Can Rigetti Computing's Margin Recover After Second-Quarter Pressure?

Rigetti Computing’s RGTI second-quarter 2025 results gave investors a closer look at the pressures weighing on margins as it balances financial discipline with technology progress. Revenues slipped to $1.8 million from $3.1 million a year earlier, largely due to the expiration of the U.S. National Quantum Initiative while awaiting reauthorization. More striking was the drop in gross margin, which fell to 31% from 64% a year ago. Management attributed the weakness to a heavier mix of lower-margin development contracts, including those tied to the United Kingdom’s National Quantum Computing Centre.

With operating expenses climbing to $20.4 million from $18.1 million last year, Rigetti’s operating loss widened to $19.9 million compared with $16.1 million in the prior-year period. While the balance sheet has been bolstered by $350 million in new equity proceeds, leaving the company with $571.6 million in cash and investments and no debt, the second-quarter results underscore that margins remain fragile and heavily dependent on contract mix.

On the technology front, Rigetti advanced with the launch of Cepheus-1-36Q, the industry’s largest multichip quantum computer, achieving 99.5% fidelity and halved error rates compared with Ankaa-3. Management reiterated plans for a 100+ qubit system by year-end, underscoring the promise of its chiplet approach. While these milestones build credibility, they have yet to translate into steady, high-margin revenues, leaving margins exposed to contract mix and funding cycles.

Peers Updates

IonQ IONQ continues to position itself differently, focusing on trapped-ion architectures and expanding partnerships with major cloud providers to broaden commercial access. This strategy has helped IonQ secure a more diverse set of enterprise agreements, including with Fortune 500 companies, providing revenue sources beyond government contracts. While this model supports steadier revenue visibility, IonQ faces its own scalability hurdles, particularly in advancing gate speeds, which could limit long-term efficiency compared with superconducting approaches.

Arqit Quantum ARQQ follows yet another route, concentrating on software and encryption rather than hardware. Its QuantumCloud platform seeks to deliver large-scale symmetric key agreement for cybersecurity, offering a more near-term use case as enterprises prepare for post-quantum security risks. While this approach shields Arqit from hardware margin pressures, its financial outlook hinges on broader adoption of quantum-safe encryption, which remains at an early stage and is dependent on customer conversion.

Rigetti’s Price Performance, Valuation and Estimates

Shares of RGTI have gained 0.8% in the year-to-date period compared with the industry’s growth of 18.8%.

From a valuation standpoint, Rigetti trades at a price-to-book ratio of 9.01, above the industry average. RGTI carries a Value Score of F.

The Zacks Consensus Estimate for Rigetti’s 2025 earnings implies a significant 86.1% rise from the year-ago period.

The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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