Q4 2025 Earnings Call Transcript

Good morning, everyone, and welcome to D-Wave Quantum Inc.'s fourth quarter fiscal year 2025 earnings conference call. Today's conference call is being recorded. At this time, I would like to turn the call over to Kevin Hunt, Senior Director of Investor Relations. Please go ahead.

Thank you, and good morning. With me today are Dr. Alan Baratz, our Chief Executive Officer, and John Markovich, our Chief Financial Officer.

Before we begin, I would like to remind everyone that this call will contain forward-looking statements, which are subject to risks and uncertainties and should be considered in conjunction with cautionary statements contained in our earnings release and the company's most recent periodic SEC reports. During today's call, management will provide certain information that will constitute non-GAAP financial measures under SEC rules, such as non-GAAP gross profit, non-GAAP gross margin, adjusted EBITDA loss, adjusted net loss, and adjusted net loss per share, as well as operating metrics such as bookings.

Reconciliations to GAAP financial measures, definitions, and certain additional information are included in today's earnings release and are available in the Investor Relations section of our company website at www.dwavequantum.com. An on-demand webcast and a transcript of the conference will be posted on the Investor Relations section of the website within 48 hours after the call. Given that D-Wave is now fortunate to have 15 sell-side security analysts publishing research on the company, we may have to limit each analyst to one question during the first round and, time permitting, proceed to a second round of questions.

I will now hand the call over to Alan.

Morning, and thank you all for joining us today. Fiscal 2025 was not just a strong year for D-Wave. It was an inflection point for the company and for the quantum computing industry. For years, this sector has been defined by unrealized promises, dependence on government grants, and an inability to deliver customer value.

In 2025, D-Wave separated itself from that narrative. We delivered proof. We delivered revenue. And we delivered real-world advantage.

While 2025 was declared the International Year of Quantum Science and Technology, for D-Wave, it was something more important: the year quantum computing moved decisively from research to real-world impact. 2025 was a year of objective proof, evidence of D-Wave's technical and commercial progress. We began the year by closing our first Advantage quantum computer system sale to the Jülich Supercomputing Center, marking the first time a commercial annealing quantum computer was purchased for integration into a national supercomputing facility. We then became and remain the only quantum computing company to demonstrate quantum supremacy on a useful real-world problem.

That result, which was achieved natively on our Advantage2 quantum processing unit, has not been successfully challenged for nearly two years after the paper's initial publication. This demonstration was an entirely quantum computation, not a hybrid computation. Moreover, no other companies other than D-Wave, Google, and Quantinuum have achieved quantum supremacy on any problem. Not Rigetti, not Infleqtion, not Xanadu, not IQM, not IBM, not IonQ.

All attempts other than D-Wave, Google, and Quantinuum have been spoofed. Critically, we transitioned that technical leadership into commercial performance. With record revenue of $24.6 million in fiscal 2025, up 179% year-over-year. Then in May, we launched general availability of our Advantage2 system, the same system that achieved that supremacy milestone, and our sales opportunity pipeline expanded by nearly 1,500% year-over-year.

Bookings were the second highest quarterly bookings in the company's history and up 471% from the immediately preceding third quarter to $13.4 million in Q4 bookings. In an industry long on promises, D-Wave is delivering measurable results. And now we have entered 2026 with extraordinary momentum. In January alone, we generated more bookings than in the entirety of fiscal 2025. We closed a $20 million system sale with Florida Atlantic University.

We signed a two-year $10 million enterprise quantum compute-as-a-service agreement with a Fortune 100 company, one of the largest enterprise quantum computers-as-a-service deals in the history of the quantum computing industry. We completed the acquisition of Quantum Circuits. It has been our strategy for five years to position D-Wave as the world's leading quantum computing company and the only dual platform quantum computing company. Our dual platform approach is important because it allows D-Wave to be a one-stop shop capable of solving the full range of the complex problems customers face.

This approach is not new, but let me be clear. The acquisition of Quantum Circuits fundamentally changes the competitive landscape. We dominate optimization today with annealing. And now by combining Quantum Circuits' industry-leading dual-rail qubit technology with D-Wave's proprietary on-chip cryogenic control, we are also positioned to be the leader in error-corrected gate-model systems.

Annealing quantum computing remains a strategic focus for D-Wave. Optimization is one of the largest and most immediate commercial opportunities in quantum computing. It spans logistics, defense, telecom, manufacturing, finance, and energy—virtually every major industry. D-Wave has demonstrated material performance advantages over classical systems for optimization.

To our knowledge, no gate-model quantum computing company has demonstrated a practical advantage over classical systems for optimization. They likely never will. Academic literature suggests optimization problems require annealing quantum computing. It is a commercially proven architecture with expanding performance gains.

We are running production workloads today across a multitude of optimization use cases. Annealing dominates optimization today, and we believe that it will continue to dominate as the market expands. With our Advantage3 system in development, we expect to further extend that performance gap. Now let's talk about gate-model.

Most superconducting competitors are pursuing legacy transmon architectures that require massive physical qubit overhead for effective error correction and complex wiring schemes that will struggle to scale economically. With Quantum Circuits, D-Wave takes a different path. The dual-rail technology is transformational. With it, we believe that D-Wave gains a decisive architectural advantage.

Dr. Rob Schoelkopf, the inventor of the transmon qubit, developed dual-rail qubits to move beyond that architecture with built-in erasure detection that identifies 90% of errors that occur. Our erasure detection and our observed erasure rate of 0.5% allow us to deliver logical qubits with an order of magnitude fewer physical qubits compared to architectures without this capability. With erasure detection, this technology delivers gate fidelities that exceed 99.9%, bringing trapped-ion fidelities along with superconducting execution speeds to today's gate-model algorithm developers.

Error correction is essential to unlocking broad quantum utility, and we believe that the dual-rail technology offers the fastest path to large-scale error-corrected architectures. I cannot emphasize this enough. The dual-rail technology allows us to achieve superconducting speed with the fidelity of ion-trap or neutral-atom approaches. That is a fundamental improvement in the metrics that matter.

Speed matters. Error-correction overhead matters. Scalability matters. Our approach achieves logical qubit ratios of roughly one logical qubit for every 100 to 200 physical qubits compared to about one logical qubit for every 1,000 to 2,000 physical qubits in conventional superconducting designs or neutral-atom systems.

What is equally remarkable are the gate speeds. Dual-rail gate speeds are 1,000 times faster than high-fidelity ion-trap systems. And D-Wave now holds advantages in each. But our gate-model innovations do not stop there.

In January, D-Wave demonstrated that the on-chip cryogenic control currently being used in its Advantage annealing quantum computers can be used to control gate-model qubits without loss of fidelity. This industry-first milestone advances the development of commercially viable gate-model quantum computers by providing a path to significantly reduce the wiring to control large numbers of qubits. We are now working on leveraging this technology to provide full qubit control at scale. This would ultimately enable the ability to control gate-model qubits with multiple orders of magnitude fewer control lines than required by competing superconducting gate-model systems.

That difference is not incremental. It is architectural. It is essential. As we discussed at the time of the Quantum Circuits acquisition, we have an eight-qubit gate-model system available to select customers today, and we expect to start generating some quantum compute-as-a-service revenue from our gate-model systems this year and expect the 17-qubit system later in 2026. We have already seen tremendous interest from customers, and we expect our gate-model offering to deliver a small but growing stream of revenue in 2026, while also building a pipeline of gate-model system sales opportunities for delivery beginning in 2027. We believe that the Quantum Circuits acquisition positions D-Wave as the leading contender to deliver the first fully error-corrected, scalable superconducting gate-model quantum computer.

This effectively doubles our long-term addressable market by delivering both annealing and gate-model quantum computing solutions. What is also particularly noteworthy is our rapidly accelerating commercial traction, which reflects a differentiated strategy from most all other quantum computing companies. At our Qubits conference in January, our largest and most successful user conference ever, we announced a $20 million Advantage2 system sale with Florida Atlantic University, as well as a two-year $10 million enterprise QCaaS agreement with a Fortune 100 company, one of the most significant enterprise deals in the history of the quantum computing industry.

This is not research revenue. It represents commercial adoption and more. The U.S. government is also taking note. We recently launched a dedicated U.S. government solutions business unit.

Unlike other quantum companies that are focused primarily on securing federal R&D grants and characterizing those as commercial revenue, our strategy is very straightforward: solve real mission-critical problems now and derive government revenue today. At Qubits, we demonstrated a missile defense simulation in collaboration with Davidson Technologies and Anduril. For a 500-missile attack simulation, we showed a 10x faster time to solution, a 9% to 12% improvement in threat mitigation, and 45 to 60 additional missile intercepts. As complexity increased, D-Wave's technological advantage increased.

This is operational relevance. Anduril's President and Chief Business Officer, Matthew Steckman, spoke during my Qubits keynote and indicated that he was surprised at how fast and mature D-Wave's technology is. We believe that there is significant opportunity in U.S. government applications across both our annealing and gate-model platforms. We are also seeing growing interest in system sales.

We continue to advance discussions in South Korea, as well as with additional HPC systems in Munich in Germany, Q Alliance in Italy, and Florida Atlantic University in the U.S. In addition to annealing and gate-model quantum computing system-related agreements with academic and government institutions, these are premium-priced systems with high gross margin profiles. On the gate-model side, we expect to see the development of a multimillion-dollar R&D system sales pipeline for collaboration going forward. Underpinning all of D-Wave's technical and commercial traction is a very strong leadership team with decades of deep expertise in their respective areas of focus.

We recently brought on Jack Sears Jr. to lead U.S. government solutions; Stan Black as our Chief Information Security Officer; and, as I previously mentioned, Dr. Rob Schoelkopf, who brings world-class superconducting leadership and maintains strong ties with Yale University. Our Chief Development Officer, Dr. Trevor Lanting, will oversee product development across both annealing and gate systems, ensuring integration, speed, and execution.

The strength of our management team and its track record of success and execution continue to expand with the announcement that D-Wave's headquarters and operational footprint will relocate from Palo Alto, California, to Boca Raton, Florida, later this year, where we will also open a major U.S.-based R&D center. We are building a distributed innovation footprint designed to attract top-tier quantum talent and ultimately provide bicoastal redundancy in case of disaster recovery, with three main R&D hubs: Burnaby, British Columbia; New Haven, Connecticut; and Boca Raton, Florida. We are building a distributed innovation footprint designed to attract top-tier quantum talent and ultimately lead the next era of computing.

Near-term opportunities and long-term growth are key to maximizing D-Wave's sustained capital market support. Let me close with a broader industry observation. Quantum computing is entering a new phase. The first phase was scientific exploration.

The second phase was capital formation. The next phase will be commercial separation. Over the next several years, we expect that this industry will consolidate around a small number of companies that can demonstrate three things: real performance advantage, real commercial adoption, and a scalable, economically viable architecture with a credible pathway to full error correction. Many will not make that transition.

D-Wave already has. We are the only company running production applications for 2,000 enterprise customers. We are the only dual platform quantum computing company with a commercially proven annealing quantum computer generating meaningful revenue and a differentiated superconducting gate-model platform. We are the only company to demonstrate real-world quantum supremacy on a useful problem.

We have proof of commercialization with contracts and expanding bookings. Others are still pursuing proof of concept, government funding, or long development timelines. Others have made product development decisions that focus on either superconducting speed or ion-trap and neutral-atom fidelity. We can deliver both.

As the market matures, capital will flow toward companies with operating leverage, commercial validation, and technical defensibility. We believe D-Wave is uniquely positioned at that intersection. The quantum industry will not support dozens of long-term winners. It will support a handful of durable platforms, and we intend to be one of them.

Fiscal 2025 marked the moment when D-Wave moved from participant to front-runner. The momentum we are seeing in early 2026 suggests that this gap is widening. With that, I will hand the call over to John to provide a review of our fourth quarter and fiscal 2025 results.

Thank you, Alan, and thank you to everyone for taking the time to join today's call.

John?

I will begin with the non-GAAP financial measures for the most part, as we believe these metrics improve investors' ability to evaluate our underlying operating performance. These measures are defined in the tables at the bottom of today's earnings press release and include non-GAAP gross profit, non-GAAP gross margin, adjusted EBITDA loss, adjusted net loss, and adjusted net loss per share, adjusting for non-cash and non-recurring expenses. In my review of the fiscal year 2025 and fourth quarter results, I will be providing non-GAAP operating metrics, including bookings, as well as non-GAAP financial measures that include non-GAAP gross profit, non-GAAP gross margin, adjusted net loss, and adjusted net loss per share.

Revenue for fiscal 2025 totaled $24.6 million, an increase of $15.8 million, or 179%, compared with fiscal 2024 revenue of $8.8 million, with fiscal 2025 revenue including $16.2 million in systems sales revenue, $5.5 million in QCaaS subscription revenue, and $2.7 million in professional services revenue. I would like to highlight several aspects of D-Wave's revenue that clearly distinguish the company from a number of other so-called quantum computing companies. First, all of our revenue is derived from selling, providing access to, or providing services for quantum computing systems. We do not recognize any revenue from any products or services that are not directly related to quantum computing, such as quantum sensing, quantum networking, and encryption systems that rely on quantum physics but not on quantum computing.

We defined quantum computing systems as computing systems that harness superposition and entanglement to solve complex computational problems. In addition, we do not give, grant, invest, or lend funds to any of our customers that they utilize or intend to utilize towards the purchase of our products or services. Fiscal 2025 bookings were $18.7 million, a decrease of 22%, or $5.2 million, from fiscal 2024 bookings of $23.9 million, keeping in mind that the 2024 bookings included an eight-figure booking of the company's first system sale. Subsequent to the end of fiscal 2025, D-Wave has closed over $32.8 million in additional bookings that includes a $20 million system sale to Florida Atlantic University, and a $10 million two-year enterprise license deal with a Fortune 100 company.

With respect to the diversity of our customer base, in fiscal 2025, D-Wave recognized revenue from over 135 individual customers, encompassing over two dozen Forbes Global 2000 enterprises. The average revenue per commercial customer increased by 20% over fiscal 2024, and the total revenue recognized from Forbes Global 2000 customers increased by 70% on a year-over-year basis, with the average Forbes Global 2000 deal size up 90% on a year-over-year basis. GAAP gross profit for fiscal 2025 was $20.3 million, an increase of $14.7 million, or 265%, from fiscal 2024 GAAP gross profit of $5.6 million, with the increase due primarily to a higher-margin quantum computer system sale during the year.

Non-GAAP gross profit for fiscal 2025 was $21.1 million, an increase of $14.7 million, or 229%, from the prior year non-GAAP gross profit of $6.4 million. GAAP gross margin for fiscal 2025 was 82.6%, an increase of 19.6% from fiscal 2024 GAAP gross margin of 63%, with the increase again due primarily to a higher-margin quantum computer system sale during the year. Fiscal 2025 non-GAAP gross margin was 86%, an increase of 13.2% from the prior year non-GAAP gross margin of 72.8%. Net loss for fiscal 2025 was $355.0 million, or $1.11 per share, compared with the fiscal 2024 loss of $143.9 million, or $0.75 per share.

The increase in net loss was primarily driven by $250.5 million in non-cash, non-operating charges related to the remeasurement of the company's warrant liability as well as realized losses stemming from warrant exercise, both directly related to the increase in the price of the company's warrants and common stock. Excluding this non-cash remeasurement charge, the adjusted net loss for fiscal 2025 was $84.5 million, or $0.26 per share, an increase of $8.9 million, or 11.8%, when compared to the fiscal 2024 adjusted net loss of $75.6 million, or $0.39 per share. The reduction in net loss per share was due to a higher issued and outstanding number of common shares in 2025 when compared to 2024. Adjusted EBITDA loss for fiscal 2025 was $71.8 million, an increase of $15.8 million, or 28%, from the fiscal 2024 adjusted EBITDA loss of $56.0 million, with the increased loss due primarily to higher operating expenses, partially offset by higher gross profit.

Now we move on to the fourth quarter. Revenue in the fourth quarter totaled $2.8 million, an increase of approximately $0.5 million, or 19%, from the prior year fourth quarter revenue of $2.3 million, with fourth quarter 2025 revenue including approximately $1.1 million in systems sales revenue, $1.0 million in QCaaS subscription revenue, and approximately $0.7 million in professional services revenue. Bookings for the fourth quarter were $13.4 million, a decrease of $4.9 million, or 27%, when compared to the year earlier quarter of $18.3 million that included the eight-figure system sale that I referenced earlier.

On a sequential quarter-to-quarter basis, bookings increased $11.0 million, or 471%, from the immediately preceding fiscal 2025 third quarter bookings of $2.4 million, with the increase due primarily to the previously announced €10 million booking for a multiyear 50% capacity commitment for a D-Wave Advantage2 annealing quantum computing system to support the development of a Lombardy, Italy-based state-of-the-art quantum computing and research facility. GAAP gross profit for the fiscal 2025 fourth quarter was $1.8 million, an increase of approximately $0.3 million, or 21%, from the fiscal 2024 fourth quarter gross profit of $1.5 million, with the increase due primarily to the growth in revenue.

For the fourth quarter, non-GAAP gross profit was $2.0 million, an increase of approximately $0.3 million, or 17%, from the prior year fourth quarter non-GAAP gross profit of $1.7 million. GAAP gross margin for the fiscal 2025 fourth quarter was 64.8%, an increase of 1.0% from the fiscal 2024 fourth quarter GAAP gross margin of 63.8%. For the fourth quarter, the non-GAAP gross margin was 71.8%, a decrease of 1.2% from the fiscal 2024 fourth quarter non-GAAP gross margin of 73.0%. Net loss for the fourth quarter 2025 was $42.3 million, or $0.12 per share, a decrease of $43.8 million, or $0.25 per share, from the fiscal 2024 fourth quarter net loss of $86.1 million, or $0.37 per share.

The decrease in net loss was primarily due to a decrease of $57.7 million in non-cash, non-operating charges related to the remeasurement of the company's warrant liability, partially offset by higher operating expenses. Excluding this charge, the fourth quarter adjusted net loss was $31.8 million, or $0.09 per share, an increase of $14.0 million, or $0.01 per share, from the fiscal 2024 fourth quarter adjusted net loss of $17.8 million, or $0.08 per share. Adjusted EBITDA loss for the fourth quarter was $25.0 million, an increase of $9.7 million, or 63%, from the prior year fourth quarter adjusted EBITDA loss of $15.3 million, with the increase due primarily to higher operating expenses, partially offset by higher gross profit.

Now I will address the balance sheet and liquidity. As of 12/31/2025, D-Wave's consolidated cash and marketable securities balance totaled $884.5 million, representing a 397% increase from the year earlier consolidated cash balance of $178.0 million, and a 6% increase from the immediately prior fiscal 2025 third quarter consolidated cash balance of $836.2 million. During fiscal 2025, D-Wave raised over $800.0 million in gross proceeds from the issuance of equity under two ATM programs, an ELOC program, and from the exercise of warrants and stock options. During the fourth quarter, the company received $63.7 million in cash proceeds from the exercise of warrants.

As previously announced, subsequent to year-end, we invested $250.0 million in cash in conjunction with the acquisition of Quantum Circuits, and we believe that our remaining liquidity is sufficient to support a fully funded plan to profitability. With respect to 2026, we will continue our practice of not providing formal financial guidance. However, I would like to provide some parameters. As we have previously noted, the system sales process is fairly complex and the sales cycle is usually lengthy in duration, not only for our Advantage2 annealing system, but also for our dual-rail gate-model quantum systems.

With respect to bookings, we are obviously off to a tremendous start, with fiscal 2026 year-to-date bookings already exceeding our annual bookings for any year in the company's history. As Alan noted earlier, our sales opportunity pipeline entering 2026 was up nearly 1,500% to 2025. That includes a 700% increase in the total number of prospective sales transactions. We continue to see interest in potential system sales, and we continue to see interest in potential system sales as well as QCaaS and professional services deals. With respect to revenue recognition on system sales, please keep in mind that most of these transactions will involve site preparation, installation, calibration, and other key steps before the systems are fully operational that are likely to encompass multiple months and possibly quarters depending on the unique elements of a particular system transaction.

As a result, our revenue recognition on system sales is on a percentage-of-completion basis. In addition, we anticipate that most system sales transactions will involve a multiyear service and maintenance revenue component, and some may include a multiyear LeapCloud access component, which we expect will be in the second half of this year. The €10 million booking in Italy will be recognized ratably over five years commencing once the system is fully installed. With respect to the recently announced $10 million enterprise QCaaS agreement, this revenue will be recognized ratably over a two-year timeframe commencing in the current quarter.

To summarize, we expect incrementally higher revenue growth in the second half of this year when compared to the first half. With respect to operating expenses, we intend to continue to invest aggressively in both our annealing and gate-model technology development initiatives that consist primarily of research and development headcount, fabrication expenses, and to some degree, capital expenditures. As we previously outlined, approximately 65 research and development professionals joined D-Wave through the Quantum Circuits acquisition, and we intend to expand this New Haven, Connecticut-based gate-model team by at least 50% over the course of this year.

In addition, we will be making significant headcount and capital investments at our recently announced U.S. R&D facility in Boca Raton, Florida, to support our LeapCloud service offering. Over the course of fiscal 2026, we expect to increase quarterly operating expenses by approximately 15% sequentially over the immediately prior fiscal quarter. Lastly, given the recent formation of our government business unit, we will be making meaningful investments in this area given the magnitude of opportunities that we see here.

In conclusion, as we have previously stated, we continue to believe that D-Wave has the opportunity to be the first independent publicly held quantum computing company to achieve sustained profitability and to achieve this milestone with substantially less funding than required by other independent publicly held quantum computing companies. With that, operator, please open the call for questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing any keys.

If at any time your question has been addressed, and you would like to withdraw your question, please press star then 2. As a reminder, please limit yourself to one question and requeue should you have a follow-up. At this time, we will pause momentarily to assemble our roster. Our first question comes from Harsh Kumar of Piper Sandler. Please go ahead.

Alan, I had one for you. I wanted to ask about the gate model, particularly. Can you help us think about the advantage with the built-in error correction that you have? And I am asking specifically from a time-to-market standpoint and all the progress you are making on technological achievements.

Should I just think of this as you need a lot less, like 10x fewer qubits to get to a commercial system? I have to believe this translates to some kind of a timing advantage for you as well.

Yes, it absolutely translates into a timing advantage. The reason it translates into a timing advantage is because the complexity of building a fully error-corrected system and scaling it to the size needed to achieve quantum utility is much lower, given the dual-rail technology combined with our cryogenic control technology. The dual-rail technology gives us very high gate fidelities, on par with some of the best in the industry, including trapped ion and neutral atom, while preserving the thousand-times speed advantage of superconducting over the other modalities. Because of the higher fidelities, we are able to error correct with many fewer physical qubits per logical qubit.

That is a complexity reduction advantage. Then you add the on-chip cryogenic control, which will ultimately allow us to control qubits with just hundreds of I/O lines versus hundreds of thousands of I/O lines, as with other superconducting approaches. Again, we believe that combination will allow us to build and deploy scaled error-corrected superconducting gate-model systems ahead of anybody else. We believe that, ultimately, superconducting will lead because of the speed advantage and the reduction in the complexity.

Our next question comes from Quinn Bolton of Needham & Company. Please go ahead.

Hey, guys. I will also offer congratulations on a great 2025. John, I just wanted to come back. I know you are not giving guidance per se for 2026. But as we think about the integration of QCI now into the business, can you give us any sort of points as to how much OpEx you would expect to incur for the year now that the QCI acquisition is closed? Is the incremental OpEx for that team sort of fully factored into that 15% OpEx quarter-on-quarter increase that you talked about for March?

Just trying to think about if we had a base model for D-Wave prior to the QCI acquisition, how much additional OpEx would you think we would be putting into the models in 2026 with that acquisition?

Quinn, my comments earlier in terms of the sequential 15% growth in OpEx include the incremental costs associated with QCI. The answer to your question is yes. That includes expansion in not only their R&D team, but other expenses including fabrication expenses, as well as some capital expenditures.

Our next question comes from William Kingsley Crane of Canaccord. Please go ahead.

Congrats on the really strong momentum. John, for you, QCaaS has moderated a bit the past year with system sales driving growth. I am wondering if you have a sense of what you think an ideal net retention rate for that segment can be or what that could be this next year. And then if Stride Hybrid Solvers and new ML integration capabilities could change that upsell conversation at all with existing customers?

We have not published retention rates, but what I can tell you is when you take a look at the composition of the QCaaS in 2024, a significant component was Jülich, and that transitioned to a system sale. And when you take a look at the bookings that we recently announced, including the €10 million booking for a multiyear 50% utilization of the system in Italy, as well as the enterprise QCaaS deal, we are starting to see substantially larger transactions in the overall QCaaS than what we have seen in the past that give us incrementally more visibility on the growth.

Kingsley, we have been saying all along that system sales and QCaaS are very complementary models for us. System sales for now are larger deals, with earlier revenue recognition than the QCaaS deals, which are a bit smaller and recognized ratably over a multiyear period in general. However, we are beginning to see an increase in the size of QCaaS deals. I started signaling this last year when I said we are now looking at larger companies doing larger deals with us, including potentially enterprise all-you-can-eat licenses.

That is starting to transition QCaaS into larger enterprise license deals. The two-year $10 million Fortune 100 company deal that we closed at the beginning of this year is the first example of that. Now, revenue for those deals still gets recognized ratably, so the revenue recognition is generally over a longer period of time than the system sales. But I think we are going to really start to see QCaaS picking up the pace as we begin to do more enterprise licenses.

Our next question comes from Joe McCormick of Evercore. Please go ahead.

Yes. Thanks for taking the question on for Mark Lipacis. Maybe just around Quantum Circuits and how it is playing into that sales pipeline increase that you are talking to. I saw that you closed a little bit north of $2 million in bookings for QCI in January.

Can you speak a little bit to the levels of engagement that you are seeing, and if there is any qualification around what that book of business looks like from a backlog perspective that is folding in as we enter the 2026 year?

I am happy to. As we articulated when we first announced the transaction, we do expect revenue contributions from Quantum Circuits this year on the professional services and QCaaS side. They also have a book of business that is government-related, and they actually have some revenue last year that was government-related. Then, as we have previously outlined, we also expect to start to develop a sales pipeline over the course of this year for potential system sales.

The only other thing I will say is we are seeing a lot of interest in the dual-rail systems, including the eight-qubit system that we have operational today with some early customers using it, and the 17-qubit system we expect later this year. A number of our current annealing customers have expressed interest in that system in addition to the annealing system. We are quite encouraged by the interest that we are seeing.

Our next question comes from Krish Sankar of TD Cowen. Please go ahead.

Yeah. Hi. Thanks for taking my question. I just wanted to find out, like, one of your competitors is buying one of your foundries. Kind of wondering how you are looking at risk mitigation. And also, does QCI use the same foundry as D-Wave, or is this a different foundry?

Okay. So currently, the dual-rail technology is not fabricated at SkyWater. For our annealing technology, SkyWater does fabricate the wiring, but they do not fabricate the active components—the Josephson junctions—which is the most important fabrication component from an IP perspective. The active components we fabricate ourselves in our R&D facilities, and SkyWater does the wiring.

On dual-rail technology, SkyWater is not involved at all. So my view on the IonQ acquisition of SkyWater is that, on the one hand, they are saying all the right things relative to continuing to work together exactly as we have been, and we should not be concerned about anything changing as a result of this transaction. On the other hand, we are skeptical and we are concerned. And so we are actively working on other sources of fab support for our systems.

Our next question comes from Kevin Garrigan of Jefferies. Please go ahead.

Good morning, and thanks for the question. You mentioned commercial value and production use. How are customer conversations evolving, and what metrics are customers really focused on when evaluating quantum as a solution? Is it all about speed-up time, or is it convenience, or just that your quantum annealer is far better than anything out there?

First of all, the annealing quantum systems are the only ones that can actually deliver any commercial value today. They are the only ones that are used in production by customers today. No other quantum computer is capable of that level of computation and commercial ROI on real-world problems. The way this evolves is that we basically engage a customer on an initial application, and we have gotten very good at being able to identify up front whether the application will benefit from our systems or not.

When we start an initial application development with a customer, we have a very high degree of confidence that they are going to be able to see a very strong ROI. That allows us to move more quickly to getting that initial application into production. Then, that is what generates interest in other applications. The Fortune 100 deal that we did started with a first application.

They were blown away by the results that we achieved, including a dramatic improvement in their bottom line based on using this technology. Then they came back and said, “Okay. We have quite a few other applications. We want an all-you-can-eat license.” We are now starting to see some other large companies see similar benefits from the initial application and talking about similar kinds of engagements.

Our next question comes from Ruben Roy of Stifel. Please go ahead.

Alan and John, congrats on the progress. These are probably a little bit longer-term in nature questions. With your annealing customers, obviously you have a lot of success stories on the annealing side. With the dual platform approach, are there opportunities in your view to combine annealing and gate-model quantum computing?

Again, it is probably pretty early here, but are there opportunities longer term to have hybrid solutions or whatnot to even expand the TAM further? Have you started to have some conversations on potential commercial customers on the gate-model side?

First of all, yes. A number of our annealing customers have approached us and said, “Look, we have some other use cases here that we would like to look at in the context of your gate-model technology.” Our customers understand the difference between annealing and gate. We have educated them on that. They understand the types of problems that require annealing versus the types of problems that require gate.

They recognize that they have other problems that potentially could demonstrate benefit from gate, and they have started to engage us on those discussions. The only other thing I will say relative to your second question is that there is some early evidence based on the fact that we have integrated some digital controls into our annealing systems. Maybe read that as some gate operations in our annealing systems. We are seeing some very interesting scientific results based on that.

But it is way too soon to be thinking of that as a viable commercial opportunity.

Our next question comes from Troy Jensen of Cantor Fitzgerald. Please go ahead.

Hey, gentlemen. Congrats on all the momentum here. My best takeaway from Qubits 2026 was there are dozens of customers out there that have piloted programs and seem ready to move forward. So my question: on multiple eight-figure enterprise QCaaS deals, can you talk about how much capacity you have with your existing annealing computers, and the time that they take to launch more if you need to ramp quickly?

We have plenty of capacity in our Leap Quantum Cloud service to support minimum tens of enterprise deals. We have four of our quantum computers available today. Our quantum computers are very capital efficient. Each quantum computer can support $25 million to $30 million of revenue per year.

The capital cost is only about a couple of million dollars. The build time, once we have the componentry, is like three to four months. With some lead time, we have no problem deploying additional systems for these kinds of deals.

Our next question comes from Craig Ellis of B. Riley Securities. Please go ahead.

Yeah. Thanks for taking the question, and guys, congratulations on the real strong execution. Alan, I wanted to ask you a higher-level question, and I will rewind the clock a little bit. I think it was three quarters ago, you told us to expect increased R&D and go-to-market spend, and here we are now.

We start the year with, I think, around $45 million in trailing bookings. The pipeline is extremely robust. So as we start the year, if you can give us any color on what you see in the pipeline on the system side and with that all-you-can-eat newer offering, are we seeing signs of execution of what you were pointing to, or were you expecting something else? It would be greatly appreciated.

Thank you.

The short answer is yes. On the R&D side, our investments were designed to accelerate work on the gate-model system—one of the key elements that we uniquely were bringing to the table was on-chip cryogenic control—and to really start accelerating work on our Advantage3 system, which includes analog-digital capability as well as multichip for scaling to 100,000 qubits. The investments are playing out as we had planned. On the go-to-market side, you said it.

We are making really good progress. It is robust at this point in time. Our pipeline has grown significantly, and we are feeling quite good about what we can expect to see this year. So the investments in go-to-market are playing out exactly as we expected as well.

I like what you are doing. A question on Advantage3. Could you give us any more information about circuit tests that incorporate Advantage3? Any information that you could give us relative to how you are progressing there and what the capabilities might be compared to Advantage2? Thank you. Great work.

I called out the two key elements. Functionally, the big things for Advantage3 are putting some digital controls into the annealing fabric, as well as a multichip for scaling far more rapidly. With each generation of system, it is more qubits, more connectivity, and higher coherence times. We have our first chips back that demonstrate the analog-digital controls, and we are close to having our first chips that demonstrate multichip interconnect.

We are making good progress on all fronts.

Our next question comes from David Williams of Benchmark. Please go ahead.

Hey. Good morning. Let me also echo my congrats on the execution here. Maybe, Alan, can you speak to some of the pipeline that you talked about?

In the script, just the strength there, where that is coming from, and really what you are hearing from customers, and how quickly can this pipeline turn into confirmed revenue or when those orders could come in? Just kind of that life cycle of that pipeline.

Honestly, we have a strong pipeline for both system sales, QCaaS, and professional services deals. I am not going to address the revenue piece because that is all based on the revenue recognition policies of the company, and different deals have different recognition timelines. But as far as closing the deals, our pipeline for system sales right now is very robust. When we talked about this at the beginning of last year, I said expect maybe one a year for the foreseeable future.

We are beyond one a year at this point in time. The same is true on QCaaS. We are closing deals with much larger companies—one of the world's largest airline companies, one of the world's largest health care companies, largest chemical companies. These are much larger deals from the outset, and we are progressing through them much faster.

Very strong go-to-market environment for us right now.

Our next question comes from Antoine Leblond of Wedbush Securities. Please go ahead.

First, let me echo my congratulations on the progress in 2025. There have been reports that the Pentagon's budget would increase significantly into fiscal 2027, with some of that budget likely to be allocated to Quantum Technologies. Can you tell us a bit more about the magnitude of the opportunity ahead and how that might benefit you, particularly given your new government business unit?

First of all, we are not primarily pursuing R&D research grants to be able to fund our R&D roadmap. This is not about the government funding us to build our systems. We have plenty of liquidity. What we are focused on is helping the government solve their hard computational problems today.

We have a very interesting pipeline there. I will be very frank with you. When we talked about the Davidson-Anduril deal at Qubits, and Anduril talked about what they had seen in using our system, that generated a very significant inflow of interest in leveraging our systems to solve hard problems within the U.S. government. With Jack Sears on board and building the government business, we are feeling quite good about the opportunity.

Our next question comes from Richard Shannon of Craig-Hallum. Please go ahead.

Hi, guys. This is Tyler Anderson on for Richard. Thank you for taking my question. You mentioned that you have 50% of the capacity of your system booked.

When we are thinking about future new systems that are coming online for the Advantage3 and beyond, is there a potential where we see multiple of those systems come online right away and have that capacity reserved for customers that you are talking to today? Are you having those conversations? Just want to get some color on that.

Yes. So, Tyler, first of all, when you say 50%, the only time we have talked about 50% of capacity was in the QAlliance deal in Italy. They purchased 50% capacity of an Advantage2 system. In general, in our cloud service today, we are not yet even at 50% capacity.

We have plenty of capacity in our LeapCloud service to support our professional services engagements and quantum computers-as-a-service customers. When we bring a new system to market, we try to upgrade all our cloud systems as quickly as possible. We do installation so that we can upgrade all our cloud systems as quickly as possible.

Our next question comes from David Liu of Mizuho. Please go ahead.

Hi. I am going for Vijay. Thanks for taking the question and congrats on strong momentum here. You called out the interest and momentum in system sales growth going into 2026, as well as the enterprise traction for QCaaS. How should we think about QCaaS and sales mix going forward? And in relation to that, the OpEx number as well for the year?

In the past, because the numbers have been small, we have just done them one at a time. However, now that we are seeing a lot more interest in system sales, we are making some investment in the team and the capabilities so that we do not have to serialize. We can do more in parallel going forward. So the answer is yes.

With respect to the OpEx number, as I articulated earlier, my comments were based upon our consolidated OpEx. My comments were that we are expecting OpEx to grow at 15% sequentially quarter to quarter over the course of the fiscal year. With respect to the mix, the mix is going to be lumpy for the foreseeable future, where we could have a substantially higher QCaaS enterprise mix in any given quarter than we have systems bookings, or vice versa. It is entirely a function of the composition and elements of the bookings, which, as we have articulated in the past, could have unique revenue recognition elements to it—for instance, the percentage of completion on a system installation.

This concludes our question and answer session.

I would like to turn the conference back over to Dr. Baratz for any closing remarks.

D-Wave is different. We are pulling away from the quantum computing pack, as demonstrated by our undeniable commercial traction and our remarkable technical leadership. D-Wave is the only dual platform quantum computing company capable of delivering both annealing and gate-model systems. The only company with quantum computers that have demonstrated quantum supremacy on a useful real-world problem.

The only company that has customer applications in production now. The only company with highly differentiated gate-model technology that delivers the remarkable speed of superconducting and the fidelity of ion-trap or neutral-atom approaches, a powerful combination that positions D-Wave to win in the error-corrected gate-model race. 2026 is the year of D-Wave Quantum. The year we emerge as a defining company in the quantum era. Thank you all for joining us today, and we look forward to updating you on D-Wave's progress in the coming months.

Thank you for participating, and have a pleasant day. You may disconnect your lines. This concludes today's conference call.