Rigetti Shares Down 15% Post Q1 Earnings: Time to Buy, Hold or Sell?

Rigetti Computing RGTI shares have plunged 15% following the company’s first-quarter 2025 earnings release on May 12. In the first quarter, RGTI reported an adjusted loss per share of 8 cents, along with a sharp decline in revenues of more than 50% year over year. RGTI’s earnings and revenues for the reported quarter missed the Zacks Consensus Estimates by 60% and 40.2%, respectively.

Rigetti’s first-quarter 2025 results raised concerns as revenue fell sharply to $1.5 million, largely due to the timing of milestone-based contracts. Operating expenses also rose to $22.1 million, driven by higher compensation and tax-related costs, highlighting ongoing challenges in scaling operations efficiently. While these figures signal short-term pressures, the company’s robust cash position of $237.7 million offers a solid financial cushion. More encouragingly, strategic wins, including a $5.5 million U.S. Air Force grant and securing an investment of $35 million from Taiwan’s Quanta Computer, underscore growing institutional confidence in Rigetti’s quantum capabilities.

RGTI Shares Underperform Sector, Industry & Peers

Rigetti’s shares have underperformed the Zacks Computer & Technology sector and its industry peers, which include IonQ Inc. IONQ, D-Wave Quantum Inc. QBTS and Atlassian TEAM, in the year-to-date period.

The RGTI stock has tumbled 35.4% in the year-to-date period. Shares of IONQ and TEAM have plunged 20.5% and 5.7%, respectively. QBTS shares have gained 27.7% during the same period. The broader sector has declined 4.5% over the same timeframe.

RGTI has also underperformed the Zacks Internet - Software industry, which has improved 5% in the year-to-date period.

Let's delve deeper and determine the best course of action for your portfolio regarding the RGTI stock.

RGTI's Price Performance Comparison

Developments Propelling Rigetti’s Growth

Advancements in Quantum Processor Technology: In the first quarter of 2025, Rigetti achieved a significant scientific milestone through a joint research paper with Harvard University, MIT, and the University of Chicago, published in Nature Physics. The study showcased the successful integration of a hybrid microwave-optical quantum transducer with a Rigetti-fabricated superconducting qubit. This breakthrough enabled optical control of the qubit, eliminating the need for traditional microwave coaxial lines, which are bulky and introduce thermal load, major barriers to scaling quantum systems.

Alongside its scientific progress, Rigetti advanced its quantum algorithm capabilities by applying its new “quantum preconditioning” algorithm to a real-world energy grid problem. Using South Carolina’s public energy grid data, the 84-qubit Ankaa-3 system computed the maximum power exchange section, a key grid health metric. The algorithm enhanced the performance of classical optimizers, achieving a relative advantage and high solution accuracy. This marks a significant step toward demonstrating practical quantum advantage in real-world applications.

As the quantum computing market continues to evolve, RGTI is poised to benefit. Per a Grand View Research report, the global quantum computing market is expected to witness a CAGR of 20.5% from 2025 to 2030.

Major Government and Industry Recognition: Rigetti achieved significant recognition from both government agencies and industry leaders during the first quarter of 2025. Most notably, Rigetti was selected to participate in DARPA’s prestigious Quantum Benchmarking Initiative, advancing to Stage A — a six-month performance period focused on their utility-scale quantum computer concept. The company’s selection by DARPA is a strong endorsement of its technical vision, positioning Rigetti at the forefront of national efforts to realize practical quantum computing.

Rigetti received a $5.48 million grant from the Air Force Office of Scientific Research to advance its Alternating-Bias Assisted Annealing chip technology. Leading a consortium with Iowa State University, RMIT, the University of Connecticut, and Lawrence Livermore National Laboratory, Rigetti aims to tackle superconducting qubit defects. Additionally, the company secured three Innovate UK Quantum Mission Pilot Awards to enhance real-time QEC, upgrade its 36-qubit quantum processing unit, and improve its control stack. Rigetti is also involved in two other Quantum Mission projects focused on integrating digital chip-based technology and creating an open-architecture quantum test bed. These achievements highlight Rigetti's growing leadership in the quantum field.

Strategic Partnerships and Investments: Rigetti strengthened its strategic position in the quantum computing ecosystem through a major investment and expanded industry collaborations. The most significant development was the closing of a previously announced strategic investment by Quanta Computer, Inc. In late April, Quanta purchased approximately $35 million worth of Rigetti common stock at a price of about $11.59 per share. This investment not only provides Rigetti with substantial capital to support its technology roadmap and growth initiatives but also deepens the strategic collaboration between the two companies. The partnership with Quanta is expected to accelerate Rigetti’s efforts in advancing quantum hardware and potentially open new opportunities for commercial deployment and manufacturing scale.

Additionally, the company’s ongoing collaboration with Riverlane, a recognized leader in quantum error correction, is central to several government-backed projects, including the DARPA Quantum Benchmarking Initiative and Innovate UK Quantum Mission Pilot Awards. Rigetti is also working with SEEQC to integrate digital chip-based technology with its Novera QPU at the UK’s National Quantum Computing Center, and with a consortium including TreQ, Qruise, Q-CTRL, and Oxford Ionics to develop an open-architecture quantum computing test bed.

RGTI’s Sales & EPS Growth

Rigetti is poised for a strong growth phase in 2025, with sales projected to rise 36.4% and an even sharper acceleration of 153.3% in 2026. On the profitability front, EPS is expected to turn positive, with a 44.4% increase in 2025, followed by a 15% rise in 2026, suggesting improved operational efficiency and better cost management. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Key Challenges for Rigetti

Rigetti’s growth is closely tied to regulatory and geopolitical factors, particularly its reliance on U.S. government funding through programs like the National Quantum Initiative. Delays in policy approvals or budget allocations could slow critical R&D efforts and hinder long-term planning. Geopolitical tensions such as tariff hikes on semiconductors or cryogenic equipment pose risks to supply chains, inflate costs, and threaten project timelines. Stricter export controls may limit international collaborations, potentially affecting key initiatives such as Innovate UK. Quantum technology’s strategic importance invites heightened regulatory scrutiny, increasing compliance burdens and the risk of sudden policy shifts. Restrictions on partnerships with entities in sanctioned regions may also limit access to global talent and innovation networks. As a result, Rigetti must balance its reliance on public funding with proactive risk management to maintain global competitiveness.

RGTI Shares Look Overvalued

Rigetti’s stock is not so cheap, as suggested by the Value Score of F.

RGTI is currently trading at a price-to-book (P/B) ratio of 22.2X, which is more than four times higher than the industry average of 5.87X. This can mean that investors are valuing the company far above the worth of its actual assets, largely because of its potential in quantum computing rather than its current financial performance. Such a high P/B ratio suggests that the stock is priced for significant growth and innovation, but it also makes it highly sensitive to execution risks or negative news.

Price-to-Book Ratio

How to Play Rigetti’s Stock Now?

Rigetti continues to make impressive progress in quantum technology through innovations in processor design, the practical application of algorithms, and strategic partnerships. Strong sales and earnings growth forecasts suggest improving financial health. However, heavy reliance on government funding, geopolitical risks, and high regulatory burdens pose challenges. With the stock trading at a premium valuation, execution risk remains high.

Given the balance of strong innovation potential against near-term external headwinds, valuation concerns and a Zacks Rank of #3 (Hold), Rigetti is best viewed as a stock to watch with a neutral stance for now. 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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