D-Wave Quantum Inc. (QBTS) Earnings

Management highlights

### Industry Positioning and Technology Differentiation - Management frames the quantum computing market as at an inflection point, emphasizing that investors should judge companies on differentiated scalable technology, enterprise-ready systems, and measurable execution, rather than unfulfilled roadmap claims. - IDC named D-Wave one of two Leaders in its 2026 Worldwide Quantum Computing Vendor Assessment, with recognition for production deployment, mature enterprise access, and hybrid integration capabilities, which aligns with D-Wave's core strengths. - D-Wave pursues a dual-platform strategy covering both annealing quantum computing (currently commercially viable) and gate-model quantum computing (targeting long-term fault-tolerant commercial applications), to serve different classes of computational problems. ### Gate-Model Technical Progress - D-Wave's superconducting dual-rail gate-model architecture achieved peer-reviewed validation in *Nature*, demonstrating 99.9% fidelity for two-qubit entangling gates with 500-nanosecond fast operation, preserving native hardware-level error detection. - The architecture targets a lambda (error reduction per error correction increment) of 10, which would enable 100-200 physical qubits to produce one reliable logical qubit, far lower hardware overhead than competing superconducting approaches. - Clear milestone roadmap: 17-physical-qubit system (late 2026, 2x error reduction), 49-physical-qubit system (2027, 20x error reduction), 181-physical-qubit system (2028, 2000x error reduction), 10 logical qubits (2030), 100 logical qubits with 1 million+ reliable operations (2032, initial commercial use). - A new error-aware gate-model simulator will be released to enable developer prototyping before hardware availability, accelerating ecosystem development. ### Annealing Technical and Commercial Progress - Updated annealing roadmap targets a 20,000-qubit Advantage 3 system in 2029, and a 100,000-qubit system in 2031, enabled by advanced multi-chip packaging and interconnect technology. - D-Wave now has 6 customer applications in production (more than any other publicly traded quantum computing company, per management), with major expanded customer engagements: - Expanded AT&T agreement to apply annealing to network optimization, with early results reducing processing time from 1 hour to <15 seconds, with further applications planned for outage response and routing. - Optum (UnitedHealth Group) moved directly to production after strong proof of technology, bypassing the traditional POC stage, and ran ~30,000 jobs by mid-June 2026, with additional opportunities being evaluated. - NTT Docomo expanded production use, delivering 15% paging signal reduction in the first application and 65% location registration signal reduction plus 7% peak paging reduction in the second, exceeding expectations. - On-premises systems pipeline remains strong, with D-Wave targeting 2-3 system bookings annually, including two deliveries in 2026, with the Florida Atlantic University system delivery on track for 2026. ### Government and Organizational Updates - D-Wave received $1.57 million in NSF funding for the ARIS fault-tolerant quantum computing project, and continued second-year funding for the SQFAB superconducting qubit materials project, reflecting growing U.S. government confidence in the company's technology. - D-Wave earned 2026 Great Place to Work certification based on employee feedback.

Guidance

- The company expects to ship two annealing quantum systems in the remainder of 2026, likely in Q4 2026, with some associated installation and calibration revenue recognized in 2027. - Q3 2026 revenue is expected to increase modestly compared to Q2 2026, while Q4 2026 revenue will be significantly higher than Q3 and will account for the majority of full-year 2026 revenue. - D-Wave reaffirms its expectation that it will be the first independent public quantum computing company to achieve sustained profitability, and will reach this milestone with substantially less funding than peers. - The annealing roadmap maintains previously stated targets of 20,000 qubits in 2029 and 100,000 qubits in 2031. - The gate-model roadmap maintains its previously announced milestone timeline through 2032, when initial commercial gate-model applications are expected to launch.

Segment performance

D-Wave has three core product/segment categories in Q2 2026: 1. QCAS subscription revenue: $1.9 million, representing 61.3% of total Q2 2026 revenue, with 50% year-over-year growth. 2. Professional services revenue: $900,000, representing 29.0% of total Q2 2026 revenue, with over 18% year-over-year growth. 3. Systems and other revenue: $300,000, representing 9.7% of total Q2 2026 revenue, primarily from pre-installation activities for the $20 million Florida Atlantic University system sale. For the first half of 2026 (H1 2026): 1. QCAS subscription revenue: $3.6 million, up over 30% year-over-year. 2. Professional services revenue: $1.9 million, up 22% year-over-year. 3. Systems and other revenue: $400,000. By customer segment, 62.4% of Q2 2026 revenue came from commercial enterprises (up from 45.1% in Q2 2025), and Forbes Global 2000 customers accounted for 47.7% of total Q2 2026 revenue (up from 20.4% in Q2 2025). Over 37% of H1 2026 QCAS revenue came from production applications, up from 9.8% in H1 2025.

Risks & headwinds

No explicit discussion of material business risks, operational failures, or updated risk factors was included in the Q2 2026 earnings call beyond the standard cautionary note that forward-looking statements are subject to inherent uncertainties.

Analyst Q&A

• Q: With growing enterprise interest like the expanded AT&T deal, can you update the state of the QCAS annealing customer pipeline? /

  A: Management confirms the pipeline is expanding rapidly, with the company closing larger deals with larger global corporations. In addition to publicly announced deals with AT&T and Optum, multiple other unannounced deals were closed this quarter. Interest is strongest for multiple applications per large customer, with engagements typically starting with one use case to demonstrate value before expanding. (187 characters)

• Q: The Optum deal skipped the traditional proof of concept stage and moved directly to production. Is this an outlier, or do you expect this trend to continue for future customers? /

  A: Management notes this outcome depends primarily on customer readiness for data access and internal engagement. Many customers will still need to complete a two-stage proof of technology to proof of concept process, but a growing number of well-prepared customers will be able to move directly to production like Optum, so this will become a more common model over time. (221 characters)

• Q: What is the practical implication of the *Nature* paper dual-rail results, and what level of engineering work is needed to hit your stated error reduction milestones as you scale? /

  A: The paper confirms D-Wave has achieved superconducting speed (faster than trapped ion/neutral atom modalities) with 99.9% gate fidelity matching the highest fidelity of competing modalities, a unique best-of-both-worlds result demonstrated on an existing 8-qubit system, not an abstract lab experiment. The stated 2x, 20x, 2000x error reduction milestones for upcoming systems are directly tied to the lambda = 10 error correction property validated in the paper, and management expects to hit these targets as the architecture scales. (335 characters)

• Q: Do you see a trend in who you engage with at commercial customers for QCAS, compared to past years? /

  A: A clear shift has occurred: one year ago, all discussions were with central research or innovation teams, but today 25-30% of discussions now include or are led by operational line of business units. This shift is driven by growing awareness of existing production use cases at large Fortune 100 customers, which makes quantum value more tangible for business units. (202 characters)

• Q: How is the Quantum Circuits integration progressing, and is the gate-model customer pipeline separate from your existing annealing customer base? /

  A: Integration has gone extremely well, with aligned cultures and immediate cross-team collaboration that delivers synergies, with annealing technology accelerating gate-model development and vice versa. The gate-model pipeline is mixed: existing annealing customers are asking about gate-model, new customers are approaching specifically for gate-model, and former Quantum Circuits contacts are now interested in annealing, creating cross-selling synergies. (241 characters)