Earnings call transcript: D-Wave Quantum Q3 2025 earnings beat expectations

D-Wave Quantum Inc. reported its third-quarter 2025 results, surpassing both earnings and revenue forecasts. The company posted a revenue of $3.7 million, significantly above the expected $3.03 million, marking a surprise of 22.11%. Earnings per share (EPS) stood at a loss of $0.05, outperforming the anticipated loss of $0.07. Despite the positive earnings surprise, the stock saw a 1.8% decline in premarket trading, with shares priced at $30.461.

Key Takeaways

• D-Wave reported a 100% increase in revenue year-over-year, reaching $3.7 million.
• The company’s EPS loss was smaller than forecasted, at $0.05 versus $0.07 expected.
• The stock dropped 1.8% in premarket trading following the earnings release.
• D-Wave launched the Advantage II quantum computer and is developing new quantum technologies.
• Cash balance surged to $836.2 million, a 2,700% year-over-year increase.

Company Performance

D-Wave Quantum showcased robust performance in Q3 2025, doubling its revenue compared to the same period last year. The company’s strategic focus on expanding its quantum computing offerings and customer base appears to be paying off, with significant growth in both revenue and cash reserves. The company continues to lead in the quantum computing sector, developing both annealing and gate model systems, which sets it apart from competitors.

Financial Highlights

• Revenue: $3.7 million, up 100% year-over-year
• Earnings per share: Loss of $0.05, better than the forecasted loss of $0.07
• Gross margin: 77.7% (non-GAAP)
• Cash balance: $836.2 million, up 2,700% year-over-year

Earnings vs. Forecast

D-Wave’s Q3 2025 earnings exceeded expectations, with a revenue surprise of 22.11% and an EPS surprise of 28.57%. The company’s actual EPS loss of $0.05 was a notable improvement over the anticipated loss of $0.07, marking a positive deviation from forecasts and previous quarters’ trends.

Market Reaction

Despite the earnings beat, D-Wave’s stock fell 1.8% in premarket trading, reflecting a potential disconnect between investor expectations and the reported results. The stock remains within its 52-week range, with the last close at $31.02, highlighting ongoing volatility in the quantum computing sector.

Outlook & Guidance

D-Wave remains optimistic about its future, with plans to continue investing in its Gate model program and expand globally through shared system capacity models. The company anticipates significant growth in the upcoming quarters, with projected revenue increases and continued technological advancements.

Executive Commentary

Dr. Alan Baratz, CEO, stated, "Only D-Wave is the real deal," emphasizing the company’s leadership in quantum computing. He also noted, "We are helping customers realize the value of quantum today," highlighting the practical applications of D-Wave’s technology. CFO John Markovich expressed confidence in achieving sustained profitability, stating, "We believe that D-Wave has the opportunity to be the first independent, publicly held quantum computing company to achieve sustained profitability."

Risks and Challenges

• Market Volatility: The quantum computing sector is subject to rapid changes and investor sentiment can be unpredictable.
• Technological Challenges: Developing cutting-edge quantum technologies involves significant technical hurdles and R&D costs.
• Competitive Pressure: As the quantum computing market grows, competition from established tech giants may intensify.
• Regulatory Uncertainty: As quantum computing applications expand, regulatory landscapes may evolve, impacting operations.

Q&A

During the earnings call, analysts focused on D-Wave’s strategic plans for government applications and global expansion. Questions also addressed the company’s competitive positioning and potential for long-term profitability. D-Wave’s leadership reiterated their focus on quantum computing as their core business, emphasizing their unique technology and market position.

Full transcript - D Wave Quantum Inc (QBTS) Q3 2025:

Conference Operator: Good day and welcome to the D-Wave Q3 2025 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Kevin Hunt, Senior Director of Investor Relations. Please go ahead, sir.

Kevin Hunt, Senior Director of Investor Relations, D-Wave: 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 may contain forward-looking statements 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 and operational measures under SEC rules, such as non-GAAP gross profit, non-GAAP gross margin, adjusted EBITDA loss, adjusted net loss, adjusted net loss per share, and bookings. Reconciliations to GAAP financial measures and certain additional information are also included in today’s earnings release, which is available in the Investor Relations section of our company website at www.dwavequantum.com. I will now hand over the call to Alan.

Dr. Alan Baratz, Chief Executive Officer, D-Wave: Good morning, everyone, and thank you for joining us today. I’m really pleased to share D-Wave’s Q3 2025 results, which reflect the ongoing momentum we’ve seen across all key business metrics, including revenue, gross profit, bookings, and a healthy cash balance. I will walk you through several of our recent business and technical highlights, starting with our continued commercial traction. The United Nations declared 2025 to be the International Year of Quantum Science and Technology, and it is evident that the world is watching the quantum industry in general and D-Wave specifically. Our esteemed leadership team has been invited to speak at events across the globe in order to address the growing interest in our quantum solutions.

From Tokyo to Berlin and Taiwan to Miami, businesses, research institutions, and governments around the world are eager to learn more about D-Wave, our incredibly powerful yet energy-efficient technology, and the impact it is starting to have for customers right now in solving complex computational problems that are outside the reach of classical computers. Just weeks ago, D-Wave announced its participation as a founder of the Q Alliance, an initiative designed to create a quantum hub in Italy that advances scientific discovery, industrial transformation, and digital sovereignty in the country. A core objective of the Q Alliance is the development of a state-of-the-art quantum computing and research facility in Lombardy, Italy. In support of that effort, D-Wave announced a EUR 10 million contract for a D-Wave Advantage II annealing quantum computer in the region, ensuring accessibility for Italy’s scientific community, academia, and industry.

In partnership with the Italian government and the Q Alliance, the agreement includes acquisition of 50% capacity of an Advantage II system for five years, with the option to purchase the full system. We expect to deploy the system sometime in 2026. While other quantum companies are telling investors that sales really do not matter, we beg to differ. Sales and customer success are key to business growth and driving shareholder value in the near and long term. Our market presence allows us to learn directly from customers and rapidly enhance our systems to address their needs. D-Wave offers the only quantum computers that have demonstrated advantage on a useful real-world problem. We can support customer applications in production today.

Our customer portfolio includes one of the world’s largest airlines, one of the world’s largest chemical companies, one of the world’s leading mobile carriers, and one of the world’s largest payment companies. As other quantum companies remain in R&D mode, we are laser-focused on a path to profitability built on customer value. We signed a number of new and renewing customer engagements in Q3 for both commercial and research applications. These engagements include one of the largest U.S.-based international airlines, SkyWater Technology, the nation’s largest pure-play semiconductor foundry, Japan Tobacco’s pharmaceutical division, which is exploring new quantum AI applications in drug discovery, Yapı Kredi, one of the leading banks in Turkey, and Korean Quantum Computing, a company specializing in quantum computing R&D, quantum security solutions, and AI infrastructure in Korea.

We continue to work with a myriad of organizations on quantum computing applications across a diverse set of use cases. Most notably, in the past quarter, we worked with BASF, one of the world’s leading chemical companies, completing a proof-of-concept project that used a hybrid quantum application to optimize manufacturing workflows in a BASF liquid filling facility. The hybrid quantum technology set a new benchmark for manufacturing efficiency, allowing a reduction of production scheduling time from 10 hours to just seconds. One of their key operational challenges involves scheduling liquids unloading onto filling lines for customer orders across several different products. While this may sound like a simple problem, it is, in fact, a very complex optimization problem that involves dozens of single chemical tanker trucks and hundreds of customer orders on fulfillment lines that require careful timing and coordination.

The challenges often exceeded the capabilities of a classical-only optimization approach, and our solution outperformed substantially, with latency reduced by 14%. Setup time reduced by 9%. Tank unloading durations reduced by up to 18%. During our last earnings call, I spoke to you about a hybrid proof of technology with North Wales Police to optimize deployment of patrol vehicles. I’m pleased to report that the POT was successfully completed in Q3 with a hybrid quantum application that significantly outperformed classical results. Our hybrid solution enabled North Wales Police to respond to over 90% of incidents within their target response time, reduced average incident response time by nearly 50%, and reduced police vehicle coordination time from four months to four minutes, which significantly improves real-time adaptability. North Wales Police noted that the application could be scaled nationally.

It is a valuable example of how our hybrid quantum computing solutions are beginning to show real-world potential across private and public sectors. Earlier this year, we announced the successful completion of a proof of concept with Japan Tobacco’s pharmaceutical division that used D-Wave’s quantum technology and AI to improve the drug discovery process. We are now taking that work a step further with a second proof of concept with Japan Tobacco for molecular discovery through quantum AI. They are running a significant number of problems to help expedite the drug discovery process, and they are receiving sub-second responses from the D-Wave quantum computer, which is leading to improved performance versus classical computing alone for the large language model training.

This work demonstrates that these hybrid LLM models produce more valid generated molecules compared to classical-only methods, and we believe that no other quantum computer on the market today can produce such results. This work could have a significant impact on speed to market for new drugs, which in turn could drive better patient outcomes. Our results show that quantum annealing is the most effective method of quantum optimization. A recent IBM study showed a family of multi-objective optimization problems where gate model quantum optimization could compete with classical approaches. We threw this problem at our Advantage II processor and found that it was 1,000 times faster than all the classical and quantum approaches in the IBM study, in addition to finding higher quality solutions. You can read the full research paper on the archive.

Against the backdrop of heightened global awareness around quantum computing and increasing exposure for D-Wave, we held our first-ever Qubits Japan user conference in Tokyo in September. The response was fantastic, as Dr. Trevor Lamping, our Chief Development Officer, and I addressed a very enthusiastic audience representing many of Japan’s leading companies and academic institutions. We were also honored to welcome Hidetoshi Nishimori as a presenter. Hidetoshi is widely recognized as the father of annealing quantum technology and the first to propose the concept nearly 30 years ago. Given the success of Qubits Japan, we are exploring hosting Qubits events in other regions going forward, and our global Qubits 2026 conference will take place on January 27th and 28th, 2026, in just a couple of months in Boca Raton, Florida. Registration is now open, and I hope to see many of you there in person.

Let me now turn to technology. As we drive important development work that is focused on helping customers realize the value of quantum computing now and in the future. Before I get to some specific product updates, I want to take a moment to discuss the underlying technologies or modalities that implement both of the two primary architectural approaches to quantum computing systems, that is, annealing and gate model, as I believe there is a lot of misinformation and lack of understanding in this area. These technologies relate to how qubits are implemented. There are four primary methods for implementation, whether for gate or annealing. These implementation technologies are superconducting, ion trap, neutral atom, and photonics. We believe that one will clearly emerge victorious in the long run, and that approach is superconducting. There are a few reasons why we believe superconducting will win.

The first is gate speed, with superconducting gates estimated to be 1,000-10,000 times faster compared to the other major technologies. While approaches like ion trap or neutral atom may hold some near-term advantages in terms of Qubit fidelity, we believe that gap will substantially close over time. We do not believe that the gate speed advantage will change materially. Over the long term, superconducting is expected to have a massive performance advantage over competing approaches when one looks at the speed-fidelity trade-off. We recently heard an ion trap company spend hours discussing their technology advantages at an analyst event, but not once did they mention gate speed. With a potential performance disadvantage of up to 10,000 times, I can see why they might have forgotten to discuss that key metric. The second advantage for superconducting involves scalability and the role that manufacturing will play.

Superconducting builds upon 50 years of integrated circuit manufacturing and packaging technology development that supports classical computing technology. Superconducting leverages these established supply chains, which we believe will provide the ability to scale faster and at a much lower cost. Other approaches require entirely new supply chains, which will likely require massive investments, extensive technological challenges, and long timelines until maturity as they attempt to scale. Those are the primary reasons why D-Wave chose superconducting technology for both our annealing and our gate model development programs. Unlike gate model systems, which will require error correction and thus are probably five-plus years away from being truly commercial-ready, our annealing systems are available for commercial use today. It is also worth noting that much of the proven superconducting technology we develop for our annealing systems will likely also provide a competitive advantage for our gate model system.

More than 60% of our patent portfolio relates to superconducting technology that we believe could apply in either annealing or gate systems. The cryogenic control I discussed last quarter is a perfect example of a patented technology that, to our knowledge, no other gate model company has today and will almost certainly need to compete effectively with D-Wave’s future gate model systems. Now I’ll turn to specific product development milestones. We’re making solid progress in a number of areas, including our gate model program. As you are aware, D-Wave is the only company in the world building both annealing and gate model quantum computers. That is the only company that is currently positioned to address the entire market opportunity for quantum. We see this as a competitive advantage that will give our customers quantum solutions that can address the full spectrum of their computational problems.

As part of our gate model development initiative, we recently completed the fabrication of fluxonium Qubit chips and superconducting control chips, and we are now bonding the two to demonstrate scalable control of gate model Qubits. This is a very important D-Wave advantage—sorry, this is a very important advantage that D-Wave has over any of our competitors, as we believe this work will enable the first-ever scalable gate model system with cryogenic control. Why is that important? To provide any real computational utility with a superconducting gate model system, you need scale. We believe cryogenic control provides the fastest path to large-scale gate model technology. On the annealing quantum computing side of our business, earlier this week, we announced that the Advantage II system installed at Davidson Technologies headquarters in Huntsville, Alabama, is now operational. This is a significant step in advancing the U.S.

government’s near-term use of D-Wave’s quantum computing technology. The system is capable of addressing mission-critical computational problems that are beyond the reach of classical computers. Together with Davidson, we are already exploring quantum use cases in areas such as radar detection, resource deployment, military logistics optimization, materials science, and AI, and look forward to continuing our collaborative work focused on national security and defense. The Advantage II system, which we made commercially available earlier this year, is an engineering marvel, our most highly performant quantum computer yet, and the only quantum computer that has demonstrated quantum supremacy on a useful real-world problem. A testament to its technical achievements, D-Wave was recently named as winner in Fast Company’s 2025 Next Big Things in Tech Awards. This is a very prestigious award that recognizes emerging technologies with the potential to profoundly impact industries.

D-Wave was acknowledged for showing what quantum computing can do right now. This is something we have been highlighting for several years, given the production readiness of our technology compared to others, and it is gratifying to see industry recognition that, unlike all other quantum companies, D-Wave has commercial solutions capable of solving real-world problems today, not five or ten years from now, but today. Finally, turning to our annealing roadmap, fabrication of our Advantage III prototype chips is nearing completion, and we expect circuits for testing this quarter. As a reminder, our work on Advantage III is focused on innovation and scaling, including increased connectivity and coherence, next-generation addressing, and multi-chip processor fabric to accelerate our path to 100,000 Qubits. In summary, the first nine months of 2025 have been remarkable for D-Wave.

We demonstrated quantum supremacy, sold our first Advantage system, introduced the Advantage II system to market, furthered development of our gate model program. Advanced the exploration of quantum and AI. Worked with research and commercial customers on a variety of groundbreaking applications that go beyond the reach of classical, increased our cash position by over $650 million, and much more. Our pipeline remains strong, with large opportunities for both system sales and quantum computers as a service deals. With more than $800 million in cash on our balance sheet, we remain well-positioned to expand our business both organically and through M&A. We look forward to seeing many of you at upcoming investor conferences and in January in Boca Raton at Qubits 2026. Before I hand it over to John, there is one more thing that I want to say.

We recently had a fair amount of chest-pounding from quantum leaders. Let me be clear. Anyone who characterizes quantum annealing as not real quantum is either intellectually incapable of understanding the physics and science or has chosen to put their head in the sand because they are worried about the competitive threat. Let’s look at the facts. There is only one quantum computer in the world that has demonstrated the ability to solve an important, useful problem that can’t be solved classically, not a synthetic problem, but a useful problem, and that’s our D-Wave Advantage II system. When we announced this breakthrough work, there were research teams that tried to downplay the significance, but they never computed anything classically that we hadn’t already computed classically and included in our science paper.

Moreover, their scaling claims were ridiculous, and we have demonstrated that they are totally flawed through experimental results using their code, and this has been published on the archive. It is not just that we are the only ones that have demonstrated true advantage. We are the only ones that have shown that we can do better than classical at all. Think about that. There is no other quantum computer that has been able to demonstrate anything better than classical, let alone supremacy. For example, a quantum company that I mentioned previously recently touted multi-optimization results, claiming as good as classical, not better, but as good as. We have run those same problems 1,000 times faster than both their quantum computer and their classical approaches. You can find that on the archive as well. It is not just about power. It is also about availability.

Our systems are online with high uptime providing sub-second response times. Other systems are frequently down. When they are up, they regularly have multi-hour queuing delays. Let’s ask this question: which systems are the real deal and which are toys? And noisy toys at that? Only D-Wave is the real deal. With that, I’ll hand the call over to John to provide a review of our third quarter and first nine months of 2025 results. John? Thank you, Alan, and thank you to everyone taking the time to participate in today’s third quarter earnings call.

In my review of the third quarter results, I will be providing non-GAAP operating metrics, including bookings, as well as non-GAAP financial metrics, including non-GAAP gross profit, non-GAAP gross margins, adjusted net loss, adjusted net loss per share, and adjusted EBITDA loss, 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 third quarter earnings press release, with the non-GAAP financial metrics, for the most part, adjusting for non-cash and non-recurring expenses. Revenue in the third quarter of fiscal 2025 totaled $3.7 million, an increase of approximately $1.8 million or 100% from the third quarter of fiscal 2024 revenue of $1.9 million.

Third quarter revenue was comprised of $1.8 million in systems revenue associated with the upgrade of the HULIC Advantage system to an Advantage II system, $1.4 million in QCAS revenue, and $500,000 in professional services revenue. Bookings for the third quarter totaled $2.4 million, an increase of approximately $100,000 or 3% when compared to the third quarter of 2024 bookings of $2.3 million, and an increase of $1.1 million or 80% compared to the immediately preceding fiscal 2025 second quarter bookings. As Alan previously noted, after the close of the quarter, we signed a EUR 10 million agreement to place a D-Wave Advantage II system in Europe, which will be reflected in our fourth quarter bookings that, to date, have totaled over $12 million.

This agreement is for one half the capacity of an Advantage II system over a five-year period, with an option to purchase the entire system at any time at a price that is within the range of our targeted system pricing of $20-$40 million. In terms of revenue recognition, the EUR 10 million will be recognized ratably over five years, commencing when the system becomes operational, which we expect to be sometime next year. I would like to also reiterate my comments from the last two quarters’ earnings calls with respect to the composition of our sales pipeline, incorporating incrementally larger average deal sizes than what we saw at this point last year. Two recent examples of this are the third quarter high six-figure booking with a major U.S.-based international airline, as well as the fourth quarter EUR 10 million European agreement booking.

We continue to see increased activity from larger enterprises with more complex transaction structures, and as I have previously indicated, these deals typically take longer to close. That said, we remain confident in the outlook for booking activity going forward. With respect to customers, over the most recent four quarters, D-Wave had an excess of 100 revenue-generating customers, including approximately two dozen Forbes Global 2000 companies. GAAP gross profit for the third quarter of fiscal 2025 was $2.7 million, an increase of $1.7 million or 156% from the fiscal 2024 third quarter gross profit of $1 million, with the increase due primarily to the growth in revenue as well as the higher margin systems upgrade revenue. Non-GAAP gross profit for the third quarter of fiscal 2025 was $2.9 million, an increase of $1.6 million or 131% from the fiscal 2024 third quarter non-GAAP gross profit of $1.3 million.

GAAP gross margin for the third quarter of fiscal 2025 was 71.4%, an increase of 15.6% from the fiscal 2024 third quarter GAAP gross margin of 55.8%, with the year-over-year improvement primarily driven by the growth in revenue and the higher margin HULIC systems upgrade revenue. Non-GAAP gross margin for the third quarter of fiscal 2025 was 77.7%, an increase of 10.5% from the fiscal 2024 third quarter non-GAAP gross margin of 67.2%. The difference between GAAP and non-GAAP gross profit and gross margin is limited to non-cash stock-based compensation and depreciation and amortization expenses that are excluded from the non-GAAP measures. Net loss for the third quarter was $140.8 million, or $0.41 per share, compared with a net loss of $22.7 million or $0.11 per share in the fiscal 2024 third quarter. The increase is due primarily to $121.9 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 exercises, both of which increased materially due to the significant increase in the price of the company’s common stock and warrants. Adjusted net loss for the third quarter was $18.1 million or $0.05 per share, a decrease of $5.1 million or $0.07 per share, compared with an adjusted net loss of $23.2 million or $0.12 per share in the fiscal 2024 third quarter. The difference between net loss and adjusted net loss is primarily the non-cash non-operating warrant-related charges. The adjusted EBITDA loss for the third quarter of fiscal 2025 was $20.6 million, an increase of $6.8 million or 49%, compared with the adjusted EBITDA loss of $13.8 million in the fiscal 2024 third quarter. The increase was primarily due to higher operating expenses, partially offset by higher gross profit.

I’ll now address D-Wave’s operating performance for the first nine months of fiscal 2025. Revenue from the nine months ended September 30, 2025, was $21.8 million, an increase of $15.3 million or 235% from revenue of $6.5 million for the nine months ended September 30, 2024. The year-over-year increase is largely due to the system sale to HULIC that has been recognized over the first three quarters of fiscal 2025. Year-to-date revenue was comprised of $15.5 million in revenue from the sale of an Advantage annealing system to HULIC, along with the associated Advantage II processor upgrades, $4.2 million in QCAS revenue, and $2.1 million in professional services revenue. Bookings for the nine months ended September 30, 2025, were $5.3 million, a decrease of approximately $300,000 or 7% from bookings of $5.6 million for the nine months ended September 30, 2024.

GAAP gross profit for the nine months ended September 30 was $18.5 million, an increase of $14.4 million or 353% from $4.1 million in GAAP gross profit for the nine months ended September 30, 2024, with the increase due primarily to the recognition of the higher margin HULIC system sale during the first nine months of fiscal 2025. Non-GAAP gross profit for the nine months ended September 30, 2025, was $19.2 million, an increase of $14.5 million or 304% from the non-GAAP gross profit of $4.7 million for the nine months ended September 30, 2024. Moving on to gross margins, GAAP gross margin for the nine months ended September 30, 2025, was 84.8%, an increase of 22.1% from the 62.7% GAAP gross margin for the nine months ended September 30, 2024, with the increase due primarily to the higher margin nature of the system sale.

Non-GAAP gross margin for the nine months ended September 30, 2025, was 87.8%, an increase of 15.1% from the 72.7% non-GAAP gross margin for the nine months ended September 30, 2024. Net loss from the nine months ended September 30, 2025, was $312.7 million, or $1.01 per share, compared with a net loss of $57.8 million or $0.32 per share in the fiscal 2024 nine-month period. The increase is due primarily to $260 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 exercises. Adjusted net loss for the nine months ended September 30, 2025, was $52.8 million or $0.17 per share, a decrease of $5.1 million or 8.7% when compared to the fiscal 2024 nine-month period net loss of $57.8 million or $0.32 per share.

Adjusted EBITDA loss for the nine months ended September 30, 2025, was $46.7 million, an increase of $6.1 million or 15% from an adjusted EBITDA loss of $40.6 million for the nine months ended September 30, 2024. The increase is due primarily to higher operating expenses, partially offset by higher gross profit. Now, a few comments on how D-Wave’s revenue and business model are fundamentally different from most all, if not all, other quantum computing companies. Our revenue model now consists of three primary synergistic components: quantum computing as a service, or QCAS, professional services, and system sales. Our quantum computing as a service consists of cloud-based recurring subscription revenue derived by providing customers with access to our own Leap cloud service.

While we have over 100 QCAS customers, nearly 48% of which are commercial organizations, we believe that we are still at a very early stage in developing the QCAS business, with most of the revenue base still comprised of smaller deal sizes. Moreover, with four production systems now supporting the Leap Cloud service, we have over $100 million in annual QCAS revenue capacity that inherently provides us with significant operating leverage. Our professional services revenue typically involves relatively straightforward, fixed-priced, short-term engagements to assist customers with proof of concepts of applications that will help solve their business problems. Our objective is to transition these applications into longer-term production applications wherein customers access our systems on an ongoing basis to solve their computational problems. D-Wave is the only quantum company with applications in production.

System sales is our newest revenue stream, and it is worth noting that our system sales are quite different from the systems being sold by most other quantum computing companies. Our Advantage systems are highly scalable, commercial-grade systems being used to solve real problems, whereas most other quantum computing systems are development-stage, low-qubit count systems that are being used for research experimentation. While our systems may be used for research in areas like AI, these are not experimental or R&D systems. Year-to-date, we have sold a system to the Forschungszentrum Jülich Supercomputing Center in Germany, entered into a memorandum of understanding to sell a system to Yonsei University in Incheon, Metropolitan City in South Korea, signed a EUR 10 million contract for a D-Wave Advantage II annealing quantum computer to be located in Europe in partnership with the Italian government and the Q Alliance.

Earlier this week, we announced that an Advantage II quantum computer is now operational at Davidson Technologies’ headquarters in Huntsville, Alabama, to support U.S. Department of Defense and aerospace customers. D-Wave’s revenue model contrasts sharply with the revenue makeup of most other independent quantum computing companies that is typically comprised of highly concentrated government-funded research and development that is recognized under GAAP as revenue. In these arrangements, government entities are essentially funding the development of systems that they may or may not eventually purchase. This government-funded R&D revenue is typically low margin, and the systems involved are not commercial-grade, scalable production systems capable of solving real-world problems. They are experimental R&D systems.

While we believe that increased government funding in quantum could provide D-Wave with incremental revenue opportunities and could speed up development in certain areas, we don’t believe that a primary focus on government-funded R&D revenue is a sustainable business model. We will continue to focus on providing access to our commercial-grade systems either through our LeapCloud service or via on-premises sales, as well as providing the suite of professional services frequently necessary to transition applications into production. Now, I will move on to address the balance sheet and liquidity. As of September 30, 2025, D-Wave’s consolidated cash balance totaled $836.2 million, representing a 2,700% increase from the year-earlier fiscal 2024 third quarter consolidated cash balance of $29.3 million. It is a 2% increase from the fiscal 2025 second quarter consolidated cash balance of $819.3 million. During the quarter, the company received $40.3 million in proceeds from the exercise of warrants.

On October 20th, we announced the redemption of all the company’s approximately 5 million outstanding warrants that, if fully exercised before the redemption date, would provide approximately an additional $58 million in cash. Subsequent to the end of the third quarter and through November 4th, we have received $21.3 million from the exercise of warrants. To conclude, our business momentum continues to build, and as we have previously stated, we 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 any other independent, publicly held quantum computing company. With that, Operator, please open the call for questions.

Kevin Hunt, Senior Director of Investor Relations, D-Wave: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you’re using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Please limit yourself to one question and one follow-up. If you have further questions, you may re-enter the question queue. At this time, we’ll pause momentarily to assemble our roster.

Dr. Alan Baratz, Chief Executive Officer, D-Wave: Actually, Operator, just one thing. It’s one question because of the number of analysts that are now on the call. Then you can get back in the queue if you want to ask a second question.

Kevin Hunt, Senior Director of Investor Relations, D-Wave: Thank you. Our first question will come from Harsh Kumar with Piper Sandler. Please go ahead.

Harsh Kumar, Analyst, Piper Sandler: Yeah. Hey, Alan and John. First of all, congratulations on the Italy-Lombardy deal and then also the very substantial 100 customer number that you mentioned on this call and the press release. My question is, I see that you’re now finally getting some attention/love from the U.S. government. This has been something that has not happened in the past. You were getting attention from foreign governments, but not the U.S. government. I saw a deal where you’re part of an alliance for national security work. Obviously, I won’t ask about what you’re doing, but can you talk about the significance here? Is this a shift towards some attention towards annealing by the U.S. government?

Dr. Alan Baratz, Chief Executive Officer, D-Wave: Harsh, the key point that I want to make relative to the U.S. government is that our approach is quite different from the other quantum computing companies that are engaged with the U.S. government. We are not looking for R&D funding to aid in the development of our quantum computers. Our annealing quantum computers are at scale today and capable of solving important government problems. Our work with the U.S. government is all about identifying areas where our systems can actually provide value to the government. Whether it’s in areas like military logistics or resource placement or equipment maintenance, those are the sorts of things we’re focused on. I think they’re starting to become a realization in key areas of the government that our systems are capable of delivering value. That’s what’s starting to open up some opportunity for us.

Kevin Hunt, Senior Director of Investor Relations, D-Wave: The next question will come from Troy Jensen with Cantor Fitzgerald. Please go ahead.

Troy Jensen, Analyst, Cantor Fitzgerald: Hey, good morning, gentlemen. Congrats on all the progress here and the great milestones. A quick question for Alan, and I love the passion here and all the pre, excuse me, when you were speaking earlier, but can you just give us more details on the Gate model product and the superconducting computer you’re working on? Specifically, like timeline of launch and kind of what the fidelity and qubit count would be.

Dr. Alan Baratz, Chief Executive Officer, D-Wave: Yeah. First of all, we are using superconducting for our Gate model quantum computer. We are not using the types of qubits that most of the other superconducting Gate model companies are pursuing. They’re pursuing what are known as transmon qubits or voltage-controlled qubits. We are pursuing fluxonium qubits that are controlled with magnetic flux. We’re doing this because our annealing quantum computers use flux-based qubits. We have a lot of experience with them, and we think they have some very significant advantages over the transmon qubits when it comes to scaling. Of course, we are the only company that has been able to use cryogenic control with their quantum computers. I talked about this last quarter. That is why, for example, we can control 4,000 qubits in our annealing system with only 200 IO lines rather than needing three to five IO lines per qubit.

We’re bringing that into the Gate model space. Our first demonstration will be what I discussed a bit earlier in the call, which is that we have now fabricated high-quality fluxonium qubit chips, and we have fabricated cryogenic control chips, and we will be bonding those together through a bump-on process to demonstrate basically cryogenic control of Gate model qubits. From there, we will be moving on to developing basically logical qubit structures, starting with small surface code, but developed in a scalable fashion, and then building up from there. Over the course of the coming year, we expect to have the first of this kind of capability demonstrable. That is on the path to scaling the logical qubits and the number of qubits on the chip to on the path to a scaled error-corrected Gate model system.

The timeline for a scaled error-corrected Gate model system is still a number of years out. It’s pretty much the same timeline as you’ll hear from any of the other quantum computing companies who are being honest with you, in the 5-10 year timeframe.

Kevin Hunt, Senior Director of Investor Relations, D-Wave: The next question will come from David Williams with Benchmark. Please go ahead.

David Williams, Analyst, Benchmark: Hey, good afternoon, gentlemen. Thanks for taking the question. I wanted to ask a little bit on, and you talked about this earlier, the Davidson relationship that you have. I know you’ve been working on several projects there. As we kind of think about the national security and defense initiatives and things like the Golden Dome, how do you think you can play into that? Just kind of given your heritage there and you’ve been working on this for a long time, it seems like you’d have a good opportunity. Just any color around that would be very helpful, I think. Thank you.

Dr. Alan Baratz, Chief Executive Officer, D-Wave: Yeah. So look, we’re just as interested in Golden Dome as every other quantum computing company. We participate in the various government forums to kind of talk about this. We’re doing exploratory work in application areas that could be of benefit. This really does fall right into the category of solving hard problems today that can deliver value to the U.S. government, as opposed to trying to play with research systems and do research experimentation. Our work with Davidson cuts across a number of different application areas, as I previously mentioned. Very interestingly, the next step in that relationship, now that our system is fully calibrated, operational, and online.

At Davidson, the next step is to secure the system so that we can run classified versions of applications on the system, which would make it what we believe would be the very first quantum computer certified for classified government applications.

Kevin Hunt, Senior Director of Investor Relations, D-Wave: The next question will come from Quinn Bolton with Needham & Company. Please go ahead.

Quinn Bolton, Analyst, Needham & Company: Hey, guys. Congratulations on the momentum. I just wanted to follow up on the Q Alliance transaction. And SQT, where they have the option to purchase the system. John or Alan, can you sort of talk to the extent that they want to make that purchase? How would that work? You’ve got a EUR 10 million contract for half of the system over a five-year period. Would they get credit for money spent if they converted, say, in year one or year two? Or would it be sort of a full $20 million-$40 million purchase price? Anything that had been recognized on the EUR 10 million contract you would keep, and then you would get the full system sale to the extent that they move in that direction. Thanks.

Dr. Alan Baratz, Chief Executive Officer, D-Wave: Yeah. Sorry. I’m sorry, Quinn, but we haven’t disclosed any of the details around how the purchase would occur. The only thing I will say is that you should certainly not assume that €10 million for half the capacity of a system means double that or €20 million for the full purchase of a system. There are many benefits that a customer gets when they purchase the system, and we pass title to them, including the ability to do things with this system that can’t be done when the system is online and shared. As a result, there’s a premium on the pricing for the actual purchase of a system. The relationship with the Q Alliance and the Italy government is for 50% capacity of the system over the course of the next five years.

They do have the option to purchase the full system, which would then put them into a different category where title would actually pass.

Kevin Hunt, Senior Director of Investor Relations, D-Wave: The next question will come from Kingsley Crane with Canaccord Genuity. Please go ahead.

Quinn Bolton, Analyst, Needham & Company0: Just to double-click on that Q Alliance deal, it sounds like somewhat of an innovative deployment and procurement model. So I believe that 50% of the capacity would then be available to QCAS customers. Could this just become a blueprint to future deals and establishing points of presence across the world? Just curious your thoughts on that structure.

Dr. Alan Baratz, Chief Executive Officer, D-Wave: It absolutely could. In fact, it’s not entirely new for us. We did something like this with the Forschungszentrum Jülich Supercomputing Center. Initially, they had a system on-site, and they had a portion of the capacity of that system, and the rest was available for other QCAS customers. They chose to purchase the system. This is a really interesting model for, A. kind of building out presence around the world. B. taking it one step at a time toward the purchase of the system. Of course, there are other companies that just outright want to purchase the system, which is the nature of the discussion that we’re having, for example, in Korea. We have actually a few others of those that have now become quite advanced as well.

Kevin Hunt, Senior Director of Investor Relations, D-Wave: The next question will come from Craig Ellis with B. Riley Securities. Please go ahead.

Craig Ellis, Analyst, B. Riley Securities: Yeah. Thanks for taking the question. Congratulations on progress with large customers and Advantage II engagement. The question I wanted to ask goes back to an expectation that was set three months ago, which was that the company would increase investment moderately, about 15% half on half in R&D and sales and marketing as it looks to accelerate technology and its go-to-market capability. Can you just talk about how that’s going, what we should expect in the fourth quarter with respect to operational things, increased capability, and what should we expect as we look at the first half of 2026? More stable expenses or a further uptick? Thanks, guys.

Dr. Alan Baratz, Chief Executive Officer, D-Wave: John, do you want to talk about the numbers, and then I can maybe provide a little color on the use of the funds?

John Markovich, Chief Financial Officer, D-Wave: Sure. As we outlined in the second quarter earnings call, we outlined that our operating expenses for the balance of the year will increase approximately 15% on a sequential basis, with the majority of that incremental spend in the R&D area. Craig, with respect to your question, the first half of next year, we’re not going to provide any guidance beyond what we have provided for the balance of this year in terms of the growth in the OpEx.

Dr. Alan Baratz, Chief Executive Officer, D-Wave: Craig, just to give a little color on you, I think that it will not be a surprise to anybody if I say that, given the fact that we have significantly more cash now than in the past, we do have the ability to start making some modest investments in R&D. One of the key areas that we will be accelerating is our Gate model program. We believe that we have got some unique, valuable technology in the Gate space that is going to allow us to move in a fairly short-footed fashion. That is a target for a bit of increased investment. From a go-to-market perspective, now that we have the system sales model, we have got a portion of the team that is now focused on system sales, and a portion is focused on professional services and QCAS.

We’ve made a bit of an investment to kind of facilitate both of those go-to-market motions. Then we’re starting to see something that is actually pretty exciting. It’s still early with respect to exactly when and how this will materialize. We’ve talked a lot about proof of concept and the value that we’re seeing and the move to production. We’ve started to have the first conversations along the lines of, "Hey, this application is looking really good. We want to move it into production, but we’ve got a few other applications now that we’re interested in. Could we do a deal that gives us the ability to support.

Multiple proofs of concept and multiple applications in production? I’m not entirely sure what to call it, but you could think of it as maybe something like an enterprise license that bundles a number of production apps and a number of proofs of concept. To really start accelerating the professional services and QCAS sales and revenue. That’s just getting started. I mean, that’s happened literally within the last few months where we started getting inquiries about that. That could be an important inflection point for us on the PSQCAS business.

Kevin Hunt, Senior Director of Investor Relations, D-Wave: The next question will come from Suji De Silva with Roth Capital. Please go ahead.

Quinn Bolton, Analyst, Needham & Company: Morning, Alan, John. Congrats on the progress here. I want to ask a question about in the quantum market, there’s a lot of discussion of ancillary quantum opportunities. Communications, timing, memory, security keys, and so forth. I just want to understand Qubits’ position on these. Are you laser-focused on your core opportunity? Are you able to internally develop these inorganic? Or maybe the markets are not as mature as people think? Just any thoughts that would be helpful.

Dr. Alan Baratz, Chief Executive Officer, D-Wave: We are laser-focused on quantum computing. First of all, our systems for the foreseeable future do not need the quantum interconnect as you hear about on quantum networking. The other modalities, the other approaches do. For example, when it comes to interconnecting traps, whether they be neutral atom or ion traps, you need that kind of interconnect. You are going to need to interconnect the traps to scale. For our systems, that is not a critical technology. We do not view sensing as central to what we are doing. We do not view quantum key distribution as central to what we are doing. We are focused on quantum computing.

Kevin Hunt, Senior Director of Investor Relations, D-Wave: The next question will come from Richard Shannon with Craig Hallum. Please go ahead.

Richard Shannon, Analyst, Craig Hallum: Hi, everyone. This is Tyler Ron for Richard. Thank you for taking my questions. I wanted to double-click on some of the things that your customers are doing. You mentioned SkyWater is using your QPU. Is this for magnetic material simulation or for the simulation of quantum devices? Does this help improve the chips that you’re getting from them? Also, for the airline company, are they using your technology for scheduling or traveling salesmen? If you could have a comment on how often BASF has to run your program, if that is in production, I’d be interested in that. Thank you.

Dr. Alan Baratz, Chief Executive Officer, D-Wave: Okay. I’m not sure whether to call that one question or three questions. So here’s what I will say. In the case of SkyWater, they’re a new customer as of this quarter. And it is really all about looking into kind of optimization problems in their operations. In the case of this very large airline, we have not disclosed the applications that we are working on.

Kevin Hunt, Senior Director of Investor Relations, D-Wave: The next question will come from John McPeak with Rosenblatt Securities. Please go ahead.

John Markovich, Chief Financial Officer, D-Wave: Thank you. Thanks, Alan, John, and Kevin. It’s good to hear things are tracking well. I just have a question on optimization. There’s a lot of publicity around quantum, a lot of feverish commentary that you were referring to. I’m curious, relative to trial to conversion to production on the optimization side, new logos. Maybe you could just talk a little bit about what the tone is like there because that’s real business.

Dr. Alan Baratz, Chief Executive Officer, D-Wave: Yeah. I’m not entirely sure what you mean by the tone, but what I can tell you, and we started to see this maybe a quarter, two quarters ago. We are now being engaged by much larger companies interested in addressing larger and more challenging optimization problems. That is why we can talk about one of the largest airlines, one of the largest chemical companies, one of the largest payment processing companies. That is why I commented that we’re now, with successful initial proofs of concept, starting to get inquiries about, "Okay, if I wanted to do a deal that bundled in multiple proofs of concept and, assuming they’re all successful, multiple production applications, what would a deal like that look like?" I think, as I said before, we’re getting close to an inflection point on the professional services and QCAS business where we’re seeing now.

Better and better results with our customers. Due in large part to the fact that we’re now on the Advantage2 platform. We now have our really powerful NL Hybrid Solver. The results are, in some sense, speaking for themselves and allowing us to move forward more aggressively.

Kevin Hunt, Senior Director of Investor Relations, D-Wave: This concludes our question and answer session. I would like to turn the conference back over to Dr. Alan Baratz for any closing remarks. Please go ahead.

Dr. Alan Baratz, Chief Executive Officer, D-Wave: Okay. Thank you, Operator. Momentum is clearly building at D-Wave. We believe that our first mover advantage is increasingly evident in our business results and our technical innovation. As Fox Business’s Charles Payne remarked earlier this week, "We are the real deal." In the sea of quantum hype, our position is clear. We’re helping customers realize the value of quantum today. I think our 2025 results to date demonstrate that we are making consistent progress toward the service of that mission. Thanks for your time today. Thanks for your support. I look forward to updating you again in January at Qubits 2026. We’ll see you all in Boca Raton. Thank you.

Kevin Hunt, Senior Director of Investor Relations, D-Wave: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.

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