D-Wave Quantum Inc. (NYSE: QBTS)

D-Wave delivered exceptional financial results in Q1 2025, with revenue increasing 509% to $15.0 million compared to $2.5 million in Q1 2024. This record performance was primarily driven by the sale of a quantum computing system during the quarter, marking the company's first Advantage system sale to the Jülich Supercomputing Centre.

Gross profit saw a dramatic improvement, increasing 736% to $13.9 million from $1.7 million in the prior year quarter. This resulted in a record gross margin of 92.5%, up from 67.3% in Q1 2024. The substantial margin expansion was primarily attributed to the higher-margin system sale in the quarter.

Operating expenses for Q1 2025 increased 31% to $25.2 million from $19.2 million in Q1 2024. This increase was driven primarily by a $3.1 million rise in salaries and related personnel costs, along with increases in marketing expenses ($1.1 million), non-cash stock-based compensation ($0.5 million), third-party professional services ($0.4 million), and fabrication costs ($0.4 million). These investments reflect the company's continued focus on growth and expansion.

Net loss for the quarter was $5.4 million, or $0.02 per share, representing a significant improvement from the $17.3 million net loss, or $0.11 per share, in Q1 2024. This 69% reduction in net loss was primarily driven by the substantial increase in gross profit associated with the system sale.

Adjusted EBITDA loss decreased 53% to $6.1 million from $12.9 million in the prior year quarter, reflecting the company's improved operational efficiency and revenue growth, partially offset by higher operating expenses as D-Wave continues to invest in its go-to-market and research and development organizations.

D-Wave's customer base continues to grow, with total customers increasing to 133 from 128 in the prior comparable period. The company's customer portfolio includes 69 commercial customers (25 of which are Forbes Global 2000 companies), 52 research organizations, and 12 government customers.

Bookings for Q1 2025 were $1.6 million, a decrease of 64% from $4.5 million in Q1 2024. While bookings declined year-over-year, the significant increase in revenue reflects D-Wave's ability to convert prior bookings into substantial revenue through system sales.

D-Wave's annual user conference, Qubits 2025, held on March 31 and April 1, achieved record attendance with in-person attendance up 23% and virtual attendance nearly doubling compared to the previous year. This increased engagement demonstrates growing interest in D-Wave's quantum computing solutions across various industries.

The company demonstrated its expanding commercial reach with Ford Otosan deploying a hybrid-quantum application in production to streamline manufacturing processes for its Ford Transit line of vehicles. Using D-Wave technology, Ford Otosan reduced the scheduling time for 1,000 vehicles from 30 minutes to less than five minutes, representing a 6x improvement in efficiency.

Additionally, D-Wave completed a successful proof-of-concept with the pharmaceutical division of Japan Tobacco, which used D-Wave's Advantage quantum computer with artificial intelligence in the drug discovery process. This new approach resulted in molecular structures that are better candidates for subsequent drug development than structures created by purely classical methods.

D-Wave achieved a landmark technical breakthrough in Q1 2025, becoming the first quantum computing company to demonstrate quantum supremacy on a useful real-world problem. This achievement was validated in a peer-reviewed paper published in Science titled "Beyond-Classical Computation in Quantum Simulation," which showed that:

• Quantum Supremacy: D-Wave's annealing quantum computer performed a magnetic materials simulation in minutes that would take nearly one million years and more than the world's electricity supply on one of today's most powerful classical supercomputers, the Frontier massively parallel, GPU-based exascale supercomputer at Oak Ridge National Laboratory.
• Practical Application: This represents the first time any quantum computer has achieved quantum supremacy on a useful real-world problem, differentiating D-Wave's achievement from previous quantum supremacy claims that focused on theoretical problems.

In product development, D-Wave made significant progress with its next-generation Advantage2 system:

• Advantage2 Installation: The physical assembly of a D-Wave Advantage2 annealing quantum system was completed at Davidson Technologies' headquarters in Huntsville, Alabama. The system is now undergoing final calibration and readiness testing. This system is designed to support mission-critical challenges in areas such as national defense and will eventually be housed in a secure facility developed to run sensitive applications.

D-Wave also enhanced its software capabilities and offerings:

• Hybrid Quantum Solver: Introduced new hybrid quantum solver capabilities, including the ability to support continuous variables with linear interactions, enabling new use cases such as budget allocation and resource distribution.
• Expanded Use Cases: Added new optimization use cases including offer allocation, portfolio optimization, and maintenance repair operations optimization.
• Quantum Blockchain: Published a new research paper titled "Blockchain with Proof of Quantum Work" that used quantum computation to generate and validate blockchain hashes. This research, which leveraged techniques from D-Wave's quantum supremacy demonstration, indicates that using quantum computation for hashing and proof of work could potentially reduce electricity costs by up to a factor of 1,000 compared to classical resources.

D-Wave continues to execute on several strategic initiatives to drive growth and commercial adoption of its quantum computing technology:

Expanding Commercial Adoption

• Ford Otosan Production Deployment: Successfully transitioned from proof-of-concept to production deployment with Ford Otosan, demonstrating the practical value of quantum computing in industrial applications. Ford Otosan plans to activate quantum scheduling in additional body shops and extend to other processes, including paint shops, assembly lines, and buffer zones.
• Pharmaceutical Applications: Successful proof-of-concept with Japan Tobacco shows potential for quantum computing in drug discovery, creating opportunities for expansion in the pharmaceutical industry.

High-Performance Computing Integration

• Jülich Supercomputing Centre: The first sale of an Advantage system to Jülich Supercomputing Centre, with plans to connect the system to the JUPITER supercomputer, Europe's first and only exascale HPC, to facilitate breakthroughs in AI and quantum optimization applications.
• Research Partnerships: Continued collaboration with research organizations to explore new applications and advance quantum computing technology.

National Security Applications

• Davidson Technologies Installation: The Advantage2 system at Davidson Technologies is designed to support mission-critical challenges in areas such as national defense, representing D-Wave's entry into secure government applications.

Software and Solution Development

• Enhanced Solver Capabilities: Ongoing development of hybrid quantum solvers and expansion of use cases to address specific industry challenges and broaden the commercial applicability of D-Wave's technology.
• Quantum Blockchain: Exploration of new applications combining quantum computing with blockchain technology, demonstrating potential energy efficiency improvements of up to 1,000x compared to classical approaches.

D-Wave significantly strengthened its financial position during Q1 2025:

• Cash Position: Record cash balance of $304.3 million as of March 31, 2025, a substantial increase from $178.0 million at the end of 2024.
• Capital Raise: Raised $146.2 million in net proceeds through its third At-The-Market (ATM) program during the quarter.
• Equity Line of Credit: Maintained $37.8 million in available issuance capacity under the Equity Line of Credit with Lincoln Park Capital Fund, LLC, with the investment commitment running through October 2025.
• Total Assets: Increased to $325.6 million as of March 31, 2025, from $199.9 million as of December 31, 2024.
• Total Liabilities: Decreased to $118.2 million from $137.2 million at the end of 2024.
• Stockholders' Equity: Significantly improved to $207.4 million from $62.6 million at the end of 2024.

Management believes that the current cash balance is sufficient to fund the company to profitability, providing D-Wave with the financial flexibility to execute on its strategic initiatives and continue investing in growth opportunities.

Operating cash flow for the quarter was negative $19.3 million, compared to negative $12.1 million in Q1 2024. The increased cash usage was primarily due to changes in working capital, particularly a $13.1 million decrease in deferred revenue, partially offset by the improved operational performance.

Capital expenditures remained modest at $0.4 million for the quarter, reflecting the capital-light nature of D-Wave's business model as it focuses on selling systems and cloud-based access to its quantum computing technology.