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

Explicit Guidance:

• No formal fiscal year 2027 revenue, earnings, margin, or cash flow guidance provided.
• Revenue Recognition Timeline: Expects recognition of substantial portion of $20 million Florida Atlantic University (FAU) system sale in Q4 FY2026; remaining revenue recognition expected in early 2027.
• Remaining Performance Obligations (RPO): As of September 30, 2026, $38.3 million RPO balance; expects 59% to be recognized as revenue within the subsequent 12 months and 71% within the subsequent 24 months (ending September 30, 2028).
• CHIPS and Science Act Funding: Access to up to $100 million in U.S. funding secured via agreement with U.S. Department of Commerce, contingent on milestone achievement; no funds received as of Q3 FY2026.

Business-Segment Outlook:

• Product Mix: Expects 2027 revenue to see growth across system sales, Quantum Compute as a Service (QCAS), professional services, and partner channels. Anticipate a shift in bookings mix toward system sales (due to larger deal sizes) and potentially higher revenue mix from system sales compared to the recurring revenue model of QCAS.
• Enterprise Adoption: Continued expansion of production applications with large enterprise customers including United Health Group's Optum, AT&T, and NTT DoCoMo (Japan's largest mobile operator).
• Government: Expect government sector to become a "significantly larger component" of the business in 2027 due to increased interest in annealing systems and progress on significant application opportunities.
• Partnerships: Partnerships (e.g., CGI, LG CNS) expected to gain traction and contribute significantly to business in 2027, moving from early-stage collaboration to a meaningful revenue component.

Market and Competitive Outlook:

• Demand Trends: Pipeline value increased >75% in Q3 FY2026 and >3x since end of FY2025, driven by strong interest in system sales.
• Competitive Positioning: Management asserts D-Wave is the only dual-platform (annealing and gate model) quantum computing company. Confident in being the first to deliver a scalable fault-tolerant gate model system.
• Industry Recognition: Gartner recognized D-Wave as a "market shaper" in the emerging market quadrant (Nov 2026); IDC ranked D-Wave as a "leader" in 2026 vendor assessment.
• Global Expansion: System sales creating focal points for ecosystems (e.g., Italy's first annealing system); noting that global supply chains will remain necessary due to component specialization, despite sovereign supply chain trends in the EU and US.

Macro / Industry Outlook:

• Regulation & Funding: U.S. government validation of roadmaps via CHIPS Act funding; EU funding restrictions (must go to EU companies) noted as a potential headwind for European sales, though commercial funding sources are being pursued.
• Supply Chain: Expecting timelines for dilution refrigerators (critical component) to potentially shorten due to new suppliers (e.g., Maybel), though current lead times remain a challenge; actively buying ahead of inventory for long-lead items.
• Geopolitics: No immediate negative impact on pipeline strength or sales negotiations observed post-election; bipartisan support for quantum remains strong.

Strategic Initiatives:

• Hardware Roadmap (Annealing):
  • Fabricating first dual-chip annealing processor this week (week of call); completing scalable I/O development wafers in November.
  • Targeting 20,000-qubit and ultimately 100,000-qubit annealing systems.
  • Utilizing new superconducting interconnect and scalable I/O control to enable multi-chip systems with ~200-300 IO lines for 100 logical qubits (gate model equivalent efficiency).
• Hardware Roadmap (Gate Model):
  • On track to complete 17-qubit gate model system; already discussing orders for 17-cubit system delivery in 2027.
  • 2028 Target: First fully error-corrected fault-tolerant logical qubit.
  • 2032 Target: 100 logical qubits capable of reliably executing >1 million operations.
  • Launched simulator beta program in October for error-aware programming; participants include BBVA, First QFM, and others.
• M&A/Partnerships:
  • Extended multi-year agreement with Skywater for semiconductor process development; Skywater proof-of-technology reduced lot delays by 30%.
  • MOU with LG CNS (South Korea) for enterprise optimization; partnership with CGI to integrate D-Wave platforms into advanced technology services portfolio (logistics, transport, retail).
• Capital Allocation: $100 million CHIPS Act funding allocated to next-generation annealing and gate model development (QPU design/fabrication/testing applicable to both).

Risks and Headwinds to Outlook:

• Execution Risk: Roadmap milestones (e.g., 100 logical qubits by 2032) are contingent on successful engineering of multi-chip interconnects and error correction; no other company has yet produced a fault-tolerant logical qubit meeting D-Wave's standard.
• Supply Chain Constraints: Dilution refrigerator lead times remain a bottleneck; reliance on limited suppliers for critical cryogenic components.
• Revenue Recognition Volatility: Significant revenue fluctuation possible due to mix of one-time system sales vs. recurring QCAS/PS revenue and timing of system deliveries/installations.
• Definition Disputes: Acknowledges market confusion regarding "logical qubit" definitions; peers using alternative (lower) standards may create misperceptions of D-Wave's progress relative to competitors.
• Regulatory/Funding Uncertainty: CHIPS Act funding is subject to milestones; EU sovereign supply chain requirements could complicate European market access if not managed via commercial funds.

Management Tone on the Future:

• Confidence Level: High confidence in the "opportunity ahead" and ability to convert pipeline to revenue; management describes the dual-platform strategy as a "distinctive position."
• Strategic Clarity: Emphasis on moving from "professional services as a means to an end" toward selling systems and QCAS; confidence in partner ecosystem driving scale.
• Pacing: Accelerating product development and go-to-market initiatives, evidenced by increased operating expenses ($40.5M non-GAAP OpEx, +72% YoY) to support these goals.
• Tone: Pragmatic but optimistic; explicitly clarifies technical definitions to manage expectations while asserting leadership in fault tolerance.

Miscellaneous:

• Board Additions: Bernard Gevgani (ex-BNP Paribas CIO) joined Cybersecurity Committee; Kevin Chrysler joined Audit Committee, bringing public finance and risk expertise.
• Stock-Based Compensation: $4.1 million increase in non-cash SBC for the quarter.
• Warrant Liability: All remaining publicly traded warrants redeemed in November 2025, removing associated non-cash remeasurement charges.