Is Rigetti Computing (RGTI) a Buy Ahead of Its Earnings Report Amid Quantum Breakthroughs and Earnings Uncertainty?

The quantum computing race is heating up, and Rigetti Computing (NASDAQ: RGTI) has just thrown a curveball into the mix. With a 30% stock price surge following its July 16 announcement of 99.5% median two-qubit gate fidelity on a modular 36-qubit system, investors are scrambling to assess whether this breakthrough—coupled with improving analyst sentiment—justifies a “Buy” ahead of its August 12 earnings report. But beneath the technical hype lies a company with a history of unprofitability, high burn rates, and a market that often overvalues hype over fundamentals. Let's cut through the noise.

Quantum Breakthroughs: A Game-Changer or a Hype Play?

Rigetti's recent achievement—99.5% gate fidelity on a modular system—is no small feat. For context, gate fidelity above 99% is a prerequisite for error correction, a holy grail in quantum computing. By using chiplets (smaller, tiled quantum chips) instead of monolithic designs, Rigetti is addressing scalability challenges that have plagued competitors like IBM and IonQ. This modular approach mirrors Moore's Law-era strategies, leveraging proven semiconductor techniques to scale qubits while maintaining performance.

The 36-qubit system is just the beginning. Rigetti plans to launch a 100+ qubit system with similar fidelity by year-end, positioning itself as a leader in the logical qubit race. Logical qubits—built by error-correcting physical qubits—will be the foundation of practical quantum applications in cryptography, optimization, and drug discovery. Rigetti's partnership with Quanta Computer (a $35M investment and $100M manufacturing deal) further validates its roadmap, providing the manufacturing infrastructure needed to scale.

Strategic Moves: Building an Ecosystem

Beyond hardware, Rigetti has secured key partnerships and grants that strengthen its long-term position:
- $5.48M Air Force grant for chip fabrication R&D.
- $3.5M Innovate UK award for quantum error correction.
- DARPA Quantum Benchmarking participation, aligning with national security priorities.
- Collaboration with QphoX and the National Quantum Computing Centre on optical readout technology.

These moves are critical. Quantum computing isn't a solo act—it's a team sport requiring government, academic, and corporate buy-in. Rigetti's ability to secure such partnerships signals institutional confidence in its technology and execution.

Earnings and Financial Risks: A Tale of Two Stories

Now, let's get real. Rigetti's financials are a mess. For Q1 2025, it reported $1.5M in revenue but burned $23M in operating expenses. Over the past five years, earnings have declined at a 34.7% CAGR, with a net margin of -1,493.98%. Its balance sheet isn't dire—$575M in cash and no debt—but this is a company that spends $54M on R&D quarterly and $24M on G&A. That's a lot of money chasing a future that may or may not materialize.

Analysts are bullish, though. Six firms have “Buy” ratings, with a $15.50 average price target (vs. current $15.43). B. Riley raised its target to $19, and Cantor Fitzgerald initiated coverage at $15. But Zacks has a “Sell” rating, citing downward revenue revisions and a Zacks Rank of #4. The disconnect is stark: the market is betting on quantum's long-term potential, while fundamentals suggest short-term pain.

The Investment Argument: Buy, Hold, or Run?

The Case for Buy
- Quantum Leadership: Rigetti's modular architecture and 99.5% fidelity position it as a first-mover in error-corrected logical qubits.
- Strategic Validation: Partnerships with Quanta, the Air Force, and UK institutions signal institutional confidence.
- Capital Reserves: $575M in cash gives Rigetti flexibility to execute its roadmap without near-term fundraising.
- Analyst Momentum: Rising price targets and a “Buy” consensus suggest a short-to-medium-term upside.

The Case for Caution
- Unprofitability: Rigetti's losses are widening, and it's unclear when (or if) it will turn a profit.
- Market Volatility: The stock is highly speculative, with a beta of 2.5 and a 52-week high of $20.37 vs. current $15.43.
- Competition: IBM, IonQ, and D-Wave are all racing to commercialize quantum systems. Rigetti's edge is narrow.

The Verdict: A High-Risk, High-Reward “Hold”

Rigetti's quantum breakthroughs are undeniably impressive, but they don't erase its financial shortcomings. The stock is priced for long-term optimism, not near-term results. If you're a risk-tolerant investor, RGTI could be a speculative buy ahead of its August 12 earnings, especially if the report shows progress in revenue diversification or cost control. Historically, RGTI has shown a strong positive performance post-earnings, with an 84.62% win rate over three days and a 39.52% maximum return observed on day 55 following releases since 2022. However, this isn't a “buy and hold” play—it's a bet on quantum's future, with a stop-loss at $12.

For conservative investors, a “Hold” is prudent until Rigetti demonstrates it can scale without burning cash at a rate that outpaces revenue growth. The quantum race is still in its early stages, and while Rigetti is in the lead, the finish line is far.

Final Thoughts
Rigetti Computing is a story of two halves: one of cutting-edge innovation, the other of financial fragility. The recent 99.5% fidelity milestone is a technical win, but it's not a financial one. Investors should treat RGTI as a “Hold” unless the August earnings report includes concrete steps toward profitability or a major partnership that shifts the valuation narrative. For now, this is a stock for the quantum-optimistic, not the risk-averse.