Last Update 11 Aug 26
Fair value Decreased 6.60%QBTS: AT&T And Government Support Will Drive Future Quantum Adoption
Analysts have trimmed their average D-Wave Quantum price target as the updated fair value estimate moves from about $25.09 to $23.43. This reflects recent target cuts alongside recognition of ongoing technological and commercial progress.
Analyst Commentary
Recent research on D-Wave Quantum highlights a mix of optimism about long term quantum computing opportunities and more cautious views around valuation, execution, and growth timing. Several firms continue to discuss progress on technology roadmaps and commercial traction, while also refining models and lowering price targets as new information comes through from quarterly reports and sector developments.
Some analysts describe D-Wave Quantum as part of a wider quantum computing group that is still early in its commercial journey. Commentary points to factors such as engineering and physics hurdles, the shift from government contracts to broader commercial customers, and the move from heavy cash use to more efficient operations as key signposts in the years ahead. These themes matter for how you think about risk and potential reward in a segment that is still forming clear leaders.
Other research highlights sector wide enthusiasm. One firm that covers multiple quantum stocks has expressed a positive view on the group as a whole and suggested that investors who are interested in the space may want to consider a portfolio approach across several companies rather than trying to pick a single winner. This aligns with views that there is not yet a clear answer on which quantum computing modality will end up best suited for mass adoption.
There is also commentary about policy support and government interest. Some analysts point to executive orders in the U.S. aimed at strengthening the quantum computing ecosystem as helpful for companies such as D-Wave Quantum that work on related technologies and use cases, including data security. Others flag potential benefits from letters of intent tied to planned funding for quantum ecosystem companies, which are framed as a sign of how important the sector could be for national defense and long term technology goals.
Within this broader context, firm specific comments around D-Wave Quantum frequently refer to its quantum computing as a service, or QCaaS, offering and a growing pipeline of potential system sales. Research notes link these points to views on commercial traction and how the company is positioning itself with enterprise customers.
Bearish Takeaways
- Bearish analysts have cut D-Wave Quantum price targets in several steps, including moves from about US$41 to US$35, US$40 to US$30, US$43 to US$41, and US$31 to US$29. This signals reduced valuation headroom relative to earlier expectations.
- Some cautious commentary ties target cuts to revenue and bookings that were described as more modest during certain quarters. This raises execution risk around how quickly reported results might line up with technology and commercial goals.
- One research note points to market valuations as a key reason for lowering the price target. This suggests concern that prior targets may not have fully reflected sector wide repricing or the risk profile of early stage quantum computing stocks.
- Another bearish view references a revenue miss in the June quarter and frames the near term setup as dependent on specific system shipments. This introduces timing risk for growth milestones and could lead to further model adjustments if those milestones shift.
What’s in the News for D-Wave Quantum
- D-Wave Quantum published research in Nature on a two-qubit entangling gate within its dual-rail erasure qubit architecture, reporting about 99.9% fidelity and gate times of roughly 500 nanoseconds. The company describes this as an advance toward more efficient fault tolerant gate-model quantum computing. Source: Nature publication and company announcement.
- AT&T expanded its use of D-Wave Quantum technology after earlier testing. The company reported that one network optimization workload moved from about one hour of processing time to less than 15 seconds and plans to explore applications such as outage detection, technician routing, network build planning, and traffic management. Source: company and AT&T client announcement.
- D-Wave Quantum agreed with Nasdaq Verafin to run a proof of concept that applies its annealing and quantum hybrid systems to financial crime detection, with a focus on spotting unusual patterns tied to fraud, scams, and money laundering across complex transaction data. Source: Nasdaq Verafin collaboration announcement.
- The company outlined a gate model roadmap that targets a 100 logical qubit system capable of more than 1 million operations by 2032. Intermediate milestones include 17, 49, and 181 physical qubit systems that are intended to improve error rates through its dual rail architecture and a Lambda target of 10 for error reduction. Source: D-Wave Quantum product roadmap announcement.
- D-Wave Quantum received external support that includes a US$1,566,250 National Science Foundation grant under the ERASE project and a letter of intent for US$100,000,000 of proposed CHIPS and Science Act funding, along with second year SQFab funding through the U.S. Microelectronics Commons program. Source: U.S. government and NSF related announcements.
Valuation Changes for D-Wave Quantum
- Fair Value has moved from about $25.09 to $23.43, which is a small reduction in the modeled estimate for D-Wave Quantum.
- Discount Rate has edged up slightly from 8.54% to about 8.54%, reflecting a very small adjustment in the required return used in the model.
- Revenue Growth has been revised from about 120.90% to roughly 122.70%, indicating a modestly higher projected growth rate for $ revenue.
- Net Profit Margin has shifted from roughly 11.96% to about 11.57%, which is a small reduction in the long term profitability assumption.
- Future P/E has been adjusted from a very large 905x to about 860x, which still implies a very high earnings multiple in the model.
Catalysts
About D-Wave Quantum
D-Wave Quantum provides commercial quantum computing systems and cloud access focused on solving complex optimization problems for government, industrial and enterprise customers.
What are the underlying business or industry changes driving this perspective?
- Although D-Wave now has over 100 revenue generating customers, including around two dozen large global enterprises, many current QCaaS contracts are still relatively small. As a result, any slowdown in converting proofs of concept into multi application or enterprise wide deployments could limit revenue growth and delay operating leverage in the subscription model.
- Although quantum optimization and Quantum AI interest in areas like drug discovery and manufacturing is expanding, customers may take longer to move beyond pilots at BASF, Japan Tobacco and others. This could temper growth in professional services revenue and slow the ramp in higher margin, production use cases.
- Although the company is engaging more with governments, including the U.S. Department of Defense through Davidson Technologies and the Q-Alliance initiative in Italy, delays in government adoption or security accreditation could push out the timing of QCaaS usage and system sales revenue tied to defense and national security workloads.
- Although superconducting technology and the Advantage2 and planned Advantage3 roadmaps target much larger, more complex real world problems, any technical or timing setbacks in scaling to higher qubit counts and multi chip architectures could raise R&D spend without a matching uplift in system sales or QCaaS revenue.
- Although D-Wave is investing to advance its fluxonium based gate model program and reuse superconducting know how across both architectures, the long multiyear path to error corrected gate systems may require sustained R&D and capital. This could weigh on adjusted EBITDA and net loss before the gate model line contributes meaningful earnings.
Assumptions
How have these above catalysts been quantified?
- This narrative explores a more pessimistic perspective on D-Wave Quantum compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
- The bearish analysts are assuming D-Wave Quantum's revenue will grow by 122.7% annually over the next 3 years.
- The bearish analysts are not forecasting that D-Wave Quantum will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate D-Wave Quantum's profit margin will increase from -2001.6% to the average US Software industry of 11.6% in 3 years.
- If D-Wave Quantum's profit margin were to converge on the industry average, you could expect earnings to reach $15.9 million (and earnings per share of $0.03) by about August 2029, up from -$248.7 million today.
- In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 860.8x on those 2029 earnings, up from -30.2x today. This future PE is greater than the current PE for the US Software industry at 31.5x.
- The bearish 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 8.54%, as per the Simply Wall St company report.
Risks
What could happen that would invalidate this narrative?
- The company reports more than 100 revenue generating customers, a growing mix of large enterprises and a deal structure that includes system sales, QCaaS and professional services. If this broadening customer base and larger average deal sizes keep scaling, revenue and earnings could expand faster than you expect, which could support a higher share price over time.
- D-Wave now has multiple production systems online, over US$100 million in annual QCaaS capacity and is talking about bundled, multi application enterprise style agreements. If usage ramps into that available capacity and customers shift from proofs of concept into wider production, recurring revenue and gross profit could grow ahead of your expectations and push margins higher.
- The company reports system sales to Jülich, a €10 million Q-Alliance contract in Italy, on premises deployments with Davidson Technologies and a pipeline that management describes as strong with larger opportunities. If this model of regional hubs and system purchases spreads to more governments and corporates, system revenue and overall earnings could surprise to the upside.
- Management highlights an annealing roadmap toward Advantage3 and multi chip processors targeting 100,000 qubits, together with progress on a superconducting fluxonium based gate model program and unique cryogenic control. If these technical programs hold or accelerate and attract more real world applications, long term revenue potential and profit margins could look stronger than the flat share price you expect.
- The company reports increasing engagement with the U.S. government, including an operational Advantage2 system at Davidson supporting defense workloads and a stated goal of being certified for classified applications. If this leads to higher value, long duration contracts or broader adoption across national security agencies, that additional revenue visibility and potential operating leverage could support a higher valuation and stronger earnings profile than you are assuming.
Valuation
How have all the factors above been brought together to estimate a fair value?
- The assumed bearish price target for D-Wave Quantum is $23.43, which represents up to two standard deviations below the consensus price target of $35.25. This valuation is based on what can be assumed as the expectations of D-Wave Quantum's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
- However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $43.0, and the most bearish reporting a price target of just $22.0.
- In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2029, revenues will be $137.2 million, earnings will come to $15.9 million, and it would be trading on a PE ratio of 860.8x, assuming you use a discount rate of 8.5%.
- Given the current share price of $20.19, the analyst price target of $23.43 is 13.8% 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.
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AnalystLowTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystLowTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystLowTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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