Rigetti Computing, Inc. (NASDAQ:RGTI) Q2 2025 Earnings Call Transcript

Rigetti Computing, Inc. (NASDAQ:RGTI) Q2 2025 Earnings Call Transcript August 12, 2025

Rigetti Computing, Inc. beats earnings expectations. Reported EPS is $-0.05355, expectations were $-0.06.

Operator: Good day, and thank you for standing by. Welcome to the Rigetti Computing Second Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Dr. Subodh Kulkarni, Chief Executive Officer. Please go ahead.

Subodh K. Kulkarni: Good afternoon, and thank you for participating in Rigetti’s earnings conference call covering the second quarter ended June 30, 2025. Joining me today is Jeff Bertelsen, our CFO, who will review our results in some detail following my overview. Our CTO, David Rivas, is also here to participate in the Q&A session. We will be pleased to answer your questions at the conclusion of our remarks. We would like to point out that this call and Rigetti’s second quarter ended June 30, 2025, press release contain forward-looking statements regarding current expectations, objectives and underlying assumptions regarding our outlook and future operating results. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described and are discussed in more detail in our Form 10-K for the year ended December 31, 2024, our Form 10-Q for the 3 and 6 months ended June 30, 2025, and other documents filed by the company from time to time with the securities and exchange commission.

These filings identify and address important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. We urge you to review these discussions of risk factors. Today, I’m pleased to report that we continue to achieve our ambitious road map goals and maintained our momentum on the technology front, most recently by demonstrating the industry’s largest multi-chip quantum computer with impressive performance. Our multi-chip quantum computer, Cepheus-1-36Q, the industry’s largest multichip quantum computer is released for general availability and deployed on the Rigetti Quantum Cloud Services platform, QCS, and will be available on Microsoft Azure thereafter. Just 6 months after our record performance with Ankaa-3, we have once again halved our error rates.

With a median 2-qubit gate fidelity 99.5%. Cepheus-1-36Q has achieved a 2x reduction in 2 qubit gate error rate from our previous Ankaa-3 system. Cepheus-1-36Q is the first multichip quantum computer in the industry to achieve this level of performance. With 4 chips, Cepheus-1-36Q contains the largest number of chiplets in a quantum computer and further validates our approach to scaling Rigetti’s quantum computers. It’s our view that superconducting qubits are the leading modality for quantum computers due to their ability to scale and their ability to achieve gate speeds more than 1,000x faster than other modalities like ion traps and pure atoms. Our superconducting qubits leverage technologies like chiplets that have been maturing in the semiconductor industry for decades.

Use of these well-established methods enables Rigetti to scale its quantum computers to higher levels of performance and qubit counts. This legacy of technological advancement continues with the Cepheus-1 architecture and includes the following features that contribute to improved performance. Transitioning from a monolithic chip to chiplets enables greater control over chip uniformity, which in turn improves performance. Leveraging chiplets also reduces manufacturing complexity and improves fabrication yield. Optimized 2 qubit gates enable faster gate times while reducing coherent errors, which improves fidelity and is important for executing quantum error correction techniques. These improvements enable a 2x reduction in error rates. Advances in multilayer chip and tunable coupler design also enables higher performance.

Our industry-leading proprietary chiplet approach to scaling makes us confident that we will hit our end of year technology goals. We believe quadrupling our chiplet count and significantly decreasing error rates is a clear path towards quantum advantage and fault tolerance. We intend to continue our momentum and expect to release a 100-plus qubit chiplet-based system at 99.5% median 2-qubit gate fidelity before the end of 2025. While we are pleased with our sequential growth in quarterly revenues, we believe achievement of our technology milestones remains a key metric to achieving our long-term success. On the financing front, I’m pleased to report that Rigetti has significantly strengthened its balance sheet. During the second quarter of 2025, Rigetti completed the sales of $350 million gross proceeds of its common stock pursuant to our previously disclosed at-the-market equity offering program.

We are well positioned to support commercial scale-up of our superconducting gate-based quantum computers. Thank you. Jeff will now make a few remarks regarding our recent financial performance.

Jeffrey A. Bertelsen: Thanks, Subodh. Revenues in the second quarter of 2025 were $1.8 million compared to $3.1 million in the second quarter of 2024. On a year-over-year basis, our revenue for the quarter was impacted by expiration of the National Quantum initiative and its pending reauthorization in the U.S. Congress. Renewal of the U.S. National Quantum initiative, sales to U.S. and foreign governments and Novera are all important to future sales. Gross margins in the second quarter of 2025 came in at 31% compared to 64% in the second quarter of 2024. The lower gross margins on a year-over-year basis were impacted by revenue mix and variability in the pricing in terms of our development contracts, including our contracts with the U.K.’s NQCC for Quantum Systems, which have lower gross margins than most of our other revenue.

On the expense side, total OpEx in the second quarter of 2025 was $20.4 million compared to $18.1 million in the same period of the prior year. The increase in total OpEx was due to annual salary increases, new hires and higher consulting costs, mainly in research and development. Higher costs for our annual shareholder meeting due to the increase in the number of beneficial owners of our stock also contributed to the increase. Stock compensation expense for the second quarter of 2025 was $3.6 million compared to $3.3 million for the second quarter of 2024. Our operating loss for the second quarter of 2025 came in at $19.9 million compared to $16.1 million in the prior year period. We recorded a $39.7 million net loss for the second quarter of 2025 compared to a net loss of $12.4 million for the second quarter of 2024.

Our net loss for the second quarter of 2025 includes noncash charges for the change in the fair value of our derivative warrant and earn-out liabilities, which had a $22.8 million unfavorable impact on our net loss for the quarter. Derivative warrant and earn-out liabilities had a $3.4 million favorable impact on our net loss for the second quarter of 2024. As of June 30, 2025, we had approximately $571.6 million of cash, cash equivalents, and available-for-sale investments and no debt. Thank you. We would now be happy to answer your questions.

Q&A Session

Operator: [Operator Instructions] Our first question comes from Troy Jensen with Cantor Fitzgerald.

Troy Donavon Jensen: First off, congrats on all the great traction here.

Subodh K. Kulkarni: Thanks, Troy.

Troy Donavon Jensen: Subodh for you, maybe to start off with, just use of proceeds, you’ve got a ton of money on the balance sheet now. I mean, is the intention to accelerate R&D, do a little M&A or just kind of a cushion on the balance sheet to fund operating losses?

Subodh K. Kulkarni: Our focus, Troy continues to be on R&D development. We will obviously look at every opportunity to accelerate our time line. Right now, we believe we are funding R&D adequately to hit the milestones that we have laid out. As you saw, we demonstrated a 4x9qubit multichip system. We are going to — we are deploying it as we speak. Our plan for the end of the year is to deliver a multichip 100- plus qubit system with 99.5% 2-qubit gate fidelity. And from there on to continue to increase the fidelity as well as qubit count using chiplet approach. Every opportunity we get to accelerate that time line, we continue to look at it and we will do so. At this point, we believe we are still about 3 to 4 years away from getting to the 1,000-plus qubit, 99.9% fidelity with error correction and gate speeds of less than 50 nanoseconds, which is when we achieve quantum advantage.

If we can accelerate that time line using our strengthened balance sheet, as you correctly pointed out, we will obviously look at that. But I believe right now, we are still looking at roughly about 4 years to get to that quantum advantage point. I hope that answers your question.

Troy Donavon Jensen: Yes, it does very much so. But just with respect to OpEx, it would assume just kind of sequential growth going forward, but no big stepping, no big leaps in spending.

Jeffrey A. Bertelsen: Yes, Troy, I think that’s a good summary for right now anyway. So as Subodh said, we’re adequately funded in R&D, but we’ll look for opportunities. But right now, I don’t think we anticipate any significant uplift.

Troy Donavon Jensen: Perfect. And maybe just one follow-up. Could you just give us an update on Quanta, what they’re doing, what we can’t see to kind of satisfy their commitment here with your investment — further investment in Rigetti?

Subodh K. Kulkarni: Sure. So as we have disclosed in the past, Quanta is a very strategic partner for us on the hardware side outside the QPU area. So we continue to stay focused on the QPU side. Quanta will invest — is investing right now on the non-QPU portion of the hardware stack. That primarily means control system and the rest of the hardware stack. Right now, their focus is to essentially come up to speed in control systems. And our goal is to get them up and running with control systems that work with our QPUs fairly soon here in the next few quarters. Once they are up to speed in quantum computing and control systems, they will obviously accelerate development of that, allowing us more focus on the QPU side. So they continue to be a very good and very strategic partner for us. The partnership is going really well. We are excited to codevelop the quantum systems, our quantum systems with them. Hopefully, that answers your question.

Operator: Our next question comes from David Williams with The Benchmark Company.

David Neil Williams: Congrats on meeting the targets on the Cepheus chip. That’s impressive. But I guess maybe, Subodh, last time we spoke, you had confidence that you could get to this 99.5%. But you said that you had a little bit of work to do and you clearly hit that here. I guess how confident are you in being able to parlay that on the 100-qubit chip? And are there any major, I guess, steps or challenges ahead of you in order to get that 100 qubit at the same fidelity?

Subodh K. Kulkarni: Thanks, David, for the question. Certainly, getting to 4 chiplets with 9 qubits to the 36 qubit level was a significant accomplishment this last quarter and we are really happy to get that. Regarding your question about 100-plus qubit, we are confident we’ll get there with 99.5%, 2-qubit gate fidelity before the end of this year. The beauty of the chiplet approach is once the fundamental architecture is defined and the performance is there, scaling up becomes a lot easier by definition. And that’s the whole reason for the chiplet approach. You intrinsically are using the same 9-qubit chip multiple times. And that gets — you get better uniformity on your wafers, you get better yields. And it really allows us to get a perfect 9-qubit chip and then replicate it multiple times, which is why the semiconductor industry uses chiplets as a CMOS technology right now for all your advanced applications.

So all the reasons that help semiconductor CMOS industry with chiplets are the same reasons why we chose the chiplet approach. Now that we have proven that it works at this high fidelity, our confidence is fairly high that we will get to 100-plus qubit and beyond, frankly. We really need to get to 1,000 qubit and multi-thousand qubits here soon to get to that quantum advantage point and then fault tolerant quantum computing beyond that. So our confidence is fairly high. But obviously, this is still technology development and challenges will always be there. So we are not taking it for granted by any means, and we’ll continue to work hard to get it there. Hopefully, that answers your question.

David Neil Williams: No, it absolutely does. And I guess the follow-up to that would be, do you think that your road map can be accelerated beyond? I know you’ve talked about 3 to 4 years. But it seems like you’re making just such great progress on the scalability side that you might be able to accelerate that even though maybe the error correction is lacking. Do you think you’ll hit one of your targets maybe on the qubit side before you get to the others that you talked about this 3 to 4 years out?

Subodh K. Kulkarni: We will certainly try to accelerate our time line from that 4-year to Quantum Advantage. Having said that, there are — chiplet certainly helps us quite a bit to achieving that milestone. At the same time, there are other important metrics as well. I mean we talked about getting to 1,000 qubit for that quantum advantage or more, getting to 99.9% or better 2 qubit gate fidelity, error correction, as you correctly pointed out, has to be there, too. And also improving the gate speeds to better than 50 nanoseconds faster than that. There are other challenges in the dilution refrigerator. There’s a lot of cables that we use right now. Right now, we are still using primarily coax cables. And when you get to 1,000 qubit or higher, your density of cables and other components in the dilution refrigerator become quite intense.

So you have to start looking at things like flex cable technology and other things that we will encounter. So there are — I don’t want to make it sound simply that just because chiplets have been demonstrated. It’s a relatively easy path. And we will be able to accelerate the time line from what we have already told you. We’ll certainly look at opportunities, but there are multiple dimensions we need to tackle and that’s where the number roughly 4 years comes from. Our view is that 4 years is probably the fastest any of us in the quantum computing space can get to quantum advantage. We have already quantified what our view is to get to quantum advantage. You need a minimum of 1,000 qubits. You need a minimum of 99.9% 2 qubit gate fidelity.

You need to be faster than 50-nanosecond gate speed and you need error correction. None of us doing gate-based quantum computing are there yet by any means and that’s where the 4 years comes from. So even though you may have heard about some companies talking about quantum advantage now and very soon. Our view is that it’s going to take time to hit those four things. And certainly, for some modalities like trapped ion and pure atoms where they have fundamental science challenges to improve their gate speeds to get to these tens of nanoseconds. I mean right now, they are dealing with hundreds of microseconds. And they have some serious scientific fundamental inventions needed situation on hand to get to the gate speeds that you need to get to, to demonstrate practical quantum advantage.

So we continue to look at opportunities to accelerate and we hope we find them. But a realistic time line is what we are using for Quantum Advantage in about roughly 4 years with those 4 things that I mentioned earlier. Hopefully, that answers your question.

David Neil Williams: Yes. And you’ve certainly done a good job hitting your milestones so far. So we’ll certainly be looking for that acceleration. I appreciate it.

Operator: Our next question comes from Krish Sankar with TD.

Kinney Chin: This is Steven calling on behalf of Krish. Subodh, if I could start first, I wanted to explore the M&A-related question again. I guess, just with the stronger balance sheet that you guys have now. And I guess I want to get your view on kind of current valuations on quantum assets currently? And is M&A an important part of your growth story over the next year or 2? And specifically, just asking related to like more adjacent technologies, whether it’s semi manufacturing, advanced packaging or software-related capabilities.

Subodh K. Kulkarni: Thanks, Steven. We will continue to look at opportunities where M&A could help us with our time line. Our view is that we are very much in technology development right now. The time line that we have laid out the 4 years to Quantum Advantage is primarily within our control right now. If we find opportunities in M&A where we can accelerate our time line, we will certainly look at that. As of today, we don’t see anything out there that can help us. We are in the leadership camp right now when it comes to overall quantum computing performance. There’s probably a couple of tech giants that have one or two critical metrics that are ahead of us. But besides that, I mean, frankly, and those tech giants are out of our league to consider M&A.

Besides those kinds of opportunities, we really don’t see anyone out there who is anywhere close to we are. So we are quite a bit ahead of everyone when it comes to technology right now, except for a couple of tech giants in a couple of key metrics. So really, we don’t see any tactical opportunity to use M&A to help us with our time line acceleration. But we’ll continue to look at that. And if there are opportunities out there, we’ll certainly not be shy to exercise those opportunities.

Kinney Chin: My second question is related to gate speeds. You kind of mentioned that first that getting below 50 nanoseconds is important for ultimately reaching quantum advantage for the industry. I think previously, you mentioned you guys are around 70 nanoseconds currently. And just kind of curious if you can provide some thoughts on the road map for getting to sub-50 nanoseconds. And also, what are the implications in terms of overall quantum system performance? Like is it a benefit or a boost to coherence times, fidelity rates or like in terms of the overall productivity and performance of the system? If you could help provide some color, that would be helpful.

Subodh K. Kulkarni: Good question, Steven. I mean the four things that we have mentioned to get to quantum advantage are the qubit count, which we believe has to be minimum 1,000, 2 qubit gate fidelity, which we believe has to be minimum 99.9% error correction and then gate speeds faster than 50 nanoseconds. Of the four things, we feel most confident that we will be able to get to gate speeds, faster gate speeds relatively quickly. That’s not the determining factor, if you will, to get to quantum advantage. We are — as you correctly said, with Ankaa-3, we are at about 70 nanoseconds. We are deploying Cepheus-1 right now, which is a little faster than Ankaa-3, as my remarks pointed out. We are still quantifying it. But it will be in the 50 to 60 nanosecond type range.

We certainly think we will be able to accelerate that faster. So getting to 50 nanoseconds or faster is not that difficult, honestly. We believe gate speed is extremely important. Ultimately, you are building a quantum computer, speed absolutely matters. So once you combine all the metrics, gate speeds are going to be critical when it comes to time for performing any operation and completion kind of tasks. Our view, as we have pointed out multiple times before, is that a quantum computer is not going to exist in a silo in some kind of a quantum network. It is going to sit in existing data centers with CPUs and GPUs in form of a hybrid system. It will have to interface with existing networks. So I think our view is that you need to design a quantum computer that fits into the overall data centers, which means that your clock speeds and other metrics have to be commensurate with CPU, GPU clock speeds.

And for that, you do need the quantum computer to be faster than 50 nanoseconds. One would argue even that is on the slower side compared to CPUs and GPUs. But at least there is a chance to be able to use that gate speed to stay up with CPU and GPU clock speeds. But once you start talking the hundreds of microseconds that some other modalities like trapped ion or pure atoms. You are really like 1,000 times, if not 10,000x slower than superconducting quantum computers and certainly CPUs and GPUs. And that makes it really hard to think about a quantum computer existing in current data center using current networks. So our view of a hybrid system using existing networks really forces you to talk about tens of nanoseconds of gate speeds. Hopefully, that answers your question.

Kinney Chin: Subodh, just a quick follow-up or a housekeeping item for Jeff. Jeff, like post the equity raise, what share count should we be modeling for Q3?

Jeffrey A. Bertelsen: Sure. So we I would say roughly $327 million-ish roughly.

Operator: Our next question comes from Quinn Bolton with Needham & Company.

Nathaniel Quinn Bolton: Congratulations on the nice results and the technical milestone for the midyear. I wanted to start just with that sort of the road map on the size of the chiplet versus the number of chiplets in your tiled approach. It sounds like you’re going to stick with a 9-qubit QPU for the near term. But getting to 1,000 qubits, if you stuck with a 9-qubit solution would require over 100 chiplets. And so I’m kind of wondering when do you start to see a trade-off between the number of chiplets versus the number of qubits on a given chiplet? Like where is that sweet spot do you think — where do you think that sweet spot ultimately ends up?

Subodh K. Kulkarni: Good question, Quinn. Honestly, we don’t know the answer right now as to what — when exactly would be the right time to transition from a 9-qubit chiplet to something higher. Clearly, we will do it before we get to 1,000 qubits, as you correctly said. Otherwise we are talking about more than 100 chiplets and that will start putting unnecessary pressure on the packaging side and no reason to push it that hard at this time. Certainly, there’s more flexibility on the size of the chiplet itself. So we will stay with 9 qubit at least until we get to the 100-plus qubit milestone before the end of this year. And then for next year’s milestone, which would be higher qubit count and better fidelity than this year.

We will look at options of staying with 9 qubit or trying to attempt something bigger like a 16 qubits, some square number, so 16, 25, 36 kind of qubits for the next chiplet size. We are doing the work right now to decide which is the next optimal chiplet size. But certainly, once we go over a few hundred qubits, we will be using a higher qubit count chiplet to get to 1,000-plus qubit.

Nathaniel Quinn Bolton: As you go to larger square qubit tiles, would that require any significant CapEx on the equipment in Fab 1? Or do you think the existing equipment set should allow you to go to sort of any reasonable square number of qubits on a single tile?

Subodh K. Kulkarni: There will be some — there’s always going to be some need for new capital or upgraded capital for our fab in Fremont, California. We continue to do the necessary investments there. We don’t see anything. Our Ankaa-3 chip, if you will, was 84 qubit at roughly 1.5 centimeter. And the 9-qubit chip that we are dealing with chiplet right now, we are dealing with is 6 millimeter by 6 millimeter. So certainly, we have capability to handle a chip, if you will, up to 1.5 centimeter. So we don’t think we need something drastically different for fab to get a higher chiplet size. Packaging is certainly an area we are looking at right now as we start building more than 10 or 20 chiplets. Do we need better quality packaging equipment? Or do we need something different? We are doing that work right now. But we don’t think some significantly new equipment with very, very high price Tab is needed at this time to get to the higher qubit count.

Nathaniel Quinn Bolton: That’s great. I wanted to move on just to — you mentioned one of the four requirements for Quantum Advantage would be the quantum error correction. And I know this year’s milestones are really around the tiled approach and hitting 100 qubits with 99.5% fidelity by year-end. As you get to that 100-plus qubit solution by year-end, when do you think you start trying to implement the low- density parity check error codes that I think you guys had submitted as part of your QBI DARPA program?

Subodh K. Kulkarni: Correct. And quantum error correction is obviously a very important area long term. And it will become more and more of a discussion as we get into 2026 and beyond. This year, we are — you are correct. We are focusing much more on the fidelity side and increasing the qubit count to more than 100 qubit. We continue to work on quantum error correction on our own along with our partner, Riverlane in Cambridge, U.K. Jointly, we have done some excellent work demonstrating real-time error correction to some level, low latency error correction. And then we will take that work to get to real-time error correction soon. But there’s a lot of work to be done on that front. We believe we need several hundred qubits at 99.7% or 99.8% or something along those lines to truly demonstrate the value of error correction in a real-time sense.

So we are not quite at that point on the hardware side to try the sophisticated error correction codes like the QLDPC code that you referred. We are a year or 2 away from starting to do that kind of work. Hopefully, that answered your question.

Nathaniel Quinn Bolton: Yes, it did. And then lastly, just any updated chatter on when the DOE National Quantum Act or the reauthorization of NQI might make it through Congress? Does it feel like there’s any momentum there? Is it going in front of committees? Are there hearings being held in Congress to try to advance that bill towards signage?

Subodh K. Kulkarni: Yes, absolutely. It looks like there’s bipartisan support. There has been bipartisan support for a while and it continues to be the case. There are several versions of the NQI reauthorization bill that are in different committees and a lot of hearings have happened in the last few months along those lines. The House has multiple versions. The Senate has multiple versions. Nothing has been consolidated down to a single version yet. We hope that happens in the next few weeks or months and it becomes NQI Authorization Act. Obviously, we are looking forward to getting that done and signed, but it hasn’t happened yet. But certainly, support seems to be there. And all the hearings that we have participated in ourselves as well as following. It looks like it’s going to happen. It’s just a question of when, not if.

Operator: Our next question comes from Richard Shannon with Craig-Hallum Capital Group.

Tyler Perry Cucinotta Anderson: This is Tyler Anderson on for Richard. And congrats on all the work this quarter. I was wondering, do you have any feedback or updates from QBI or NQCC to give?

Subodh K. Kulkarni: I mean we certainly talk to both of the organizations, the DARPA organization as well as NQCC organization on an ongoing basis. They are very much aware of our progress. With NQCC, as we have disclosed in the past, there are several active projects that are going on right now. One of them being upgrading their existing 24-qubit system to what we have right now in California, the 4/9 qubit chiplet type system. So we are going to be working with them to upgrade their system, along with demonstrating some other fundamental technology blocks like optical interconnects and other things. So those projects are ongoing. We will continue to disclose that appropriately as we hit some technology milestones or publish some papers.

With DARPA, we clearly are in Phase 1 right now. They will be narrowing the group down for Phase 2 before the end of this year. We certainly are optimistic given our results and where we are that we will make it to Phase 2, but it’s ultimately DARPA’s decision. Our key differentiation from everyone else is our open modular approach as well as the chiplet design. We clearly believe this is a leadership system that we have introduced with 4 chiplets. So I’m sure that will play a huge role in DARPA’s decision-making. So we continue to stay optimistic on that front. But we will find out when they decide before the end of this year.

Tyler Perry Cucinotta Anderson: That’s great. And then do you have any time line on when you plan to reach a 16-tile chiplet? And are there any learnings that you’ve had from transitioning back to the chiplet approach?

Subodh K. Kulkarni: Well, there’s plenty of learnings that we have derived from going to — from monolithic chip to chiplets. A lot of it is part of our know- how as well as many of the patents we have filed in this area. Certainly, you can take a look at our patent portfolio. Many of those patents have started issuing now. And you can take a look at what exactly we cover in those patents. It’s obviously a very important critical piece of IP for us to be the first and foremost in demonstrating chiplet and having a proprietary approach to scaling up. There’s a lot of learning. I mean, you clearly have to design the qubits appropriately because you are using chiplets, not a single chip. So there’s — you need to adjust the geometries and the wiring layouts and so on.

Not very different than what we have learned in the CMOS industry when we use chiplets. If you look at all the work that happened a decade or so ago in the CMOS industry to incorporate chiplets and advanced devices. Some of the things are similar that we are learning. But some are because by definition, we are coupling qubits across the chiplets through an interposer. There are some new things that we are uncovering as we go along and that’s where a lot of know-how is getting developed and IP is getting developed.

Tyler Perry Cucinotta Anderson: Okay. And then are you planning on staying with a square layout for your tiles? And piggybacking off of Quinn’s question, do you have any range that you could give for the logical qubit overhead for QLDPC codes?

Subodh K. Kulkarni: So for the time being, we’ll continue to stay with the square chiplets. So right now, it’s 9. As I mentioned to Quinn, we’ll probably look at a higher number before we go to 1,000 qubits. We are pretty sure we’ll look at a higher number before we go to 1,000 qubits. Up to 100 will stay with 9 for sure. But beyond that, we will look at a higher number than 9. Regarding the whole discussion of logical qubit, as you probably are well aware, I mean, there’s no clear definition of logical qubits. A lot of it depends on the error correction and how you lay it out. So we’ll continue to stay with physical qubit and fidelity, which basically gives you effectively logical qubit. So once you are in that 99.9% 1,000-plus qubit range, we believe we will get to an overhead of 10:1 or better, but it’s all projections right now.

I mean no one has demonstrated anywhere close to 100 logical qubits yet. So our projections say that once we are at 1,000-plus qubits at 99.9% 2 qubit gate fidelity or better, we will be in that range, but we need to get there. But really, it a lot depends on the definition of logical qubits and error correction and so on. So we’ll continue to use physical qubits and 2 qubit gate fidelity and metrics like that, which are clear and not controversial. Otherwise, you get into — once you say logical qubit, you have to define what a logical qubit is, how you did your error correction and then numbers are all over the place at that one, making it very difficult to compare. Hopefully, that answers your question.

Tyler Perry Cucinotta Anderson: That does. And I got one more speaking of controversial. So does having this chiplet, is that garnering any more attention towards people getting any more on-premise systems, whether it’s from people who you’ve already sold to or someone new?

Subodh K. Kulkarni: I mean we certainly, right now, we deal with the U.S. government, the U.K. government as our two primary customers, if you will. And we continue to talk to some other governments on a selective basis. All of them are very interested in the chiplet approach. Our belief and many of those customers believe as well is — this is truly the only scalable way to get to more than 1,000 qubits. None of us see how you can take a single monolithic chip and take it to more than 1,000 qubits and certainly to tens of thousands and hundreds of thousands of qubits, which you eventually have to, to get to a fault tolerant quantum computer. So everyone sees chiplet as a necessary component to get to fault tolerant quantum computing. So when we talk to the DOEs, DoDs, the U.K. national NQCC, they all understand the strategic value of chiplets and demonstrating that to get to fault tolerant quantum computing. Hopefully, that answered your question.

Kinney Chin: It does. And I agree with the statement on the need for chiplets.

Operator: Our next question comes from Brian Kinstlinger with Alliance Global Partners.

Brian David Kinstlinger: While we both can agree that the most important metrics today are based on progress in your road map. And you’ve clearly stated that you still have 4 years left on that road map to achieve Quantum Advantage. Is there some combination of your 4 metrics that begin to drive revenue or larger scale orders in your opinion?

Subodh K. Kulkarni: Certainly, we agree that right now, it’s all about technology development and technology metrics. That’s the most important thing. Obviously, sales we monitor, we report. We are dealing with primarily government labs and academic institutes right now. Sales, as you call them, they are more like research contracts, they are one-off. So we will continue to participate with DOE, DoD, U.K. Government and other governments as appropriate. As we really don’t believe that those numbers, one-off numbers, they can fluctuate very widely, are really representative of what’s happening. But at the same time, yes, the government, national labs, universities are interested in getting on-premise quantum computers for research applications, not for production workflows, not in their data centers or anything like that, but for research applications.

As we continue to get closer and closer to Quantum Advantage, you are going to see more and more of those orders. If you look at the national quantum missions, if you will, of various countries, starting the U.S., we are talking substantial numbers. I mean, the NQI reauthorization, the number we talked about is $2.5 billion over 5 years. So that’s roughly $500 million a year. The DoD DARPA initiative is already — they have disclosed it to be more than $0.5 billion for the current QBI initiative. And there will be more projects like that from the DoD side. Then you go to the U.K., you are talking of hundreds of millions of dollars and many other countries in the Western world, along with some other select countries in Asia, friendlier countries in Asia.

They’re all talking about hundreds of millions of dollars a year. And some of that will be used for on-premise quantum computers. And we will continue to look at those opportunities to participate on a selective basis. So even though it’s not our focus, we’ll continue to look at those opportunities. And we are pretty confident we will get those opportunities. But by no means do we want that to become the focus of the company while we are continuing to work on getting to Quantum Advantage as fast as we can. Hopefully, that answers your question.

Operator: Our next question comes from Craig Ellis with B. Riley Securities.

Craig Andrew Ellis: Congratulations on the progress technically and Subodh on the extended visibility that it gives you to get to a 100-qubit system and beyond that. I had a question related to how the technology advances and the way you collaborate with your partner, Quanta on the way things progress. So I would expect that at some point when you scale up to larger qubit sizes and I’m not sure what the thresholds might be. But at some point, there would be systems implications and a system for a certain qubit count would have to evolve for one of a higher qubit count. The question is, how do you ensure that Quanta is progressing with the system development issues so that as you scale up to 100 multi-hundred qubits, 1,000 qubits that on the system side, they’re delivering on time and that the entire system is going to be one that works really well.

Subodh K. Kulkarni: Good question, Craig. I mean, certainly, any time you do a strategic partnership with anyone. You have to worry about those exact questions that your partner is capable up to speed. They are not the ones who are going to slow you down and so on. And we will continue to work closely with Quanta. I mean they are a very, very capable company, as you know. They are the leaders in CPU, GPU servers on the cloud right now. They have the #1 market share for GPU servers. They have a significantly capable and large technical team. And they are putting some of their best people on the quantum computing program right now. So we have seen no indications that they are going to drop the ball on their side. They’re very actively involved.

And right now, we continue to make our own control systems. But we continue to basically get them up to speed. They are very capable on the CPU GPU side. So when it comes to the hybrid system side, they are going to be teaching us effectively on the CPU GPU side. So I believe the collaboration is working out great right now. It’s still very early days. They are coming up to speed in 2026, at least certainly before the end of 2026. I believe we will start using control systems from Quanta. And then they’ll start getting into the rest of the hardware stack. So given the overall time line for Quantum Advantage of about 4 years from now and that’s when the volumes will start picking up in 2 to 3 years. I believe Quanta is very well positioned to help us with the acceleration ramp.

I mean that’s where we really bring the strengths of high-volume, low-cost manufacturing of these GPU servers. And that’s really where we will start getting the benefit of Quanta’s capabilities a couple of years from now when we start talking higher volumes. Hopefully, that answered your question.

Craig Andrew Ellis: It does. And then the follow-up question relates to the flip side of the current state of the government funding resolution issue. No, it’s not yet signed. And yet I wouldn’t think that that would preclude you from interacting with national labs or the DOE and talking about road map issues, technology progress. Can you just talk about the things that you’re able to do with some of those entities to position the business best for when we do get those funding resolutions and the team can better realize the related revenue opportunities from them?

Subodh K. Kulkarni: Yes, it’s a good question. I mean we continue to engage very actively with both DOE and DoD right now. So even though the NQI reauthorization has not been signed and appropriated yet, our relationships continue to be very strong. So if you physically visit Fermilab and the SQMS center in Fermilab, you will see several dilution refrigerator systems over there incorporating our chips. One of them is the full-fledged 9-qubit system that we deployed last year. But there are many other systems that are using our chips and various experiments are being done. So along with it, we talk with other DOE labs as well. And you obviously are familiar with our involvement with QBI and the DARPA initiative. So nothing has changed from an interaction standpoint.

Everyone continues to be very interested in superconducting technology and our open modular approach, particularly the chiplet approach in superconducting computing technologies. So all that is progressing. Obviously, they are stranded without getting additional dollars from the NQI reauthorization. So they need more money to continue with their experiments. So overall, the technology is progressing well. We continue to do our road map. They are continuing to do their work. It’s just that all of us would like government to fund these initiatives at a higher level than what the current situation is. But as far as I can see, our internal road map has not been impacted that drastically because of the lack of NQI funding so far. But we certainly want our government to step up and start funding these initiatives.

Operator: This concludes the question-and-answer session. I would now like to turn it back to Dr. Subodh Kulkarni, Chief Executive Officer, for closing remarks.

Subodh K. Kulkarni: Thank you for your interest and excellent questions. We look forward to updating you with our progress in future quarters. Thanks again.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.