Key Points
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RIgetti saw its revenue slip in Q4, while it has also dealt with technical issues.
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The company trades at an outrageous valuation despite trailing in the quantum race.
Shares of Rigetti Computing (NASDAQ: RGTI) fell last week after the company failed to meet modest revenue expectations in its most recent quarter. Rigetti is one of a handful of quantum computing stocks that have caught the attention of investors. While the stock’s post-earnings decline sent its shares down more than 25% year to date, its shares are still up 78% over the past year, as of this writing.
With the company struggling to generate any meaningful revenue, the question is whether investors should buy the dip or avoid the stock.
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Forget about Rigetti graphic.
Image source: Motley Fool.
Technological struggles
One of the biggest technological issues facing quantum computing is that the technology is error-prone. Because quantum computing uses qubits, which aren’t in fixed positions like the bits found in classical computing, it is much more sensitive to outside sources, which can cause errors. While quantum computing companies have been making strides in reducing error rates, one company that has struggled in this area is Rigetti.
In January, the company had to delay the shipments of its Cepheus-1-108Q quantum computer due to technical issues. It now expects to deploy the system with 99.5% median two-qubit gate fidelity later this month. It also announced that it has reached 99.9% two-qubit fidelity; however, that trails its competitors, with IonQ, for example, achieving 99.99% two-qubit fidelity. While that may not sound like a big difference, it is actually quite substantial in the world of computing.
With its struggles, Rigetti saw its revenue fall 17% to just $1.9 million. That fell short of the $2.3 million analyst consensus.
Meanwhile, its gross margins fell from 44% to 35%, and its operating expenses climbed 19% to $23.2 million. This led to an operating loss of $22.6 million. Its adjusted net loss came in at $11.3 million, or $0.03 a share, helped by higher interest income.
Looking ahead, the company should see stronger revenue in 2026, fueled by recent orders. It sold two of its Novera systems for $5.7 million late last year and should recognize nearly half of that sale in the first quarter, with the rest coming throughout the year. It also has an $8.4 million order for its 108-qubit system from India’s Centre for Development of Advanced Computing that should be deployed in the second half.
Should investors buy the dip?
While Rigetti’s revenue will rise from a small base in 2026, the company is clearly behind a number of competitors when it comes to the accuracy of its systems. Meanwhile, the company commands a market capitalization exceeding $5 billion despite a projected 2026 revenue of only around $20 million. That’s an insane valuation for a company that is trailing in the quantum computing race. As such, I think this is a stock to avoid.
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends IonQ. The Motley Fool has a disclosure policy.
