D-Wave's Q3 2025 Earnings Call: Key Contradictions Emerge on U.S. Government Funding, R&D Investments, and Strategic Priorities

Date of Call: November 6, 2025

Financials Results

• Revenue: $3.7M, up ~100% YOY (from $1.9M in Q3 2024)
• EPS: $0.41 loss per share, compared with $0.11 loss per share in Q3 2024 (GAAP net loss $140.8M)
• Gross Margin: GAAP 71.4%, up 15.6% YOY (55.8% prior year); non-GAAP 77.7%, up 10.5% YOY (67.2% prior year)

Guidance:

• Operating expenses for the balance of fiscal 2025 expected to increase ~15% sequentially, with the majority of incremental spend in R&D.
• EUR 10M Italy (Q-Alliance) contract revenue will be recognized ratably over 5 years once the system is operational (expected in 2026).
• Management will not provide OpEx guidance beyond the balance of this year; gate-model capability demos expected over the coming year, while a scaled error-corrected gate-model remains a 5–10 year horizon.

Business Commentary:

* Revenue and Bookings Growth: - D-Wave reported revenue of $3.7 million for Q3 2025, up 100% from Q3 2024, and bookings of $2.4 million, an 80% increase from the previous fiscal quarter. - The growth was driven by the upgrade of the Jülich Advantage system to an Advantage2 system and increased sales in Quantum Computing as a Service (QCaaS) and professional services.

• Strategic Partnerships and System Sales:
• D-Wave signed an EUR 10 million contract to place a D-Wave Advantage2 system in Europe, indicating strong interest in the company's technology.

• These strategic partnerships are crucial for expanding market presence and leveraging government support for scientific and industrial advancements.

• Technology and Product Development:

• D-Wave's gate model program has made significant progress, with the fabrication of fluxonium qubit chips and superconducting control chips.

• The company's focus on superconducting technology is due to its potential advantage in speed, fidelity, and scalability compared to other approaches.

• Quantum Applications and Customer Success:

• D-Wave's systems have demonstrated real-world value with clients such as BASF and Japan Tobacco, achieving improvements in optimization and drug discovery processes.
• These applications highlight the effectiveness of D-Wave's quantum systems in addressing complex computational challenges, enhancing its value proposition and market credibility.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management: "Momentum is clearly building at D-Wave" and highlighted Q3 results (revenue $3.7M, bookings $2.4M) and a cash position of $836.2M. CEO emphasized repeated customer wins, Advantage2 operational deployments and production-ready commercial applications driving near-term commercial traction.

Q&A:

• Question from Harsh Kumar (Piper Sandler & Co., Research Division): Can you talk about the significance of the growing U.S. government attention and whether this signals easing engagement with the U.S. government?
  Response: D-Wave's value proposition to the U.S. government is operational capability today (not R&D funding): their annealing systems can solve government problems now, opening opportunities in military logistics, resource deployment and maintenance.

• Question from Troy Jensen (Cantor Fitzgerald & Co., Research Division): Can you give more details on the gate model product — timeline, fidelity and qubit count?
  Response: Using superconducting fluxonium qubits with cryogenic control; chips fabricated and bonding underway, first capability demonstrations expected within about a year, while a scaled error‑corrected gate-model system remains a multi‑year (5–10 year) effort.

• Question from David Williams (The Benchmark Company, LLC, Research Division): How do you see the Davidson relationship fitting into national security/defense initiatives like Golden Dome?
  Response: Davidson's operational Advantage2 will be secured next to support classified workloads — positioning it to become one of the first quantum systems certified for classified government applications and enabling defense use cases.

• Question from Quinn Bolton (Needham & Company, LLC, Research Division): If Q-Alliance converts the 50% capacity agreement to a full purchase, how would purchase pricing/credits work?
  Response: Terms are not finalized; management warned not to assume the EUR 10M half‑capacity fee simply doubles to equal full purchase — outright purchases carry a premium and different title/rights treatment.

• Question from William Kingsley Crane (Canaccord Genuity Corp., Research Division): Could the Q-Alliance capacity/hosting model be a repeatable blueprint for global points-of-presence?
  Response: Yes — similar to the Jülich arrangement, the model can both expand global presence and provide a path from shared capacity to eventual full-system purchase.

• Question from Craig Ellis (B. Riley Securities, Inc., Research Division): How is the planned ~15% sequential OpEx increase progressing and what should we expect in Q4 and H1 2026?
  Response: OpEx will rise ~15% sequentially (majority into R&D) for the balance of the year; management won't provide guidance beyond that, and incremental spend will target gate‑model R&D and go‑to‑market (system sales, professional services, QCaaS).

• Question from Sujeeva De Silva (ROTH Capital Partners, LLC, Research Division): Are you pursuing ancillary quantum markets (communications, sensing, QKD) or focused on core computing?
  Response: Laser‑focused on quantum computing; management does not view interconnects, sensing or QKD as central to D‑Wave's commercial strategy or near‑term scaling needs.

• Question from Tyler Perry Anderson (Craig‑Hallum Capital Group LLC, Research Division): Are SkyWater and the airline using the QPU for device/material simulation or optimizations, and how often is BASF running the program in production?
  Response: SkyWater is engaging on operational optimization problems; airline application details were not disclosed; earlier BASF PoC showed large scheduling gains (reduced run times and latencies), but frequency of runs in production was not specified on the call.

• Question from Unknown Analyst (Rosenblat Securities): What is the tone for trial-to-conversion to production on optimization and new logos?
  Response: Conversion momentum is improving: larger enterprises are engaging, successful PoCs on Advantage2 and NL hybrid solver are driving discussions about bundled enterprise deals that combine multiple PoCs and production apps.

Contradiction Point 1

U.S. Government Interest and Funding

It involves the nature of D-Wave's work with the U.S. government, which could impact perceptions regarding the company's research and development focus, and potential funding sources.

What is the significance of the U.S. government's interest in D-Wave, and does this signal increased attention from the U.S. government? - [Harsh Kumar](Piper Sandler & Co., Research Division)

2025Q3: Our approach is different from other quantum computing companies working with the U.S. government. We are not seeking R&D funding but working on solving important problems today. - [Alan Baratz](CEO)

How is D-Wave assessing funding sources, particularly government funding and M&A opportunities? - [David Williams](The Benchmark Company, LLC, Research Division)

2025Q2: Specifically, we view the most likely sources of funding in the next few years will be research dollars from governments and academia. - [John Markovich](CFO)

Contradiction Point 2

Investment in R&D and Marketing

It involves D-Wave's strategy for investment in R&D and marketing, which affects their development capabilities and market reach, impacting investor expectations.

Can you discuss the increase in R&D and sales and marketing investments and future expectations? - [Craig Ellis](B. Riley Securities, Inc., Research Division)

2025Q3: Operating expenses will increase approximately 15% sequentially, with most in R&D. We are investing in our gate model program and go-to-market efforts. - [Alan Baratz](CEO), [John Markovich](CFO)

How does D-Wave assess investment levels in R&D and marketing? - [Craig Andrew Ellis](B. Riley Securities)

2025Q2: We do not foresee any major increase in our R&D or go-to-market expenses for the next few quarters. - [John Markovich](CFO)

Contradiction Point 3

U.S. Government Interest and Partnerships

It highlights a shift in the company's stance regarding the U.S. government's interest and partnerships, which could have implications for strategic direction and revenue sources.

Does the U.S. government's interest in D-Wave's work signal increased attention from the U.S. government? - [Harsh Kumar](Piper Sandler & Co., Research Division)

2025Q3: Our approach is different from other quantum computing companies working with the U.S. government. We are not seeking R&D funding but working on solving important problems today. The U.S. government is starting to realize the value of our systems, opening opportunities for us. - [Alan Baratz](CEO)

Can error mitigation techniques be applied to customer systems? What is the government's interest in D-Wave's systems? - [Tyler Perry Anderson](Craig-Hallum Capital Group LLC, Research Division)

2025Q1: U.S. government interest is limited, but D-Wave seeks to engage and educate, hoping for increased support. - [Alan Baratz](CEO)

Contradiction Point 4

R&D and Sales and Marketing Investment

It reflects differing views on the allocation and growth of R&D and sales and marketing expenses, which are crucial for product development, market positioning, and revenue generation.

Can you elaborate on the increased R&D and sales and marketing investments and future expectations? - [Craig Ellis](B. Riley Securities, Inc., Research Division)

2025Q3: Operating expenses will increase approximately 15% sequentially, with most in R&D. We are investing in our gate model program and go-to-market efforts. - [Alan Baratz](CEO), [John Markovich](CFO)

Clarify the status of the partnership with Davidson Technologies and if it relates to prior system sales. Also, discuss D-Wave's progress in error correction and cryogenic control compared to competitors? - [Harsh Kumar](Piper Sandler)

2025Q1: We expect our operating expenses to be approximately $57 million in Q1, reflecting a 10% increase sequentially. The quarter-over-quarter increase is primarily due to higher R&D related to system development and scaling. - [John Markovich](CFO)

Contradiction Point 5

System Sales and QCaaS Bookings

It involves differing perspectives on the importance and growth of system sales and QCaaS bookings, which are key revenue streams for the company.

What is the current tone regarding optimization and trial-to-production conversion? - [Unknown Analyst](Rosenblat Securities)

2025Q3: We are now being engaged by larger companies for more complex optimization problems. The results are driving interest in bundled deals for multiple proofs of concept and production applications. - [Alan Baratz](CEO)

How should we view the system sales versus services business moving forward? - [Harsh Kumar](Piper Sandler)

2024Q4: We're interested in delivering Advantage 2, scaling through multi-chip and increased density, exploring gate, and integrating quantum into AI. Both system sales and services are important, and we'll continue to support customers in addressing complex problems. - [Alan Baratz](CEO)