Fab Expansion And Quantum Cybersecurity Will Shape Long Term Prospects For This Stock

Catalysts

About Quantum Computing

Quantum Computing Inc. develops room temperature, integrated photonic quantum systems and thin film lithium niobate chips for applications in computing, sensing, AI and secure communications.

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

• Although the company now has significant cash and investments earmarked for Fab 1 and Fab 2, the shift from small batch to higher volume photonic chip production could be slower than planned if process yields and high speed test tooling do not ramp as expected. This would limit the pace of revenue growth from foundry services and telecom or datacom customers.
• Although interest in quantum ready cyber security is rising as enterprises respond to concerns around RSA-2048 and future quantum attacks, wide adoption of QCi's quantum communication systems depends on customers upgrading existing infrastructure and committing to new equipment. This could extend sales cycles and defer any material impact on revenue and earnings.
• While integrated photonics and energy efficient computing are gaining attention as AI workloads strain data centers, QCi's room temperature quantum optimization and AI devices still need broader validation across more commercial use cases. As a result, monetization of this demand may remain concentrated in a small number of contracts and keep margins and earnings volatile.
• Although management is planning Fab 2 to potentially support very high chip volumes for both internal quantum machines and external customers, actual utilization will depend on third party demand for thin film lithium niobate at scale. Underused capacity could pressure net margins through higher depreciation and fixed operating costs.
• While QCi is building relationships with government, aerospace, financial services and international partners, the reliance on a developing ecosystem for quantum systems and photonic machine learning means some expected contracts or collaborations may take longer to convert. This could delay the translation of the current sales pipeline into a steadier revenue base and more predictable earnings.

Assumptions

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

• The bearish analysts are assuming Quantum Computing's revenue will grow by 243.2% annually over the next 3 years.
• The bearish analysts are not forecasting that Quantum Computing will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Quantum Computing's profit margin will increase from -12519.2% to the average US Tech industry of 6.2% in 3 years.
• If Quantum Computing's profit margin were to converge on the industry average, you could expect earnings to reach $1.4 million (and earnings per share of $0.01) by about January 2029, up from $-68.4 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 3032.0x on those 2029 earnings, up from -39.2x today. This future PE is greater than the current PE for the US Tech industry at 24.7x.
• 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 8.16%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The company has raised more than US$1.5b in 2025 to fund TFLN fabrication, quantum machines and potential acquisitions, which creates pressure to translate this capital into meaningful commercial traction. If that does not happen, returns on this large capital base could be weak and weigh on earnings and return on equity.
• Management is planning Fab 2 to target hundreds of millions of thin film lithium niobate chips per year alongside quantum machines. If long term demand from telecom, datacom and quantum information customers does not materialise at that scale, underused capacity could keep revenue below expectations and compress net margins through higher fixed costs and depreciation.
• QCi is hiring across research, engineering, manufacturing, sales and administration and expects SG&A to grow as it scales. If revenue from contracts in quantum computing, sensing, AI and cybersecurity does not broaden beyond a relatively small set of projects, rising operating expenses could limit progress towards sustained profitability and keep net income volatile.
• Management is actively evaluating M&A to acquire customers, products and complementary technology. If acquisitions are pursued at high prices or prove difficult to integrate with the TFLN and quantum road map, the company could see pressure on future earnings, cash flows and potentially equity value.
• The company is positioning its room temperature quantum and photonic products for long term trends in AI workloads, quantum ready cybersecurity and higher speed Internet. If competitors or alternative technologies capture a larger share of these growth areas, QCi's revenue opportunity in optimization, sensing, communication and foundry services could be more limited and weigh on long term earnings potential.

Valuation

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

• The assumed bearish price target for Quantum Computing is $12.0, which represents up to two standard deviations below the consensus price target of $17.0. This valuation is based on what can be assumed as the expectations of Quantum Computing'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 $25.0, and the most bearish reporting a price target of just $12.0.
  
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2029, revenues will be $22.1 million, earnings will come to $1.4 million, and it would be trading on a PE ratio of 3032.0x, assuming you use a discount rate of 8.2%.
  
• Given the current share price of $11.96, the analyst price target of $12.0 is 0.3% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• 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.