D-Wave Quantum (QBTS) Capitalizes on Annealing Advantage to Extend Bullish Outlook

Shares of quantum computing pioneer D-Wave Quantum (QBTS) have surged more than 124% year-to-date, fueled by the commercial debut of its Advantage2 annealing quantum computer, strong first-quarter earnings, and a successful $400 million capital raise through a stock offering.

I’m optimistically Bullish about quantum computing and D-Wave in particular, as the company provides distinctive exposure to what could be a transformative leap in technology. That said, the stock currently trades at a premium and carries considerable risk.

QBTS Makes Progress as Competition Heats Up

As the world’s first commercial quantum computer manufacturer, D-Wave has demonstrated quantum computational supremacy in solving real-world problems, thereby distinguishing its practical applications from purely theoretical approaches in quantum computing.

The company spent over two decades developing both “annealing” and “gate-model” systems that leverage quantum mechanics to try to solve problems in fundamentally different ways from traditional computers. D-Wave’s annealing quantum technology is gaining commercial traction, with companies reporting productivity improvements from implementation.

Recent successes include a memorandum of understanding (MOU) with South Korea’s Yonsei University and Incheon Metropolitan City, positioning D-Wave within South Korea’s national quantum initiatives. The company has also completed a recent transaction with Julich. These have strengthened D-Wave’s revenue trajectory, show support for its Quantum Computing as a Service (QCaaS) business model, and help further establish the company’s presence in key global markets.

While D-Wave benefits from its first-mover advantage and commercial focus, the company faces intensifying competition as tech giants, with massive research budgets and established technology ecosystems, like IBM (IBM), Alphabet (GOOGL), and Microsoft (MSFT), race to make quantum computing a reality.

D-Wave’s Financial Performance Shows Promise

Looking back to May, D-Wave published its first-quarter 2025 results, which exceeded expectations, with revenue of $15 million—a 500% increase from the same period last year—reflecting the company’s first sale of its flagship Advantage system to a major research institution.

The company’s gross profit margin of 92% was impressive and suggests D-Wave has made significant progress toward building a genuinely scalable business model with strong pricing power.

While the company beat earnings expectations with a loss of just $0.02 per share, versus the anticipated $0.05 loss, it’s still burning through cash to fund growth, reflecting the reality that quantum computing remains primarily a research and development play.

However, the company also recently took steps to shore up its balance sheet. After completing a $400 million equity raise in July, D-Wave now holds approximately $815 million in cash.  This war chest provides crucial breathing room to invest in research, expand operations, and weather the inevitable ups and downs of an emerging market.

An Expensive Ticket to This Volatile Ride

D-Wave’s valuation has reached all-time highs. The company trades at over 176x its trailing revenue and more than 23x its book value. To put that in perspective, its peers in the Information Technology sector trade at an average Price/Sales ratio of 3.26x and a Price/Book ratio of 3.64x. D-Wave’s valuation implies investors believe the company will achieve massive scale soon.

This creates a challenging situation for investors. Any disappointment in growth, competitive setbacks, or delays in the adoption of quantum technology could trigger a sharp decline in its share price. The recent 10%+ drop following reports of increased competition from IBM and Google demonstrates the stock’s sensitivity to headline news.

Furthermore, while most experts agree that quantum computing will eventually reach mainstream adoption, “eventually” could mean anywhere from five years to twenty. The company will need to maintain its technological edge and continue growing revenue during what could be a long development/adoption period.

Is QBTS a Good Stock to Buy?

Wall Street analysts, as covered by TipRanks, currently rate QBTS as a Strong Buy based on the recent recommendations of seven analysts. Currently, QBTS’ average stock price target of $17.33 is below the current market price, indicating that analysts expect QBTS stock to decline by ~6% over the next 12 months.

See more QBTS analyst ratings

More specifically, Cantor Fitzgerald recently initiated coverage with an Overweight rating and a $20 price target, while Benchmark Co. analyst David Williams reiterated a Buy rating with a $20 price target. Both firms recognize quantum computing as an emerging technology with substantial economic potential, despite being in early developmental stages.

QBTS Must Face Risks to Achieve Quantum Dominance

Quantum computing holds the potential to transform how we solve complex problems, and D-Wave is uniquely positioned to benefit from this shift.

Its dual-technology approach provides flexibility that competitors lack, while its commercial focus has translated into actual revenue growth rather than just research papers. The recent cash infusion eliminates near-term financial risk and provides resources to accelerate development.

However, the current stock price already incorporates significant optimism about D-Wave’s future success. The extreme valuation multiples leave little room for disappointment, while intensifying competition creates ongoing execution risk.

As an investor willing to accept potential substantial volatility in exchange for exposure to quantum computing, I believe a small position in QBTS merits strong consideration.