D-Wave Q3 2026 Earnings Conference Call - D-WAVE QUANTUM INC

Financial Performance:

• Q3 FY2026 revenue was $4.5 million, representing a 21% year-over-year increase.
• Non-GAAP gross margin was 63.6% (down 14.1% YoY), primarily due to a higher mix of lower-margin professional services; GAAP gross margin was 52.9%.
• Operating expenses rose 84% YoY to $55.9 million (GAAP) and 72% to $40.5 million (Non-GAAP), driven by personnel costs, stock-based compensation, and R&D expansion.
• Net loss was $48.2 million ($0.13/share), significantly lower than the prior year's loss due to a $122 million reduction in non-cash warrant liability remeasurement charges.
• Adjusted EBITDA loss widened to $37.7 million YoY, reflecting increased investment in product development and go-to-market initiatives.
• Cash and marketable securities stood at $503.4 million (down 40% YoY) following a $253 million acquisition of Quantum Circuits.
• Remaining Performance Obligations (RPO) reached $38.3 million, more than triple the balance from the prior year, with 59% expected to convert within 12 months and 71% within 24 months.

Guidance and Future Outlook:

• Management declined to provide explicit quantitative revenue guidance for FY2027 but indicated growth across all segments: system sales, Quantum Compute as a Service (QCaaS), professional services, and partnerships.
• YTD bookings for the first nine months of 2026 totaled $37.4 million, a 611% YoY increase.
• Pipeline value increased >75% in Q3 alone and >3x since the end of 2025, driven by system sales interest.
• FY2027 outlook suggests a higher revenue mix from system sales compared to prior years, given their larger deal sizes and revenue recognition profiles.
• Long-term roadmap targets a 20,000-qubit annealing system and a 100,000-qubit annealing system, alongside a 100 logical qubit gate model system by 2032.

Business Segments and Product Lines:

• QCaaS: Revenue grew 56% YoY to $2.2 million.
• Professional Services: Revenue surged 318% YoY to $2.0 million, driven by a Fortune 100 customer engagement and gate model research.
• System Sales: Included a $360k contribution; notable delivery of Italy's first annealing quantum computer and a $20M system sale to Florida Atlantic University (revenue recognition expected in Q4/FY2027).
• Annealing Technology: Announced performance gains for the Strive Hybrid Solver (15s vs 120s on benchmarks); advanced analog-digital quantum computation preprints and topological insulator experiments.
• Gate Model Technology: Launched a beta simulator program with commercial/research partners; on track to deliver a 17-qubit system in 2027; designed a dual-chip annealing processor for fabrication.

Market and Competitive Landscape:

• D-Wave holds a unique position as the only dual-platform quantum company (annealing and gate model).
• Government validation: Secured a definitive agreement for up to $100M in U.S. CHIPS and Science Act funding for next-gen hardware development.
• Analyst recognition: Named a leader by IDC and a market shaper by Gartner in late 2026.
• Enterprise adoption: NTT DoCoMo deployed a second production application; United Health Group (Optum) and AT&T are pursuing production applications.
• Global partnerships: MOU with LG CNS for enterprise optimization in South Korea; CGI integration into advanced technology services.

Risks and Challenges:

• Supply Chain: Dilution refrigerators remain a bottleneck with long lead times, though D-Wave is qualifying additional suppliers like Maybel to diversify and reduce wait times.
• Regulatory/Geopolitical: Emerging "sovereign supply chain" pressures in the EU (funding restricted to EU companies) may impact international sales; global supply chains remain necessary for specific components.
• Financial: Continued reliance on cash burn to fund R&D and aggressive market expansion; lack of CHIPS Act funding received as of Q3.

Management Commentary and Tone:

• Tone was confident and forward-looking, emphasizing the transition from R&D to commercial production and measurable customer value.
• CEO Alan Barrett clarified industry terminology regarding "logical qubits," asserting D-Wave's path to 100 fault-tolerant logical qubits by 2032 as the standard for useful computation.
• Management highlighted the strategic shift toward partner-driven ecosystems and direct system sales to accelerate adoption.
• Emphasis placed on the bi-directional relationship with Skywater (both manufacturing support and customer optimization use cases).

Analyst Questions and Answers:

• Chip Control Multiplexing: Confirmed progress on scalable I/O control; goal is to control 100 logical qubits with only 200-300 IO lines using on-chip multiplexing; first prototype chips expected back this month for testing.
• Skywater Partnership: Contract renewed with IP protection; relationship expanded to include D-Wave optimizing Skywater's fab maintenance schedules (reducing lot delays by 30%).
• 2027 Revenue Mix: System sales expected to grow significantly in bookings; government revenue anticipated to be a larger component due to increased interest.
• Customer Autonomy: NTT DoCoMo developed their production applications internally, validating D-Wave's hardware capability.
• Gate Model Discussions: Sales discussions already underway for 17-qubit systems with both existing and new customers.

Other Key Points:

• Board of Directors expanded with Bernard Gevgani (cybersecurity/enterprise tech) and Kevin Chrysler (finance/risk).
• Clarification on revenue recognition: Large system sales (e.g., FAU) recognize revenue upon delivery and over subsequent installation periods, impacting Q4 and early 2027 results.
• D-Wave remains focused on proving utility in optimization, material simulation, blockchain, and AI rather than just hardware specifications.