Executive Summary / Key Takeaways

• Rigetti Computing is a pioneer in full-stack superconducting quantum computing, leveraging its in-house Fab-1 and modular chip architecture to pursue scalable quantum processors.
• The company is executing an ambitious technology roadmap, targeting a 36-qubit tiled system by mid-2025 and a 100+ qubit tiled system by end-2025, both aiming for a 2x reduction in error rates from 2024 levels, positioning tiling as a key path to scaling qubit count.
• Recent strategic developments, including a significant collaboration with Quanta Computer (2382.TW) and the completion of a $350 million ATM equity offering, have substantially improved liquidity and are designed to accelerate the development and commercialization timeline by focusing Rigetti's R&D on core QPU technology.
• While current revenue remains modest and lumpy, primarily driven by government and research contracts and impacted by factors like the pending NQI reauthorization, management anticipates an increase in opportunities as hardware capabilities improve and government funding materializes.
• Rigetti operates in a highly competitive, R&D-intensive market, facing larger tech giants and specialized quantum companies, but believes its superconducting modality, gate speed, open architecture, and tiling approach offer key differentiators on the path to achieving quantum advantage.

The Pursuit of Quantum Utility

Rigetti Computing, Inc. stands at the forefront of a nascent but potentially transformative industry: quantum computing. Founded in 2013, the company set out to build quantum computers and the superconducting quantum processors that power them, adopting a vertically integrated approach centered around its dedicated wafer fabrication facility, Fab-1. This control over manufacturing has been foundational to developing its proprietary technology, including the world's first multi-chip quantum processor architecture. Rigetti's long-term vision is to generate revenue from sales of Quantum Processing Units (QPUs) and Quantum Computing as a Service (QCaaS) offerings, but its journey began and continues largely through development contracts with government and commercial partners.

The quantum computing landscape is characterized by intense research and development, with various modalities vying for dominance. Superconducting qubits, Rigetti's chosen path, are fabricated using established semiconductor techniques and offer a significant advantage in gate speed, operating in the 60-80 nanosecond range. This is orders of magnitude faster—potentially 1,000 to 10,000 times faster—than competing modalities like trapped ion or pure atom systems, which operate in hundreds of microseconds. This speed is critical for enabling hybrid computing, allowing quantum processors to interact effectively with classical CPUs and GPUs in a data center environment.

Despite this speed advantage, superconducting qubits face challenges, particularly in achieving high fidelity and scaling qubit counts while maintaining performance. Rigetti's strategy to overcome these hurdles is built on several key technological pillars: its open modular architecture, the chiplet tiling approach, and advanced fabrication techniques like Alternating-Bias Assisted Annealing (ABAA). The modular architecture allows for the integration of innovative solutions across the stack, fostering collaborations. The chiplet tiling approach, mirroring strategies successfully employed in the CMOS industry, is seen as the most promising path to scale qubit counts beyond the limitations of monolithic chips. Rigetti demonstrated tiling of 9-qubit chips without performance deterioration in the third quarter of 2024, building confidence in this method. ABAA is a proprietary technique designed to precisely target qubit frequencies, crucial for consistently manufacturing high-performance QPUs with the necessary precision for high fidelities. This technique has shown the ability to reduce frequency spread by 10x or more.

The company's competitive positioning is defined by these technological choices. While competing with tech giants like IBM (IBM) and Google (GOOGL) (also pursuing superconducting) and specialized players like IonQ (IONQ) (trapped ion) and D-Wave (QBTS) (annealing), Rigetti believes its combination of superconducting speed, open architecture, and early lead in chiplet tiling provides a differentiated path to utility-scale quantum computing. IBM is a key competitor in superconducting, with a larger market share and established enterprise relationships, but Rigetti's open approach and tiling focus offer potential advantages in flexibility and scalability. IonQ, while having cost advantages with room-temperature operation, lags significantly in gate speed. D-Wave focuses on a different paradigm (annealing) but competes in optimization markets. Rigetti holds an estimated 5-10% market share, trailing IBM and IonQ, and its revenue growth has been slower than some peers, reflecting the early-stage nature of its specific market focus.

Performance and Financial Health

Rigetti's financial performance reflects its position as an R&D-focused company in a nascent market. For the first quarter ended March 31, 2025, the company reported total revenue of $1.47 million, a significant decrease of 51.8% compared to $3.05 million in the prior-year period. This decline was primarily attributed to a $1.5 million reduction in revenue from collaborative research and professional services contracts. Management noted that revenue has been negatively impacted by the expiration and pending reauthorization of the U.S. National Quantum Initiative Act, highlighting the current dependency on government funding, which comprised 89.5% of total revenue in Q1 2025 (down from 97.4% in Q1 2024).

Cost of revenue also decreased to $1.03 million in Q1 2025 from $1.55 million in Q1 2024, primarily due to lower revenue. However, gross margin compressed to 30% from 49%, partially due to an unfavorable revenue mix, specifically ongoing revenue from a contract to deliver a 24-qubit quantum computing system to the UK's NQCC, which carries a lower gross margin profile. Management expects revenue and gross margins to remain variable in future periods due to the lumpy nature of development contracts and changes in revenue mix.

Operating expenses increased year-over-year, driven by higher research and development (R&D) costs. R&D expenses rose by $4.0 million to $15.5 million in Q1 2025, primarily due to increases in salaries, employee-related costs (including higher FICA taxes related to RSU vesting and stock price increases), stock-based compensation (employee spot bonuses), and consulting charges. Selling, general, and administrative expenses remained relatively flat at $6.6 million. This resulted in an operating loss of $21.6 million for the quarter, compared to $16.6 million in the prior-year period.

Despite the operating loss, Rigetti reported net income of $42.6 million in Q1 2025, a significant improvement from a net loss of $20.8 million in Q1 2024. This was primarily driven by non-cash changes in the fair value of derivative warrant and earn-out liabilities, which resulted in a $62.1 million favorable impact on net income in Q1 2025, compared to a $4.2 million unfavorable impact in Q1 2024. As of March 31, 2025, the company had an accumulated deficit of $512.1 million, reflecting its history of significant R&D investment and operating losses since inception.

Liquidity has been a critical focus. As of March 31, 2025, cash and cash equivalents totaled $37.2 million, with available-for-sale investments of $172.0 million (short-term) and $25.1 million (long-term), totaling $234.3 million in cash and investments. Following the quarter end, the private placement transaction with Quanta Computer closed on April 29, 2025, providing approximately $35 million in proceeds. More significantly, the company completed a $350 million At-the-Market equity offering on June 11, 2025. This infusion of capital is expected to bring Rigetti's total cash, cash equivalents, and available-for-sale investments to approximately $575 million, with no debt. Management believes this provides sufficient runway for anticipated operating cash needs for at least the next 12 months (as stated in the company's Q1 10-Q) and potentially for at least the next three years or 3-5 years of R&D funding based on prior commentary and analyst assessments. This improved liquidity position is intended to support working capital, capital expenditures (including for Fab-1 and processor development), general corporate purposes, and potential strategic initiatives.

Outlook and Strategic Initiatives

Rigetti's outlook is firmly anchored in the execution of its technology roadmap, which management views as the primary driver of future value. The company is targeting significant advancements in qubit count and fidelity in the near term. By mid-year 2025, Rigetti expects to release a 36-qubit system based on four 9-qubit chips tiled together. By the end of 2025, the goal is to release a system with over 100 qubits, also utilizing the tiling approach. Both systems are targeting a 2x reduction in error rates from the levels achieved at the end of 2024 (which were 99.0% median iSWAP and 99.5% median fSim fidelity on Ankaa-3). The company also plans to develop the 336-qubit LiRAR system thereafter.

These technical milestones are crucial steps towards achieving "quantum advantage," which Rigetti estimates is still four to five years away for broad commercial impact. Management believes demonstrating narrow quantum advantage—superiority in performance or cost for specific niche applications—is achievable before the end of 2025, provided the planned fidelity and qubit count improvements are realized.

A key strategic initiative to accelerate this roadmap is the collaboration agreement with Quanta Computer, announced in February 2025. This partnership involves mutual investment commitments of over $100 million each over five years, with Quanta specifically focusing on developing and manufacturing non-QPU hardware components like control systems and dilution refrigerators. This allows Rigetti to concentrate its R&D resources on its core expertise: quantum chip design and fabrication.

Government funding remains a vital near-term revenue source and R&D enabler. Rigetti is actively engaged with U.S. government initiatives, including being selected for Stage A of DARPA's Quantum Benchmarking Initiative, which aims to build a utility-scale quantum computer by 2033. The company is also anticipating increased funding from the U.S. government (potentially a 4x-5x increase starting in 2025) contingent on the passage and appropriation of bills like the NQI Reauthorization Act. Additionally, Rigetti secured multiple Innovate UK awards to advance quantum error correction and chip fabrication technology, reinforcing its position in international markets.

The long-term market opportunity is projected to be substantial, with IDC estimating the total quantum computing business at roughly $7.5 billion by 2027, primarily driven by government spending. Beyond that, as quantum advantage is achieved, the commercial market is expected to grow significantly, potentially reaching $10s to $100s billions in the 2035-2040 timeframe. Rigetti aims to capture a sizable share of the superconducting portion of this market.

Risks and Challenges

Investing in Rigetti Computing involves significant risks, inherent in the development and commercialization of a foundational, early-stage technology. The primary challenge is the successful execution of its ambitious technology roadmap, particularly achieving targeted fidelity levels and scaling qubit counts through the tiling approach without introducing new errors or complexities. While progress has been demonstrated, translating these achievements to larger, more complex systems on schedule is not guaranteed.

Financial risks, although mitigated by recent capital raises, persist. The company continues to incur significant operating losses and negative cash flow from operations ($13.7 million used in Q1 2025). While the current cash position provides a substantial runway, the long-term capital requirements to reach commercial scale are considerable, and future financing may be needed, potentially leading to further shareholder dilution. Macroeconomic conditions, including inflation and interest rate fluctuations, could impact operating costs and the availability of future capital.

Dependency on government funding is a near-term vulnerability, as demonstrated by the impact of the pending NQI reauthorization on recent revenue. The timing and amount of future government contracts are uncertain and subject to political and budgetary processes.

Competition is intense, with well-funded tech giants and specialized startups vying for market position. While Rigetti has technological differentiators, competitors are also rapidly advancing, and the ultimate "winning" modality or architecture is not yet definitively established. Protecting proprietary technology and navigating the evolving IP landscape are also critical.

Finally, the path to achieving quantum advantage and demonstrating a clear return on investment for commercial customers is still several years away. The market for quantum computing hardware and services is nascent, and widespread adoption depends on solving complex technical challenges and developing practical applications that offer a compelling advantage over classical methods.

Conclusion

Rigetti Computing represents a high-risk, high-reward investment proposition rooted in the potential of superconducting quantum computing. The company has established a clear strategic direction focused on technical leadership, particularly through its modular architecture, chiplet tiling approach, and continuous fidelity improvements. Recent milestones, such as the launch of Ankaa-3 and progress in tiling demonstrations, coupled with strategic partnerships like the one with Quanta and significant capital infusions from equity offerings, provide a stronger foundation and clearer runway for executing its ambitious roadmap towards 36-qubit and 100+ qubit systems by the end of 2025.

While the company faces significant challenges, including ongoing operating losses, dependency on government funding, and intense competition in an early-stage market, its technological differentiators and improved financial position offer a credible path forward. The investment thesis hinges on Rigetti's ability to consistently hit its technical milestones, translate R&D breakthroughs into commercially viable systems, and capitalize on the anticipated growth in government and eventually commercial quantum computing markets. For discerning investors, Rigetti remains a speculative play, but one whose technical progress and strategic maneuvers warrant close observation as the race for quantum utility accelerates.