Quantum Annealing Adoption And System Deployments Will Transform Long Term Prospects

Catalysts

About D-Wave Quantum

D-Wave Quantum develops and sells quantum computing systems and cloud-based quantum services focused on solving complex optimization problems for commercial and government customers.

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

• Growing real-world adoption of D-Wave's annealing systems and hybrid solvers by large enterprises and public sector customers, including airlines, chemical companies, banks and law enforcement, supports the case for scaling QCaaS and professional services revenue as more proofs of concept convert into production workloads.
• Expansion of on-premises system deployments, such as Advantage and Advantage2 installations in Germany, Alabama and the planned system for Italy, creates high-value hardware and support opportunities that can increase systems revenue and support high gross margins over multi-year periods.
• Rising global attention on quantum computing, highlighted by the United Nations declaring 2025 the international year of quantum science and technology and D-Wave's role in forums and user conferences, can attract new enterprise and government customers, helping broaden the revenue base and support bookings growth.
• D-Wave's focus on superconducting technology for both annealing and gate model programs, backed by a large patent portfolio and cryogenic control capabilities, positions the company to reuse core technology across product lines, which can help manage R&D spend efficiency and support long-term margin structure.
• A three-part revenue model across QCaaS, professional services and commercial-grade system sales, combined with over 100 revenue-generating customers and rising deal sizes, provides multiple levers for scaling total revenue and leveraging existing QCaaS capacity to improve earnings over time.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more optimistic perspective on D-Wave Quantum compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming D-Wave Quantum's revenue will grow by 156.5% annually over the next 3 years.
• The bullish 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 -2957.2% to the average US Software industry of 12.1% in 3 years.
• If D-Wave Quantum's profit margin were to converge on the industry average, you could expect earnings to reach $25.4 million (and earnings per share of $0.06) by about July 2029, up from -$368.0 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 1026.7x on those 2029 earnings, up from -21.3x today. This future PE is greater than the current PE for the US Software industry at 29.3x.
• 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 8.59%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• D-Wave is still loss-making on an adjusted basis, with an adjusted net loss of $18.1 million in the quarter and $52.8 million over the first 9 months of 2025, and adjusted EBITDA loss rising to $20.6 million in the quarter and $46.7 million year to date. This signals that operating costs could remain high for longer than expected and delay any path to positive earnings.
• Revenue and gross margin are heavily influenced by a small number of large system deals, such as the Jülich system sale that contributed $15.5 million of the $21.8 million year to date revenue and lifted gross margin to 84.8%. If similar high value system sales do not repeat, total revenue and margins could be much lower than current levels.
• Bookings for the first 9 months of 2025 were $5.3 million, slightly below the $5.6 million reported a year earlier. Management also highlights that larger, more complex enterprise deals take longer to close, so any slow conversion of the pipeline into signed contracts could restrain revenue growth and delay operating leverage.
• The long-term thesis depends on quantum annealing and superconducting technology being widely adopted. Management acknowledges that fully error corrected gate model systems are still 5 to 10 years away and that D-Wave is increasing R&D spending to accelerate its own gate model program, so prolonged technical timelines or a shift in industry preference toward competing modalities could pressure both revenue potential and future margin structure.
• Although the company reports over 100 revenue generating customers and more than $800 million in cash, its QCaaS business is still described as early stage with mostly smaller deal sizes and over $100 million of unused annual QCaaS capacity. This suggests that if usage does not scale meaningfully, revenue may not grow fast enough to absorb ongoing R&D and go to market spending, keeping net losses elevated.

Valuation

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

• The assumed bullish price target for D-Wave Quantum is $45.0, which represents up to two standard deviations above the consensus price target of $37.39. 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 bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $45.0, and the most bearish reporting a price target of just $22.0.
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be $210.1 million, earnings will come to $25.4 million, and it would be trading on a PE ratio of 1026.7x, assuming you use a discount rate of 8.6%.
• Given the current share price of $21.16, the analyst price target of $45.0 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.