Is Rigetti Computing Stock Still a Buy?

Key Points

• Rigetti's new 36-qubit system achieves 99.5% median 2-qubit gate fidelity, but revenue remains stuck below $2 million quarterly.

• A $5.8 million Air Force contract adds credibility, while $571 million in cash provides a healthy runway.

• At 990 times trailing sales, investors are pricing in a quantum revolution that may still be years away.

• 10 stocks we like better than Rigetti Computing ›

Quantum computing stocks are having their moment, and Rigetti Computing (NASDAQ: RGTI) sits at the center of the frenzy. The stock has surged about 100% year to date, riding technical milestones and government contracts to fresh highs. The company just unveiled a 36-qubit modular system with 99.5% median 2-qubit gate fidelity. It also secured a $5.8 million Air Force contract for quantum networking. Some analysts have turned bullish on the industry as a whole in response to this rapid progress.

But look past the headlines, and Rigetti's fundamentals paint a sobering picture. Revenue fell to $1.8 million last quarter, down from $3.1 million a year earlier. The company is also burning nearly $40 million quarterly. At 990 times trailing sales, the stock's valuation assumes quantum computing transforms from science experiment to commercial reality -- soon. That disconnect between promise and performance raises the question every investor must answer: Is this real progress or just another hype cycle?

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The technology breakthrough that changes everything (eventually)

Rigetti's Cepheus-1-36Q represents genuine scientific progress. The system achieves 99.5% median 2-qubit gate fidelity -- a 2x improvement from six months ago. That matters because error rates have been quantum computing's Achilles' heel. The modular 4-chiplet architecture suggests a path to scaling beyond today's limitations. The company targets a 100-qubit system by year-end, potentially reaching the threshold where quantum computers start solving problems classical computers can't touch.

The $5.8 million Air Force Research Laboratory contract validates the technology's strategic importance. Rigetti will work with Dutch start-up QphoX to develop superconducting quantum networking nodes over three years. Government backing matters in deep tech -- it provides both funding and credibility.

IonQ, another quantum pure play, has secured similar contracts worth $54.5 million. The entire industry is benefiting from renewed federal interest in maintaining quantum supremacy over China. But technical achievements don't pay the bills, and Rigetti's commercial traction remains minimal.

The financial reality check

Rigetti's Q2 numbers expose the gulf between potential and performance. Revenue of $1.8 million missed already modest expectations, down 42% from $3.1 million a year ago. The net loss reached $39.7 million, though $22.8 million came from noncash warrant and earn-out charges. Operating expenses of $20.4 million dwarf revenue by more than 10 to 1, resulting in an operating loss of $19.9 million.

The bright spot is liquidity. Rigetti raised $350 million through an at-the-market equity offering, ending Q2 with $571.6 million in cash and no debt. That runway should last several years at current burn rates. But dilution is the price -- the company has been selling shares into the rally, taking advantage of momentum to shore up its balance sheet.

At 990 times trailing sales and a $10.2 billion market cap, Rigetti trades at a valuation that would make even high-flying software stocks blush. IonQ trades at 327 times sales with roughly 10 times Rigetti's revenue. The market is pricing in a quantum revolution, but the timeline remains frustratingly uncertain.

The verdict

Rigetti represents a pure-play bet on quantum computing's arrival. The technology is real -- the 36-qubit system proves that. The government contracts provide validation. The $571 million cash position offers time to execute. But at its current nosebleed valuation, perfection is priced in while commercial viability remains years away. Industry experts suggest meaningful quantum applications won't emerge until 2030.

For risk-tolerant investors, Rigetti offers lottery-ticket exposure to a potentially transformative technology. For everyone else, the combination of minimal revenue, heavy losses, and sky-high valuation suggests waiting for proof of commercial traction. The quantum revolution may be coming, but at 990 times sales, you're paying today for a tomorrow that might not arrive on schedule.

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George Budwell has positions in IonQ and Rigetti Computing. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.