D-Wave's Q2 Results Highlight Robust Growth, Promising Quantum Computing Trajectory

Benchmark analyst David Williams reiterated D-Wave Quantum Inc QBTS with a Buy and $4 price target.

D-Wave's second-quarter results primarily aligned with the preliminary financials released on July 20. 

The standout feature was the significant boost in liquidity, with cash reserves soaring to more than $50 million from a mere $7.5 million at the end of the second quarter. This was achieved by utilizing $35.1 million under the ELOC program and securing another $15 million tranche under its $50 million term loan post the quarter's close.

Second-quarter revenue stood at $1.71 million, with a quarter-over-quarter decline attributed to the lumpiness of revenue recognition. The company's preference for bundled contracts has led to this revenue volatility.

However, with a 146% YoY increase in quarterly bookings and a rise in average deal size, the future revenue growth trajectory looks promising.

D-Wave's annealing architecture is primed for generative AI applications, likely driving growth in upcoming quarters.

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The company witnessed a robust business performance, securing multiple new deals across varied application domains.

The company's customer base has grown, with the number of revenue-producing customers increasing to 115 from 109 quarter-over-quarter.

Commercial customers, making up 59% of the total, have risen to 47 from 44. The shift to packaged deal pricing has led to a 308% YoY surge in deal size for commercial customers and a 44% YoY revenue growth. The trend indicates growing customer confidence in D-Wave's value proposition.

Customer engagement has been robust, with new contracts signed with entities like Interpublic Group, VINCI Energies and Unisys Corporation. 

In collaboration with Davidson Technologies, D-Wave developed two advanced national defense applications that outperformed alternative computing solutions.

D-Wave has revised its FY23 guidance, expecting an annual revenue between $11 million to $13 million (vs. the prior $12 million-$13 million).

The company's $4 price target is based on a 7x EV/Sales multiple on 2026E revenue projections, positioning D-Wave as a frontrunner in the quantum computing domain, especially in catering to AI-related demand.

QBTS Price Action: D-Wave Quantum shares traded lower by 6.29% at $1.49 on the last check Tuesday.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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