Quantum Roadmap And Government Contracts Will Support Long Term Upside Potential

Catalysts

About Rigetti Computing

Rigetti Computing develops superconducting, gate based quantum computers and offers access to its systems for on premises deployments and through partnerships with government, academic and commercial customers.

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

• The roadmap to 150 plus qubits at an anticipated 99.7% median 2 qubit gate fidelity in 2026 and 1,000 plus qubits at an anticipated 99.8% median 2 qubit gate fidelity in 2027 positions Rigetti to participate in the wider adoption of high performance quantum systems, which could support higher system pricing and improve gross margins as performance increases.
• On premises Novera system sales, which are designed to be upgradable from 9 qubits to higher counts, create a hardware footprint inside research and industrial labs that can drive follow on upgrade revenue and a larger share of customer quantum budgets over time, supporting revenue growth visibility.
• Multi year government and defense related work, including the US$5.8 million three year AFRL contract for superconducting quantum networking and continued participation in DARPA QBI Phase A, ties Rigetti to long term public sector quantum programs, which can provide recurring contract revenue and more stable gross margin contributions.
• Collaboration with NVIDIA on NVQLink for AI supercomputer quantum integration aligns Rigetti with the growing use of AI and hybrid compute architectures, which may expand the addressable market for Rigetti systems and services and create future high value workloads that can support higher revenue per system.
• Plans to open an Italian subsidiary, along with relationships with C DAC and institutions such as Montana State University and the U.K. National Quantum Computing Center, extend Rigetti’s presence into regions that are dedicating more funding to quantum activity, which can broaden the contract pipeline and help absorb current operating expenses as revenue scales.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Rigetti Computing's revenue will grow by 118.6% annually over the next 3 years.
• 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 14.2% in 3 years.
• If Rigetti Computing's profit margin were to converge on the industry average, you could expect earnings to reach $11.1 million (and earnings per share of $0.03) by about January 2029, up from $-351.0 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 1888.7x on those 2029 earnings, up from -24.1x today. This future PE is greater than the current PE for the US Semiconductor industry at 43.4x.
• 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 10.49%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Revenue is still heavily tied to government and public sector programs such as the U.S. National Quantum Initiative and Department of Energy funding, and management highlighted that the expiration and only partial reinstatement of NQI funding has already affected quarterly revenue at US$1.9 million compared to US$2.4 million a year earlier. This could keep revenue growth uneven and limit visibility if reauthorizations or larger appropriations are delayed again.
• The business is operating with high losses relative to its current scale, with third quarter 2025 operating expenses of US$21 million and an operating loss of US$20.5 million against US$1.9 million of revenue. If revenue from contracts like AFRL and Novera systems does not ramp sufficiently, the company may face pressure to cut R&D or accept lower margin work, which would affect earnings and net margins.
• Management is considering a future quantum fabrication facility that could require hundreds of millions of dollars of capital spending. If external foundry options or government partnerships do not materialize on attractive terms, self funding a new fab could materially increase cash burn and execution risk, which would weigh on future earnings and may dilute returns on existing cash of about US$600 million.
• Gross margin has shown sensitivity to contract mix, with a 21% margin in the third quarter of 2025 compared with 51% in the prior year period, and management indicated some important contracts such as with the U.K. National Quantum Computing Center carry lower margin profiles. A sustained shift toward lower margin work or pricing pressure as the ecosystem matures could cap gross margins even if revenue rises.
• The long term technology roadmap depends on achieving higher fidelities and larger qubit counts, and management acknowledged that milestones like 1,000 qubits at 99.8% median 2 qubit gate fidelity and eventual 99.9% with effective error correction are still ahead. DARPA feedback pointed to gaps in areas like error correction and long range coupling, so any delays or technical setbacks in these areas could slow adoption for high value use cases and push out the timing of meaningful revenue and margin improvement from larger systems.

Valuation

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

• The analysts have a consensus price target of $38.4 for Rigetti Computing based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• 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 analysts, you'd need to believe that by 2029, revenues will be $78.2 million, earnings will come to $11.1 million, and it would be trading on a PE ratio of 1888.7x, assuming you use a discount rate of 10.5%.
  
• Given the current share price of $25.62, the analyst price target of $38.4 is 33.3% 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.