Rigetti Computing, Inc. (RGTI) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Rigetti Computing Second Quarter 2026 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 first speaker today, Subodh Kulkarni, CEO of Rigetti. Please go ahead.

Good afternoon, and thank you for joining us for Rigetti's Second Quarter 2026 Earnings Conference Call. I'm pleased to be joined today by our Chief Financial Officer, Jeffrey Bertelsen who will walk you through our financial results in more detail following my overview. We appreciate your continued interest in Rigetti and look forward to answering your questions at the conclusion of our prepared remarks. Before we begin, I would like to remind everyone that today's call, along with our second quarter 2026 press release, contains forward-looking statements. These statements reflect our current expectations, objectives and underlying assumptions regarding our outlook and future operating results and are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks and uncertainties are described in more detail in our filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2025, our Form 10-Q filing for the quarter ended June 30, 2026, and other periodic reports filed from time to time with the SEC. Rigetti undertakes no obligation to update any forward-looking statements made during this call, except as required by law. During today's call, we will refer to certain non-GAAP financial measures. For details on these measures and reconciliations to comparable GAAP measures, please refer to today's earnings release on our Investor Relations website at www.rigetti.com and to the 8-K furnished with the SEC. Before I dive into the quarter, I want to frame our discussion around 3 key takeaways. First, we continue to demonstrate technical leadership with our Cepheus-class systems, including ongoing progress to improve the performance of our 108Q, Cepheus-1-108Q platform. Second, the letter of intent we signed with the U.S. Department of Commerce for up to $100 million in funding over 3 years further validates our superconducting chiplet-based approach and strengthens our ability to invest against our road map to Quantum advantage. Third, we recently announced an expanded collaboration with HPE and the Pittsburgh Supercomputing Center to develop a hybrid quantum classical supercomputer, reflecting growing demand for our approach and positioning Rigetti to deliver differentiated quantum-enhanced HPC solutions. Q2 was another important proof point in our strategy to combine technical progress with real-world access and long-term strategic partnerships. Quantum computing remains a long-cycle opportunity, but we are increasingly seeing the ecosystem coalesce around platforms that can scale in a practical way and that are available to users where they already run their workloads. We believe Rigetti is well positioned in the environment for 3 reasons. We are focused on superconducting gate-based quantum computing, which offers a combination of scalability and speed that is difficult to replicate with other modalities. We are pursuing an open modular architecture that allows us to integrate innovative solutions from partners to advance our technology faster, such as QEC technology from Riverlane and transduction technology from QphoX. We pioneered and continue to lead in chiplet-based architectures, which we believe provide a more practical path to scaling to 1,000 qubits and beyond than monolithic approaches. Let me start with our technology and product progress. Cepheus-1-108Q remains one of the highest qubit count, generally available gate-based quantum computers in the world and the largest modular quantum computing system on the market today. The system is built from 12 interconnected 9-qubit chiplets and is accessible to customers via Rigetti Quantum Cloud services and through Amazon bracket, Microsoft Azure Quantum and qBraid. We are just 1 of 3 companies, including IBM and Google, who have delivered gate-based systems with over 100 qubits, and we believe that our modular approach gives us a strong advantage on the path towards higher qubit count systems. Today, Cepheus-1-108Q continues to operate at a median single qubit gate fidelity of approximately 99.9% and a median 2-qubit gate fidelity of roughly 99.1% with gate speeds around 60 nanoseconds. This performance levels at the 100-plus qubit scale are meaningful, and our teams remain focused on improving fidelity throughout 2026 as we refine chip design, materials and fabrication processes and incorporate learnings from our R&D platforms. From a systems engineering perspective, our work this quarter extended beyond adding qubits. We continue to mitigate coupling interactions between tunable couplers that become more pronounced beyond the 100 qubit scale and to address coherence time limitations that are now the primary constraint on fidelity. As we discussed with investors in May, our current coherence times are in the 25 to 30 microsecond range, and we are executing on a set of chip design and material initiatives intended to roughly double or triple those times over the next several years. This includes joint IP with Fermilab where capping niobium superconducting contacts with tantalum has demonstrated meaningful coherence time improvements in fundamental experiments, and we are now incorporating those learnings into production chip designs. We are also refining deposition, oxidation and etch processes to smooth interfaces in the Josephs junction area, which we believe will further improve coherence and ultimately gate fidelities. Beyond Cepheus-1-108Q, we remain on track with the chiplet-based road map we laid out earlier this year and have begun investing in dilution refrigeration and infrastructure that can support 1,000 qubit systems. Our objective remains to reach approximately 1,000 qubits, 2 qubit gate fidelities of 99.9% and gate speed below 40 nanoseconds in roughly 3 years. I would now like to spend a few minutes on the U.S. Department of Commerce letter of intent we announced on May 21. Under this LOI, the department has selected Rigetti for a potential award of up to $100 million in funding over 3 years to accelerate superconducting quantum computing R&D that addresses key technical challenges in scaling and advancing our systems. The contemplated transaction structure includes a department receiving an equity stake in Rigetti, consistent with the total amount of funding and the funding itself would be allocated under the CHIPS Research and Development Office broad agency announcement pursuant to the CHIPS Act. We believe that this prospective partnership reflects the view that quantum computing will have far-reaching impacts on national security, economic interest and overall prosperity and that superconducting qubit platforms are central to U.S. leadership in this field. It also reflects the administration's broader CHIPS R&D investments in quantum computing and related technologies designed to build domestic industry, create high-paying jobs and strengthen technological resilience. For Rigetti, this LOI is strategically significant in several ways. It would allow us to tackle key scaling bottlenecks more rapidly associated with multichip architectures. It would enable us to accelerate multiple generations of superconducting quantum processors and associated control electronics at Fab-1, our dedicated quantum device manufacturing facility. It would deepen our collaboration with the U.S. government at a time when global investment in quantum computing is increasing and geopolitical competition in this domain is intensifying. It is important to emphasize that the LOI is not yet a definitive agreement. Any final structure will also include issuance of securities to the department and will be subject to customary approvals and conditions. We view this prospective partnership as aligned with our long-term strategy and our commitment to disciplined capital deployment. Jeff will provide additional context on how we are thinking about this funding opportunity within our broader capital framework. Turning to customer momentum and market traction. Our strategy is to meet customers where they are across public cloud, hybrid infrastructure and dedicated quantum systems. On the cloud, Rigetti Quantum Cloud Services, Amazon bracket, Microsoft Azure Quantum and qBraid provide global access to our systems, including Cepheus-1-108Q. We continue to see engagement from researchers and enterprises seeking to experiment on one of the most capable generally available gate-based platforms where they benefit from ease of use and consistent uptime. In parallel, we are building a growing base of on-premises system deployments. Earlier this year, we outlined 3 systems targeted for delivery in 2026. bit Novera systems and a 108-qubit system for C-DAC in India. We remain on track and are seeing additional demand for Novera QPUs from national labs and universities with recent wins, including the University of Saskatchewan and a research arm of a large Japanese conglomerate. These deployments deepen technical engagement, create multiyear usage pathways and generate high-value feedback that informs our road map. At this stage of the market, we are prioritizing customers committed to active experimentation and collaboration, and we are deliberate in how we build those relationships. As part of this customer momentum, we recently expanded our collaboration with HPE and the Pittsburgh Supercomputing Center. Rigetti will deliver a 9-qubit Novera quantum computing system into PSC's new TangleLab test bed, which is being funded by a National Science Foundation grant. Working with HPE, this deployment is designed to integrate the Novera system with an HPE-powered supercomputing environment so that researchers and industry users can develop and test hybrid quantum classical workloads on real hardware. We view this as an important step in moving our HPE relationship from early experimentation toward commercially relevant quantum-enabled HPC solutions. More broadly, global investment in quantum computing continues to expand, led by governments and national labs and increasingly complemented by commercial interest. Outside the United States, we are seeing structured programs such as the U.K. government's 6-year ProQure initiative, where we intend to invest up to $100 million over time in systems, talent and infrastructure. In India, our 108-qubit C-DAC award reflects national level interest in superconducting platforms. And across Europe and Asia, we are seeing growing number of coordinated quantum initiatives. Commercial revenue remains early, but engagement is increasing across industries such as materials, logistics and financial services as they explore hybrid and quantum-inspired workloads. As system performance improves and the industry moves closer to quantum advantage, we expect commercial adoption to build on the government and research foundation in place today. Let me briefly connect these developments back to our long-term road map. We remain focused on a clear sequence designed to position Rigetti to reach quantum advantage in roughly 3 years. Near term, that means driving Cepheus-1-108Q toward a median 2-qubit gate fidelity of approximately 99.5% later this year while maintaining our gate speed advantages. Beyond that, we are working toward deploying higher qubit systems that leverage our chiplet-based architecture as the foundation for scaling beyond 1,000 qubits with fidelities and speed better mitigated and eventually fall tolerant computation. In support of this road map, we continue to invest in Fab-1 and associated refrigeration infrastructure as well as partnerships with organizations such as Riverlane, Quanta and QphoX to integrate innovative solutions into the stack. The prospective CHIPS Act funding would further reinforce our ability to execute on multiple generations of processes while maintaining prudent capital discipline. We intend to update our published technology road map later this year once we have additional operational data from Cepheus-1-108Q and clearer visibility into subsequent system deployments. Our objective is to provide investors with a transparent view of the milestones that matter most for Quantum Advantage, including specific targets for qubit count, fidelity, coherence time and gate speed. With that overview, I will now turn the call over to our CFO, Jeff Bertelson, to discuss our financial results and capital deployment in more detail.

Thank you, Subodh, and good afternoon, everyone. I will spend a few minutes walking through our second quarter 2026 financial results, our balance sheet and liquidity and how we are thinking about capital deployment as we continue to execute on the road map Subodh described, including the potential implications of the Department of Commerce LOI. For the second quarter of 2026, revenue was approximately $5.1 million compared to $1.8 million in the second quarter of 2025. The year-over-year increase was driven by on-premises Novera QPU sales, reflecting recognition of previously announced Novera purchase orders. Gross margin for the quarter was approximately 43% compared to 31% in the second quarter of 2025, with variability driven by contract mix and pricing and the relative contribution from the Novera QPU sales. Total operating expenses for the second quarter were $30.3 million compared to $20.4 million in the same period last year, with spending concentrated in research and development, including engineering headcount, fabrication, chip design and control electronics development as well as investments in refrigeration and infrastructure to support higher cubic count systems. Stock-based compensation for the quarter was approximately $7 million compared to $3.6 million in the second quarter of 2025. Operating loss was $28.1 million compared to $19.9 million in the prior year period. On a GAAP basis, net loss for the quarter was $52.6 million compared to a net loss of $39.7 million in the prior year period, with results again impacted by noncash fair value adjustments to derivative warrant and earn-out liabilities. As we have said previously, these fair value adjustments can introduce significant quarter-to-quarter volatility into our GAAP results and do not affect how we operate the business or allocate capital. On a non-GAAP basis, which excludes stock-based compensation and fair value adjustments to warrant and earn-out liabilities, net loss for the quarter was approximately $16 million or $0.05 per diluted share compared to a non-GAAP net loss of $13.3 million or $0.04 per diluted share in the second quarter of 2025. Let me provide a bit more color on revenue drivers and how we are thinking about the remainder of the year. As we discussed on our prior call, we expected strong year-over-year revenue growth in the first half of 2026, driven by the previously announced Novera purchase orders we received late last year and earlier in 2026. In Q2, we continued to progress on the $8.4 million C-DAC order for an on-premises 108-quubit system in India, which we still expect to recognize in the fourth quarter of this year following installation and performance acceptance testing. More broadly, our revenue profile continues to be influenced by the timing of system deliveries and government-funded projects. We view this variability as inherent to the current stage of the quantum computing market and not as a driver of our long-term capital allocation or technology strategy. Turning to the balance sheet. We ended the second quarter of 2026 with approximately $541.3 million in cash, cash equivalents and available-for-sale investments compared with $569 million as of March 31, 2026, and $589.8 million as of December 31, 2025. We continue to operate with no debt. And given our current operating profile, we believe our capital position provides sufficient runway to execute against our technology and system deployment milestones, including continued progress on scale, fidelity, system integration and our planned investment in the United Kingdom. Capital expenditures in the quarter were primarily driven by investments in Fab-1 and additional dilution refrigeration capacity to support higher cubic count systems. As we noted previously, we expect 2026 CapEx to be elevated relative to prior years, largely due to investments in dilution refrigeration and fab equipment. Our approach to capital deployment remains disciplined and consistent with what we have discussed on prior calls. The majority of our spending is directed toward core R&D activities that directly advance our technology platform, including our chiplet-based architecture, control systems and cloud integration. We are not managing the business around short-term revenue optimization. We are managing it around credible long-term progress toward Quantum Advantage and commercially relevant systems. Should we move from the current LOI to definitive agreements with the Department of Commerce, we would expect the CHIPS Act funding to be deployed in a way that is tightly aligned with this philosophy. That means focusing the capital on specific technical programs that address scaling bottlenecks and packaging and enhancements while being mindful of potential dilution associated with any equity issuance. To close, our financial strategy is unchanged from what we outlined last quarter. We are focused on maintaining flexibility, funding innovation responsibly and aligning capital deployment with the long-term value creation of our technology road map, including the CHIPS Act funding. Quarterly results will continue to reflect the early-stage nature of the quantum computing market and the timing of large system contracts. but we believe our balance sheet and capital discipline position us to execute with patience and control. With that, I will turn it back to Subodh for closing remarks before we open the call for questions.

Thank you, Jeff. We are encouraged by the progress we are making on our technology road map, the strengthening engagement we are seeing from customers across cloud and on-premises channels and the strategic support we are beginning to see from governments such as the United States and the United Kingdom. We remain focused on delivering against the milestones we have laid out, including fidelity improvements on Cepheus-1-108Q, higher qubit systems and disciplined execution of our capital plan. On behalf of the entire Rigetti team, thank you for your continued interest and support. Operator, we are now ready to open the call for questions.

[Operator Instructions] And our first question comes from Brian Kinstlinger of Alliance Global Partners.

On the last conference call, you highlighted coherence time as the primary limitation on your new architecture to fidelity and that you believe you could address that challenge. And then you gave some details around that today. When is a reasonable time frame where we can expect to see that impact fidelity?

Indeed, as we discussed in the call, coherence time is the limiting factor for 2-qubit gate fidelity at this time, and that's why we are so focused on improving coherence time. Right now, it's in the 25 to 30 microseconds range. We want to obviously bump it up as much as possible, but we think a factor of 2 or 3 improvement is practical in the near term, and that's what we are working on. The kind of stuff we are working on, we disclosed during the call, things like smoother interfaces at the Josephson junction level or capping off the niobium and tantalum, which seems to improve the coherence time, and we have published some papers along those lines. Those are the kinds of things we are doing. We definitely expect fidelity to increase at the 108 qubit level before the end of this year, and we'll update everyone when we are ready to deploy a new system. I just want to put some the developments in a little perspective here. Keep in mind that there are only 3 very capable more than 100 qubit systems with the gate-based world in quantum computing right now. Besides IBM at 120 qubits, we are at 108 and Google is at 105 qubit. Everyone else, even though they may be talking a lot and about road maps in future are well below that. And many companies are well below 50 qubits when it comes to actual systems. We get incredible feedback from end users who are using our systems every day that our system is one of the easiest to use and has consistent uptime. So we want to be careful that before we upgrade our system, if you will, with higher coherence time and higher fidelity, we have checked off all the other metrics, and we don't inadvertently go backwards in the technical progress. So we are careful with how we are doing the experiments and how we will deploy it in the actual system that is deployed for the whole world. Hopefully, that answers your question.

Does. If I can just ask one follow-up. A few months back, there was a change in the leadership in DARPA's QBI. Has this had any impact on Rigetti's chances of getting to stage B? And do you think this is still achievable by year-end?

Certainly, there was a change in leadership at DARPA. Our plan stays the same. DARPA gave us a bunch of areas where they wanted to see improvements to get into Phase B. We continue to work with them. We have periodic calls with them and meetings with them, and we will continue to demonstrate improvements in the areas that we pointed out. We still feel optimistic that we will get into DARPA Phase B relatively soon. It's impossible to predict the exact time lines on all these kinds of things, but we continue to make very good progress. and we continue to get -- we continue to believe we will get into Phase B soon. Along with DARPA, there are other initiatives, as I mentioned in my call, there is a U.K. government's procure initiative, which is kind of like the DARPA QBI initiative and some other initiatives across the world. So we are engaged in multiple initiatives like that. So it's not just DARPA alone. And as you saw, the Department of Commerce in the U.S. created a separate initiative focused on accelerating road maps, and we are definitely part of that. So DARPA is and will continue to be an important player in the quantum computing ecosystem, but it's not the only one. There are multiple areas that we are participating in right now.

And our next question comes from Krish Sankar of TD Cowen.

The first question on the current fab facility in Fremont. The current tooling and your -- what's the annual QPU production capacity? And what kind of CapEx requirement should we expect for that?

So Krish, right now, the fab we have in Fremont is a 150-millimeter fab. Frankly, capacity is not a concern at all. We have plenty of capacity in that fab with 150 millimeters because each quantum chip is capable of significant computation, as you're aware. So we make a number of 9-qubit chips right now. And with our chiplet architecture, we are using 9-qubit chiplets to get a 36-qubit system or 108-qubit system. In future, we believe we will make things like 36qubit chiplets that will take us to 1,000 qubits and beyond, and we will continue to increase the size of the chiplets in the future. Right now, I mean, to give you a reference, the 9-qubit chiplet is roughly 6 millimeter by 6 millimeter. So as you can imagine, we can build plenty of 9-qubit chiplets in a single 150-millimeter wafer, and we can run a number of wafers a day. So we -- capacity is not an issue at all. Challenge, of course, is getting the capability out there. And there are some limitations with 150-millimeter equipment and it's not an automated line. And we believe there are some limitations that come with nonautomated line and 150-millimeter size. So we continue to look at alternative options for upgrading the fab, but it's mostly for capability, not for capacity.

Got you. Very helpful, Subodh. And then a follow-up on HPE -- 9-qubit Novera QPU system. Will you be providing this QPU chips only? Or would it be QPU dilution switch controls and other infrastructure? And what is kind of like the timing for delivery on that?

So yes, it's a good question. And we are really excited to partner with HPE and Pittsburgh Supercomputing Center. It's really a great initiative to demonstrate how hybrid computing works. If you go out there right now, a lot of people talk about hybrid computing, but honestly, there are very, very few places, in fact, hardly any where you can go and actually do demonstrate hybrid computing and how it's supposed to work. So we believe we will be one of the first ones to do that along with HPE. Our contribution to that NSF sponsored project is a full 9-qubit system. So not just the QPU, but the QPU plus addition refrigeration plus control system and everything. Obviously, HPE is a top player in the HPC world. So HPE's contribution is HPC and the interfaces is what we will be working on, and that's really the role of Pittsburgh Supercomputing Center. It's going to be an exciting project to bring in the best of HPCs, the best of quantum computing and allow access to anyone in the world where they can easily play around with hybrid computing and see how hybrid computing works. In particular, I will bring forth that because we are using superconducting gate technology, we have a huge benefit in terms of speed. Our gate speeds are in the 50 nanosecond, 60 nanosecond range, which are roughly 1,000x to 10,000x faster than trapped Ion or atoms or other modalities. And that really will shine and will come forward when we show the data coming out of hybrid computing because clearly, a trapped Ion or an atom-based quantum computer with its very, very slow speed will have a tough time keeping up with CPU and GPU -- and you can see that in some of the results being discussed when they talk about hybrid computing, whereas with superconducting computing, you will really see the benefit of speed and how speed helps in the overall computation and coming into the correct answer much, much faster than the other modalities. So we are pretty excited about this partnership opportunity and demonstrating how hybrid computing will work particularly with superconducting.

Maybe just to follow up on that with Jeff's last question, timing of delivery and how to think about rev rate for this?

Yes. So we believe the delivery will be sometime in 2027. We don't know the exact quarter yet. The program just got kicked off recently. As we find out, we will be transparent about the time lines. But at this point, it definitely will be a 2027 delivery. We'll let you know once we know exactly when it will happen.

And our next question comes from Troy Jensen of Cantor Fitzgerald.

Maybe a quick question to start with Subodh here. Just any thoughts on the executive order? And has there been any change in kind of government activity post signing of that order? I'm wondering if it's mainly security more or just system level, but just love to get your thoughts and if anything has changed since then.

Sure. So indeed, with the executive order passed by the President, there has been increased emphasis on quantum computing. A number of initiatives have started because of those executive orders. I would say they are still generally in the early stages, but you're already seeing some of them, the Department of Commerce initiative using the CHIPS Act certainly is one of those. We definitely expect more funding coming into the overall quantum computing ecosystem from the U.S. government because of those executive orders. There are various bills that are being debated as we speak, whether it's the NQR authorization bill that funds the Department of Energy, labs or the NDAA, which funds the Department of Law and there are many line items included in that for quantum computing. So overall, I would say, definitely, the executive orders highlighted the importance of quantum computing for national security and strategic reasons. It is definitely helping free up funding in quantum computing. You are already seeing that a little bit with the Department of Commerce, but definitely expect more of those kinds of things from both from Department of Energy as well as Department of Law.

All right. Makes sense. And then just another one for you maybe. Congrats on the HPE announcement. I think that's huge. Obviously, you're close to them in Quanta. I guess I would assume there's tons of big data center partnerships that you guys could have. Is HPE as much on the networking side? Or is that on the server side, but just any more kind of details on that would be wonderful.

Certainly, we are excited to partner with HPE. They are, as I mentioned, the top player in the world of HPCs. The partnership will certainly evolve as we get into demonstration and what else can we do. It's not an exclusive partnership. We are certainly going to be talking to other HPC players. And certainly, HPE will be talking with other modalities and other quantum computing companies too. I think the exciting part for both of us is truly bring state-of-the-art HPC with a state-of-the-art quantum computer and see how exactly we do the trifurcation of data, if you will, where CPUs do sequential, GPUs do parallel and quantum does simultaneous computing and with superconducting our speeds are commensurate with CPU and GPU, and that's really where it will help to truly show the benefit of quantum computing. So certainly, a lot of applications we will be able to take on with that kind of a setup and show really how quantum computing helps reduce the overall time to results or the accuracy of results or even some applications that are near impossible to solve with the current HPC setup. So certainly, we are looking forward to putting the system together between now and 2027 and making it available to general public at that time. But we'll continue to talk to HPE and other HPC players on how to leverage quantum computing in different workload applications.

And our next question comes from John McPeak of Rosenblatt Securities.

Great. Excellent. Subodh and Jeff, congrats on the execution here, steady progress. Actually, I have a couple for Jeff. You talked about CapEx. I got that. That was one of my questions. But deferred revenues ticked up more than in any quarter I've seen in the history. And you actually had your largest billings quarter if you just look at the change in deferred and revenues. Could you talk a little bit about what that's about, if anything?

Sure. Sure. That mainly relates to C-DAC, with that order, there were some prepayments and so forth that added to deferred revenue. So that was the main driver there.

Okay. That makes sense. And then one for Subodh. I've heard compliments about your QPUs from some optical interconnect companies. I'm curious if you've had any discussions with respect to with your open architecture potentially at least doing some exploratory work on optical interconnect of your Novera QPUs?

John, for telling us that you hear good things about us from optical interconnect companies. Indeed, we are very proud of the fact that our QPUs are some of the best CPUs, if not the best CPUs out there, and we consistently hear that from end users who use our QPUs. They keep telling us that they are extremely reliable, consistent, very easy to use. So it's not a surprise, but it's always good to hear from third parties. We talk to multiple optical players, the publicly disclosed partnerships among the publicly disclosed partnerships, we have mentioned QphoX where we are working with them on transduction. That's basically converting microwave signals to optical signals and vice versa. The reason that AI is important is because right now, our 9-qubit or even our 108-qubit system does not use any optical signaling. We are basically relying on coax signaling. And that will continue for a while. We plan to use flex cable technology to get to 1,000 qubits. But beyond 1,000, certainly, when we start talking 10,000 and 100,000 qubits, we cannot rely on flex cables and certainly not coax cables. And that's really where optical signaling comes in. And so the early research work is what we are doing right now with companies like QphoX, understanding how to convert microwave signal to optical and reverse that without losing fidelity or any other issues. It all shows promising results right now, but I would caution it's still early research before all of that can be converted into road map and definitive time lines. We still have some work to do. But it's encouraging to see that optical signal is going to work out, and that allows us to get to the tens of thousands and hundreds of thousands of qubits.