Hybrid Quantum AI Roadmap And Expanding Deployments Will Drive Long Term Upside

Catalysts

About Rigetti Computing

Rigetti Computing develops superconducting, chiplet based quantum computers and hybrid quantum classical systems for commercial, government, and research customers.

What are the underlying business or industry changes driving this perspective?

• The road map to 150 plus qubit systems at an anticipated 99.7 percent 2 qubit gate fidelity in 2026 and 1,000 plus qubits at 99.8 percent in 2027 positions Rigetti as a performance leader, supporting a shift from mainly research contracts to higher value system sales and usage based revenue, which could affect top line growth.
• Expanding on premises Novera system deployments to corporates, startups, and universities creates a scalable base of installed hardware that can be upgraded to higher qubit counts, providing recurring hardware and services revenue and potentially affecting gross margins over time.
• Deepening collaborations with AFRL, C DAC, MSU, and National Labs as quantum funding is restored and expanded globally supports multi year, ratable contracts that can stabilize revenue and affect earnings visibility as the business scales.
• Participation in NVIDIA NVQLink and the broader hybrid quantum AI ecosystem positions Rigetti to access emerging AI and HPC workloads, enabling higher utilization of its systems and potentially affecting long term revenue and operating leverage.
• Significant cash of roughly $600 million with no debt, combined with a maturing chiplet fabrication capability and potential access to shared quantum fabs, provides runway to reach key milestones including quantum advantage, with possible implications for margins and net income that may not be fully reflected in the valuation.

Assumptions

This narrative explores a more optimistic perspective on Rigetti Computing compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Rigetti Computing's revenue will grow by 165.1% annually over the next 3 years.
• The bullish analysts are not forecasting that Rigetti Computing will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Rigetti Computing's profit margin will increase from -4683.3% to the average US Semiconductor industry of 14.7% in 3 years.
• If Rigetti Computing's profit margin were to converge on the industry average, you could expect earnings to reach $20.5 million (and earnings per share of $0.05) by about December 2028, up from $-351.0 million today.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 1352.9x on those 2028 earnings, up from -22.5x today. This future PE is greater than the current PE for the US Semiconductor industry at 36.8x.
• The bullish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.45%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Revenue trends remain volatile and heavily dependent on government funding cycles, as shown by third quarter 2025 revenue falling from 2.4 million in the prior year period to 1.9 million. Any further delays or shortfalls in reauthorizing or expanding programs such as the U.S. National Quantum Initiative or Department of Energy quantum centers could suppress contract flow and slow top line growth.
• Structural pressure on profitability may persist if a larger mix of future contracts resembles the lower margin U.K. National Quantum Computing Center deals and other strategically priced R&D collaborations. This could prevent gross margins from recovering from the decline from 51 percent to 21 percent and keep net margins deeply negative despite higher system sales.
• Execution risk on the aggressive technical road map, including achieving 150 plus qubits at 99.7 percent fidelity in 2026 and 1,000 plus qubits at 99.8 percent fidelity in 2027, as well as improving error correction and long range coupling to reach fault tolerant quantum computing by 2033, may cause delays or underperformance versus peers. This could limit Rigetti's ability to capture high value commercial workloads and constrain long term revenue and earnings.
• Industry wide uncertainty around monetizing hybrid quantum AI and high performance computing workloads, even with initiatives such as NVIDIA NVQLink and on premises Novera systems, means that adoption for practical applications like drug discovery or financial forecasting could be slower than anticipated. This would postpone the shift from primarily research and government contracts to scalable usage based models and keep operating losses elevated.
• Long term capital intensity and fabrication strategy risk, including the potential need to invest hundreds of millions of dollars in an 8 inch or 12 inch quantum fab if suitable foundry options do not emerge, could consume a substantial portion of the approximately 600 million cash balance. This would raise the break even threshold for the business and increase the risk that net losses remain high if revenue does not scale quickly enough to support this level of investment.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Rigetti Computing is $51.0, which represents up to two standard deviations above the consensus price target of $39.67. This valuation is based on what can be assumed as the expectations of Rigetti Computing's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $51.0, and the most bearish reporting a price target of just $24.36.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $139.6 million, earnings will come to $20.5 million, and it would be trading on a PE ratio of 1352.9x, assuming you use a discount rate of 10.4%.
  
• Given the current share price of $23.96, the analyst price target of $51.0 is 53.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.