that D-Wave will do negative $34-million in adjusted PBT on revenue of $25.5-million in fiscal 2025. He believes those numbers will improve to negative $11.6-million on revenue of $50.0-million in fiscal 2026.

D-Wave’s QCaaS business continues to generate steady revenue, with 133 customers, including 69 commercial clients. Over a third are large companies from the Global 2000 list, showing strong demand for its services.

“We believe QBTS’s Advantage hardware sales represent an incremental revenue upside opportunity, with the contribution of $12.6m in the current quarter from inaugural sales to its lead hardware customer,” Desilva said. “We are encouraged by the company’s increasing visibility across QCaaS customers and expect improving traction as commercial customers invest in quantum computing applications.

“Our expectation of QCaaS revenue growth is supported by the company’s progress advancing its Advantage hardware roadmap steadily through innovation. We regard the application of quantum to areas such as AI and Blockchain as incremental opportunities for the company. We maintain our Buy rating and raise our price target from $10 to $12, based on 60x CY26 EV/Sales.”

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