D-Wave Systems Inc. Q4 FY2025 Earnings Call - Commercial Traction and Dual-Platform Leap with Quantum Circuits Acquisition

Antoine Legault, Analyst, Wedbush Securities3: Good morning, everyone, and welcome to D-Wave’s fourth quarter fiscal year 2025 earnings conference call. Today’s conference call is being recorded. At this time, I would like to turn the call over to Kevin Hunt, Senior Director of Investor Relations. Please go ahead.

Antoine Legault, Analyst, Wedbush Securities0: Thank you and good morning. With me today are Dr. Alan Baratz, our Chief Executive Officer, and John Markovich, our Chief Financial Officer. Before we begin, I would like to remind everyone that this call will contain forward-looking statements which are subject to risks and uncertainties and should be considered in conjunction with cautionary statements contained in our earnings release and the company’s most recent periodic SEC reports. An on-demand webcast will be available, and a transcript of the conference will be posted on the investor relations section of the website within 48 hours after the call. During today’s call, management will provide certain information that will constitute non-GAAP financial measures under SEC rules, such as non-GAAP gross profit, non-GAAP gross margin, adjusted EBITDA loss, adjusted net loss, and adjusted net loss per share, and operating metrics such as bookings.

Reconciliations to GAAP financial measures, definitions, and certain additional information are also included in today’s earnings release, which is available in the investor relations section of our company website at www.dwavequantum.com. Given that D-Wave is now fortunate to have 15 sell-side security analysts publishing research on the company, we’ll be limited to taking one question from each analyst during the first round of questions and then, time permitting, proceed to a second round of questions, where again, we will have to limit each analyst to one question. I’ll now hand over the call to Alan.

Dr. Alan Baratz, Chief Executive Officer, D-Wave Systems Inc.: Good morning, thank you all for joining us today. Fiscal 2025 was not just a strong year for D-Wave, it was an inflection point for the company and for the quantum computing industry. For years, this sector has been defined by unrealized promises, dependence on government grants, and an inability to deliver customer value. In 2025, D-Wave separated itself from that narrative. We delivered proof, we delivered revenue, and we delivered real-world advantage. While 2025 was declared the International Year of Quantum Science and Technology, for D-Wave, it was something more important. The year quantum computing moved decisively from research to real-world impact, and we believe that no company advanced that transition more than D-Wave. 2025 was a year of objective proof, evidence of D-Wave’s technical and commercial progress.

We began the year by closing our first Advantage quantum computer system sale to the Jülich Supercomputing Centre, marking the first time a commercial annealing quantum computer was purchased for integration into a national supercomputing facility. We became and remained the only quantum computing company to demonstrate quantum supremacy on a useful, real-world problem. That result, which was achieved natively on our Advantage2 Quantum Processing Unit, has not been successfully challenged for nearly two years after the paper’s initial publication. This demonstration was an entirely quantum computation, not a hybrid computation. Moreover, no other companies other than D-Wave, Google and Quantinuum have achieved quantum supremacy on any problem. Not IBM, not IonQ, not Rigetti, not Inflection, not Xanadu, not IQM. All attempts other than D-Wave, Google, and Quantinuum have been spoofed, and only D-Wave’s result was on a useful, real-world problem.

In May, we launched general availability of our Advantage2 system, the same system that achieved that supremacy milestone. Critically, we transitioned that technical leadership into commercial performance with record revenue of $24.6 million in fiscal 2025, up 179% year-over-year, $13.4 million in Q4 bookings, the second highest quarterly bookings in the company’s history and up 471% from the immediately preceding third quarter. A sales opportunity pipeline that expanded by nearly 1,500% year-over-year. In an industry long on promises, D-Wave is delivering measurable results. Now we have entered 2026 with extraordinary momentum. In January alone, we generated more bookings than in the entirety of fiscal 2025. We closed a $20 million system sale with Florida Atlantic University.

We signed a two-year, $10 million enterprise quantum compute as a service agreement with a Fortune 100 company, one of the largest enterprise quantum compute as a service deals in the history of the quantum computing industry. We completed the acquisition of Quantum Circuits. The acquisition of Quantum Circuits fundamentally changes the competitive landscape. We believe that it firmly secures D-Wave’s position as the world’s leading quantum computing company and the only dual-platform quantum computing company. As a result, we believe that we are the only company to position to address the full quantum computing market. Our dual platform approach is important because it allows D-Wave to be a one-stop shop, capable of solving the full range of the complex problems that customers face. Let me be clear, this approach is not new. It has been our strategy for five years....

We dominate optimization today with annealing quantum computing technology. Now, by combining Quantum Circuits’ industry-leading dual-rail qubit technology with D-Wave’s proprietary on-chip cryogenic control, we are also positioned to be the leader in error-corrected gate model systems. Annealing quantum computing remains a strategic focus for D-Wave. Optimization is one of the largest and most immediate commercial opportunities in quantum computing. It spans logistics, defense, telecom, manufacturing, finance, and energy, virtually every major industry, and optimization problems require annealing quantum computing. D-Wave has demonstrated material performance advantages over classical approaches across a multitude of optimization use cases. We are running production workloads today. To our knowledge, no gate model quantum computing company has demonstrated a practical advantage over classical systems for optimization, and academic literature suggests they likely never will.

We’re also seeing early promise with customers exploring annealing quantum computing’s impact on AI and blockchain, two areas with enormous commercial potential. Annealing is not a stepping stone. It’s a commercially proven architecture with expanding performance gains. With our Advantage3 system in development, we expect to further extend that performance gap. Annealing dominates optimization today, and we believe that it will continue to dominate as the market expands. Let’s talk about gate model. Most superconducting competitors are pursuing legacy transmon architectures that require massive physical qubit overhead for effective error correction and complex wiring schemes that will struggle to scale economically. With Quantum Circuits, D-Wave takes a different path. The Quantum Circuits deal is transformational. With it, we believe that D-Wave gains a decisive architectural advantage. Dr.

Rob Schoelkopf, the inventor of the transmon qubit, used by nearly every superconducting competitor, moved beyond that architecture to develop dual-rail qubits with built-in erasure detection that identifies 90% of errors that occur. With erasure detection, this technology delivers gate fidelities that exceed 99.9%, bringing trapped ion fidelities along with superconducting execution speeds to today’s gate model algorithm developers. Our erasure detection and our observed erasure rate of 0.5% allow us to deliver logical qubits with an order of magnitude fewer physical qubits compared to architectures without this capability. Error correction is essential to unlocking broad quantum utility. We believe that the dual-rail technology offers the fastest path to large-scale error-corrected architectures. I can’t emphasize this enough. The dual-rail technology allows us to achieve superconducting speed with the fidelity of ion trap or neutral atom approaches.

This is an industry game changer unmatched by any other gate model vendor today. The implications of D-Wave’s dual-rail technology are profound. Our approach achieves logical qubit ratios of roughly 1 logical qubit for every 100 to 200 physical qubits, compared to about 1 logical qubit for every 1,000 to 2,000 physical qubits in conventional superconducting designs. What’s equally remarkable are the gate speeds. Dual-rail gate speeds are 1,000 times faster than ion trap or neutral atom systems. The fidelity of ion trap or neutral atom approaches with the speed of superconducting. That’s a fundamental improvement in the metrics that matter. Speed matters, error correction overhead matters, scalability matters, and D-Wave now holds advantages in each. Our gate model innovations don’t stop there.

In January, D-Wave demonstrated that the on-chip cryogenic control currently being used in its Advantage quantum computers can be used to control gate model qubits without loss of fidelity. This industry-first milestone advances the development of commercially viable gate model quantum computers by providing a path to significantly reduce the wiring required to control large numbers of qubits. We’re now working on leveraging this technology to provide full qubit control at scale. This would ultimately enable the ability to control gate model systems with multiple orders of magnitude, fewer control lines than required by competing superconducting gate model systems. That difference is not incremental, it’s architectural, it’s essential. As we discussed at the time of the Quantum Circuits acquisition, we have an 8-qubit gate model system available to select customers today, and we expect a 17-qubit system later in 2026.

We’ve already seen tremendous interest from customers and expect to start generating some Quantum Compute as a Service revenue from our gate model systems this year, while also building a pipeline of gate model system sales opportunities for delivery beginning in 2027. In addition to accelerating commercial momentum that we see with our Advantage2 annealing system, we expect our gate model offering to deliver a small but growing stream of revenue in 2026. We believe that the Quantum Circuits, Inc. acquisition positions D-Wave as the leading contender to deliver the first fully error-corrected, scalable, superconducting gate model quantum computer. This effectively doubles our long-term addressable market by delivering both annealing and gate model quantum computing solutions. What’s also particularly noteworthy is our rapidly accelerating commercial traction, which reflects a differentiated strategy from most all other quantum computing companies.

At our Qubits conference in January, our largest and most successful user conference ever, we announced a $20 million Advantage2 system sale with Florida Atlantic University, as well as a 2-year, $10 million enterprise QCaaS agreement with a Fortune 100 company, one of the most significant enterprise deals in the history of the quantum computing industry. This is not research revenue. It represents commercial adoption by a growing collection of the world’s largest companies. D-Wave is currently engaged with some of the world’s leading airlines, payment companies, telecom operators, defense contractors, chemical companies, healthcare companies, aerospace companies, and more. Customers are no longer asking if quantum will be useful someday. They are asking how quickly they can deploy it. The U.S. government is also taking note.

To support escalating government interest in both our annealing and gate model technologies, we recently launched a dedicated U.S. Government Solutions Business Unit. Unlike other quantum companies that are focused primarily on securing federal R&D grants and characterizing those as commercial revenue, our strategy is very straightforward: solve real mission-critical problems now and derive government revenue today. At Qubits, we demonstrated a missile defense simulation in collaboration with Davidson Technologies and Anduril. For a 500 missile attack simulation, we showed a 10 times faster time to solution, a 9%-12% improvement in threat mitigation, and 45-60 additional missile intercepts. As complexity increased, D-Wave’s technological advantage increased. This is operational relevance.

Anduril’s President and Chief Business Officer, Matthew Steckman, spoke during my Qubits keynote and indicated that he was surprised at how fast and mature D-Wave’s technology is, and he suggested that there are a lot of potential for collaboration going forward. We believe that there is significant opportunity in U.S. government applications across both our annealing and gate model platforms. We’re also seeing growing interest in system sales. In addition to annealing quantum computing system-related agreements with Jülich in Germany, Q-Alliance in Italy, and Florida Atlantic University in the U.S., we continue to advance discussions in South Korea, as well as with additional HPC, academic, and government institutions. On the gate model side, we expect to see the development of a multimillion-dollar R&D system sales pipeline for 2027. For both our annealing and gate model computers, these are premium-priced systems with high gross margin profiles.

Underpinning all of D-Wave’s technical and commercial traction is a very strong leadership team, with decades of deep expertise in their respective areas of focus. We recently brought on Jack Sears Jr. to lead U.S. government solutions, Stan Black as our Chief Information Security Officer, and as I previously mentioned, Dr. Rob Schulte, who brings world-class superconducting leadership and maintains strong ties with Yale University. Our Chief Development Officer, Dr. Trevor Lanting, will oversee product development across both annealing and gate systems, ensuring integration, speed, and execution. The strength of our management team and its track record of success are key to maximizing D-Wave’s near-term opportunities and long-term growth. Our operational footprint and workforce also continue to expand, with the announcement that D-Wave’s headquarters will relocate from Palo Alto, California, to Boca Raton, Florida, later this year, where we will also open a major U.S.-based R&D center.

With this expansion, D-Wave will operate 3 main R&D hubs: Burnaby, British Columbia, New Haven, Connecticut, and Boca Raton, Florida. We are building a distributed innovation footprint designed to attract top-tier quantum talent, provide bi-coastal redundancy in case of disaster recovery, and ultimately lead the next era of computing. Let me close with a broader industry observation. Quantum computing is entering a new phase. The first phase was scientific exploration. The second phase was capital formation. The next phase will be commercial separation. Over the next several years, we expect that this industry will consolidate around a small number of companies that can demonstrate 3 things: real performance advantage, real commercial adoption, and a scalable, economically viable architecture. Many will not make that transition. D-Wave already has. We are the only company to demonstrate real-world quantum supremacy on a useful problem.

We are the only company running production applications for Forbes Global 2000 enterprise customers. We are the only dual-platform quantum computing company with a commercially proven annealing quantum computer generating meaningful revenue and a differentiated superconducting gate model platform with a credible pathway to full error correction. Others are still pursuing proof of concept. We have proof of commercialization. Others are dependent on long development timelines, government funding, and sustained capital market support. We’re building a business with commercial customers, contracts, and expanding bookings. Others have made product development decisions that focus on either superconducting speed or ion trap and neutral atom fidelity. We can deliver both. As the market matures, capital will flow toward companies with operating leverage, commercial validation, and technical defensibility. We believe D-Wave is uniquely positioned at that intersection. The quantum industry will not support dozens of long-term winners.

It will support a handful of durable platforms. We intend to be one of them. Fiscal 2025 marked the moment when D-Wave moved from participant to front runner. The momentum we are seeing in early 2026 suggests that this gap is widening. With that, I’ll hand the call over to John to provide a review of our fourth quarter and fiscal 2025 results. John?

John Markovich, Chief Financial Officer, D-Wave Systems Inc.: Thank you, Alan, and thank you to everyone for taking the time to participate in today’s call. In my review of the fiscal year 25 and 4th quarter results, I will be providing non-GAAP operating metrics, including bookings, as well as non-GAAP financial measures that include non-GAAP gross profit, non-GAAP gross margin, adjusted net loss, adjusted net loss per share, and adjusted EBITDA loss, as we believe these metrics improve investors’ ability to evaluate our underlying operating performance. These measures are defined in the tables at the bottom of today’s earnings press release with the non-GAAP financial measures, for the most part, adjusting for non-cash and non-recurring expenses.

Revenue for fiscal 2025 totaled $24.6 million, an increase of $15.8 million, or 179% from fiscal 2024 revenue of $8.8 million, with fiscal 2025 revenue, including $16.2 million in systems sales revenue, $5.5 million in QCaaS subscription revenue, and $2.7 million in professional services revenue. I would like to highlight several aspects of D-Wave’s revenue that clearly distinguishes the company from a number of other so-called quantum computing companies. First, all of our revenue is derived from selling, providing access to, or providing services for quantum computing systems. We do not recognize any revenue from any products or services that are not directly related to quantum computing, such as quantum sensing, quantum networking, or encryption systems that rely on quantum physics, but not on quantum computing.

None of these products or services have anything to do with quantum computing that we define as computing systems that harness quantum mechanical effects, specifically superposition and entanglement, to solve complex computational problems. In addition, we do not give, grant, invest, or lend funds to any of our customers that they utilize or intend to utilize towards the purchase of our products and/or services. Fiscal 2025 bookings were $18.7 million, a decrease of 22% or $5.2 million from fiscal 2024 bookings of $23.9 million. Keeping in mind that the 2024 bookings included an eight-figure booking of the company’s first system sale. Subsequent to the end of fiscal 2025, D-Wave has closed over $32.8 million in additional bookings.

That includes a $20 million system sale to Florida Atlantic University and a $10 million 2-year enterprise license deal with a Fortune 100 company. With respect to the diversity of our customer base, in fiscal 2025, D-Wave recognized revenue from over 135 individual customers, encompassing over 70 commercial customers. That includes over 2 dozen Forbes Global 2000 enterprises. The average revenue per commercial customer increased by 20% over fiscal 2024, and the total revenue recognized from Forbes Global 2000 customers increased by 70% on a year-over-year basis, with the average Forbes Global 2000 deal size up 90% on a year-over-year basis.

GAAP gross profit for fiscal 2025 was $20.3 million, an increase of $14.7 million, or 265% from fiscal 2024 GAAP gross profit of $5.6 million, with the increase due primarily to a higher margin quantum computer system during the year. Non-GAAP gross profit for fiscal 2025 was $21.1 million, an increase of $14.7 million, or 229% from the prior year non-GAAP gross profit of $6.4 million. GAAP gross margin for fiscal 2025 was 82.6%, an increase of 19.6% from fiscal 2024 GAAP gross margin of 63%, with the increase again due primarily to a higher margin quantum computer system sale during the year.

Fiscal 2025 non-GAAP gross margin was 86%, an increase of 13.2% from the prior year non-GAAP gross margin of 72.8%. Again, the difference between GAAP and non-GAAP gross profit and gross margin is limited to non-cash stock-based compensation and depreciation and amortization expenses that are excluded from the non-GAAP gross profit and gross margin measures. Net loss for fiscal 2025 was $355 million, or $1.11 per share, compared with the fiscal 2024 loss of $143.9 million, or $0.75 per share. The increase in net loss was primarily driven by $250.5 million in non-cash, non-operating charges related to the remeasurement of the company’s warrant liability, as well as realized losses stemming from warrant exercises....

both directly related to the increase of the price of the company’s warrants and common stock. Excluding this non-cash remeasurement charge, the adjusted net loss for fiscal 2025 was $84.5 million or $0.26 per share, an increase of $8.9 million or 11.8% when compared to the fiscal 2024 adjusted net loss of $75.6 million or $0.39 per share. The reduction in net loss per share was due to a higher issued and outstanding number of common shares in 2025 when compared to 2024. Adjusted EBITDA loss for fiscal 2025 was $71.8 million, an increase of $15.8 million or 28% from the fiscal 2024 adjusted EBITDA loss of $56 million, with the increased loss due primarily to higher operating expenses, partially offset by higher gross profit. Now we move on to the fourth quarter.

Revenue in the fourth quarter totaled $2.8 million, an increase of approximately a half a million dollars or 19% from the fourth quarter of fiscal 2024 revenue of $2.3 million, with fourth quarter 2025 revenue, including $1 million in QCAST subscription revenue, $1 million in professional services revenue, and approximately $700,000 in systems sales revenue. Bookings for the fourth quarter were $13.4 million, a decrease of $4.9 million or 27% when compared to the year earlier quarter of $18.3 million. That included the eight-figure system sale that I referenced earlier.

On a sequential quarter-to-quarter basis, bookings increased $11 million or 471% from the immediately preceding fiscal 2025 third quarter bookings of $2.4 million, with the increase due primarily to the previously announced EUR 10 million booking for a multiyear 15% fifty capacity commitment for a D-Wave Advantage 2 annealing quantum computing system to support the development of a Lombardy, Italy-based state-of-the-art quantum computing and research facility. GAAP gross profit for fiscal 2024/2025 fourth quarter was $1.8 million, an increase of approximately $300,000 or 21% from the fiscal 2024 fourth quarter gross profit of $1.5 million, with the increase due primarily to the growth in revenue.

For the fourth quarter, non-GAAP gross profit was $2 million, an increase of approximately $300,000 or 17% from the prior year fourth quarter non-GAAP gross profit of $1.7 million. GAAP gross margin for the fiscal 2025 fourth quarter was 64.8%, an increase of 1% from the fiscal 2024 fourth quarter GAAP gross profit margin of 63.8%. For the fourth quarter, the non-GAAP gross margin was 71.8%, a decrease of 1.2% from the fiscal 2024 fourth quarter non-GAAP gross margin of 73%. Net loss for the fourth quarter of fiscal 2025 was $42.3 million or $0.12 per share, a decrease of $43.8 million or $0.25 per share from the fiscal 2024 fourth quarter net loss of $86.1 million or $0.37 per share.

The decrease in net loss was primarily due to a decrease of $57.7 million in non-cash, non-operating charges related to the remeasurement of the company’s warrant liability, partially offset by higher operating expenses. Excluding this charge, the fourth quarter adjusted net loss was $31.8 million or $0.09 per share, an increase of $14 million or $0.01 per share from the fiscal 2024 fourth quarter adjusted net loss of $17.8 million or $0.08 per share. Adjusted EBITDA loss for the fourth quarter was $25 million, an increase of $9.7 million or 63% from the prior year fourth quarter adjusted EBITDA loss of $15.3 million, with the increase due primarily to higher operating expenses, partially offset by higher gross profit. Now, I will address the balance sheet and liquidity.

During fiscal 2025, D-Wave raised over $800 million in gross proceeds from the issuance of equity under 2 ATM programs and ELOC program, and from the exercise of warrants and stock options. As of December 31, 2025, D-Wave’s consolidated cash and marketable securities balance totaled $884.5 million, representing a 397% from the year-earlier consolidated cash balance of $178 million, and a 6% increase from the immediately prior fiscal 2025 third quarter consolidated cash balance of $836.2 million. During the fourth quarter, the company received $63.7 million in cash proceeds from the exercise of warrants.

As previously announced, subsequent to year end, we invested $250 million in cash in conjunction with the acquisition of Quantum Circuits. We believe that our remaining liquidity is sufficient to support a fully funded plan to profitability. With respect to 2026, we will continue our practice of not providing formal financial guidance. However, I would like to provide some parameters. With respect to bookings, we are obviously off to a tremendous start with fiscal 2026 year-to-date bookings already exceeding our annual bookings for any year in the company’s history. As Alan noted earlier, our sales opportunity pipeline entering 2026 was up nearly 1,500% to the beginning of 2025. That includes a 700% increase in the total number of prospective sales transactions.

We continue to see interest in potential system sales, not only for our Advantage2 annealing system, but also for our dual-rail gate model quantum systems. However, as we have previously noted, the system sales process is fairly complex, and the sales cycle is usually lengthy in duration. With respect to revenue recognition on system sales, please keep in mind that most of these transactions will involve site preparation, installation, calibration, and other key steps before the systems are fully operational, that are likely to encompass multiple months and possibly quarters, depending on the unique elements of a particular system transaction. As a result, our revenue recognition on system sales is on a percentage-of-completion basis. In addition, we anticipate that most system sales transactions will involve a multi-year service and maintenance revenue component, and some may include a multi-year Leap cloud access component.

With respect to the recently announced $10 million enterprise QCaaS agreement, this revenue will be recognized ratably over a two-year timeframe, commencing in the current quarter. The EUR 10 million booking in Italy will be recognized ratably over five years, commencing once the system is fully installed, which we expect will be in the second half of this year. To summarize, we expect incrementally higher revenue growth in the second half of this year when compared to the first half. With respect to OpEx, we intend to continue to invest aggressively in both our annealing and gate model technology development initiatives that consist primarily of research and development, headcount, fabrication expenses, and to some degree, CapEx.

As we previously outlined, approximately 65 research and development professionals joined D-Wave through the Quantum Circuits acquisition, and we intend to expand this New Haven, Connecticut-based gate model team by at least 50% over the course of this year. In addition, we will be making significant headcount and capital investments at our recently announced U.S. R&D facility in Boca Raton, Florida, where we intend to expand our annealing R&D team and eventually to install one or more annealing systems to support our Leap cloud service offering. Lastly, given the recent formation of our government business unit, we will be making meaningful investments in this area, given the magnitude of opportunities that we see here. Over the course of fiscal 2026, we expect to increase quarterly operating expenses by approximately 15% sequentially over the immediately prior fiscal quarter.

In conclusion, as we have previously stated, we continue to believe that D-Wave has the opportunity to be the first independent, publicly held quantum computing company to achieve sustained profitability and to achieve this milestone with substantially less funding than required by other independent, publicly held quantum computing companies. Operator, please open the call for questions.

Antoine Legault, Analyst, Wedbush Securities3: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing any keys. If at any time your question has been addressed and you would like to withdraw the question, please press star, then two. As a reminder, please limit yourself to one question and re queue, should you have a follow-up. At this time, we will pause momentarily to assemble our roster. Our first question comes from Harsh Kumar of Piper Sandler. Please go ahead.

Harsh Kumar, Analyst, Piper Sandler: Yeah. Hey, guys. Congratulations on multiple fronts and all the progress you guys are making on technological achievements. Alan, I had one for you. I wanted to ask about the gate model, particularly, can you help us think about the advantage with the built-in error correction that you have? I’m asking specifically from a time-to-market standpoint, or should I just think of this as you just need a lot less, like, 10x less qubits to get to a commercial system? I’ve got to believe this translates to some kind of a timing advantage for you as well.

Dr. Alan Baratz, Chief Executive Officer, D-Wave Systems Inc.: Yep. Yes, it absolutely does translate into a timing advantage. The reason it translates into a timing advantage is because the complexity of building a fully error-corrected system and scaling it to the size needed to achieve quantum utility, is much lower given the dual-rail technology combined with our cryogenic control technology. The dual-rail technology gives us very high gate fidelities on par with, you know, some of the best in the industry, including trapped ion and neutral atom, while preserving the 1,000 times speed advantage of superconducting over the other modalities. Because of the higher fidelities, we are able to error-correct with many fewer physical qubits per logical qubit, that is a complexity reduction advantage.

When you add the on-chip cryogenic control and what we believe will ultimately allow us to control, you know, hundreds of thousands or, you know, more qubits with just hundreds of lines versus hundreds of thousands of I/O lines, as with other superconducting approaches. A dramatic reduction in the complexity. We believe that this combination will allow us to build and deploy scaled, error-corrected, superconducting gate model systems ahead of anybody else. We believe that obviously, ultimately, superconducting will lead because of the speed advantage.

Antoine Legault, Analyst, Wedbush Securities3: Our next question comes from Quinn Bolton of Needham and Co. Please go ahead.

Antoine Legault, Analyst, Wedbush Securities4: Hey, guys. I’ll also offer congratulations on a great 2025. I guess, John, I just wanted to come back. I know you’re not giving guidance per se for 2026, but as we think about the integration of QCI now into the business, can you give us any sort of, you know, points as to how much OpEx you would expect to incur in 2026 with that acquisition? Is the OpEx for that team sort of fully factored into that 15% OpEx quarter-on-quarter increase that you talked about for March? Just trying to think about, you know, if we had a base model for D-Wave prior to the acquisition, you know, how much additional OpEx would you think we would be putting into the models for the year now that the QCI is closed?

John Markovich, Chief Financial Officer, D-Wave Systems Inc.: Quinn, my comments earlier, in terms of the sequential 15% growth in OpEx, that includes, QCI, expansion in, not only their R&D team, but other, expenses, including, fabrication expenses, as well as, some, CapEx. The answer to your question is yes, that 15% fully includes the incremental costs associated with QCI.

Antoine Legault, Analyst, Wedbush Securities3: Our next question comes from Kingsley Crane of Canaccord. Please go ahead.

Antoine Legault, Analyst, Wedbush Securities1: Hi, thanks for taking the question. Congrats on the really strong momentum. John, for you, QCaaS, it’s moderated a bit the past year with system sales driving growth. I’m just wondering if you have a sense of what you think an ideal net retention rate for that segment can be or what that could be this next year. If, you know, Stride Hybrid Solver’s new ML integration capabilities could change that upsell conversation at all with existing customers. Thanks.

John Markovich, Chief Financial Officer, D-Wave Systems Inc.: Kingsley, we have not published retention rates, but what I can tell you is when you take a look at the composition of the QCaaS for the last two years, keep in mind that a significant component of our QCaaS in 2024 was Jülich, and that transitioned to a system sale. When you take a look at the bookings that we recently announced, including the 50% utilization of the system in Italy, as well as the enterprise QCaaS deal, you know, we’re starting to see substantially larger transactions that give us incrementally more visibility on the growth and the overall QCaaS than what we’ve seen in the past.

Dr. Alan Baratz, Chief Executive Officer, D-Wave Systems Inc.: John, maybe I’ll just chime in as well, especially given the comment about the Stride Solver. Kingsley, you know, we’ve been saying all along that system sales and QCaaS are very complementary models for us, and that the system sales, for now, are larger deals and nearer-term revenue recognition versus the QCaaS deals, which are a bit smaller and recognized ratably over a multiyear period in general. However, we are really beginning to see an increase in the size of QCaaS deals. I started signaling this last year when I said we’re now looking at larger companies, doing larger deals with us, including potentially, enterprise, all-you-can-eat licenses. That 2-year, $10 million Fortune 100 company deal that we closed at the beginning of this year is the first example of that.

That is starting to transition QCaaS into larger enterprise license deals. Revenue for those deals still gets recognized ratably, so the revenue recognition is generally over a longer period of time than the system sales, but we’re really now starting to see the growth in the size of those QCaaS deals. I think that, you know, as we look to the future, we will continue to see larger system sales deals than QCaaS deals, earlier revenue recognition on the system sales than the QCaaS, but I think we’re gonna really start to see QCaaS picking up the pace as we begin to do more enterprise licenses.

Antoine Legault, Analyst, Wedbush Securities3: Our next question comes from Joseph McCormack of Evercore. Please go ahead.

Joseph McCormack, Analyst, Evercore: Yeah, thanks for taking the question on from Mark Lipacis. Maybe just around Quantum Circuits and how it’s playing into that, you know, kind of sales pipeline increase that you’re talking to. I saw that you closed, you know, a little bit north of $2 million in bookings for QCI in January. Can you speak a little bit to the levels of engagement that you’re seeing? I don’t know if there’s any, you know, kind of qualification around, like, what that book of business, you know, kind of looks like from a backlog perspective, you know, that’s folding in as we enter the 2026 year.

Dr. Alan Baratz, Chief Executive Officer, D-Wave Systems Inc.: John, you want me to do that or you want to take it?

John Markovich, Chief Financial Officer, D-Wave Systems Inc.: No, I’m happy to. As we articulated when we first announced the transaction, Joe, that we do expect revenue contribution over the course of this year, from Quantum Circuits, on the professional services and QCAST side. They also have a book of business, that is government-related. They actually had some revenue last year that was government-related. That’s where we expect revenue contributions from, Quantum Circuits this year. As we’ve previously outlined, we also expect to start to develop a sales pipeline over the course of this year for potential systems sales.

Dr. Alan Baratz, Chief Executive Officer, D-Wave Systems Inc.: The only other thing I’ll say is we are seeing a lot of interest in the dual-rail systems, including the 8-qubit system that we have operational today with some early customers using it and the 17-qubit system we expect later this year. You know, a number of our current annealing customers have expressed interest in that system in addition to the annealing system, so we’re quite encouraged by the interest that we’re seeing.

Antoine Legault, Analyst, Wedbush Securities3: Our next question comes from Krish Sankar of TD Cowen. Please go ahead.

Antoine Legault, Analyst, Wedbush Securities2: Yeah, hi. Thanks for taking the question. Alan, I just wanted to find out, like, obviously one of your competitors is buying one of your foundries. Kind of wondering how you’re looking at risk mitigation. Also, does QCI use the same foundry as Qubits, or is this a different foundry?

Dr. Alan Baratz, Chief Executive Officer, D-Wave Systems Inc.: Okay. Currently, the dual-rail technology is not fabricated at SkyWater. For our annealing technology, SkyWater does fabricate the wiring, but they do not fabricate the active components, the Josephson junctions, which is in some sense, the most important and sensitive technology fabrication component from an IP perspective. The active components we fabricate ourselves in our R&D facilities, and SkyWater does the wiring, on dual-rail technology, SkyWater is not involved at all. My view on the IonQ acquisition of SkyWater is that, you know, on the one hand, they’re saying all the right things relative to continuing to work together exactly as we have been, and we should not be concerned about anything changing as a result of this transaction.

On the other hand, we are skeptical, and we are concerned. We are actively working on other sources of fab support for our systems.

Antoine Legault, Analyst, Wedbush Securities3: Our next question comes from Kevin Garrigan of Jefferies. Please go ahead.

Kevin Garrigan, Analyst, Jefferies: Yeah. Hey, Alan and John, let me echo my congrats on all the progress. Hey, you know, you talked a little bit about it in a previous question, but on the QAST side, I mean, how are customer conversations evolving, and what metrics are our customers really focused on when evaluating Quantum as a solution? I mean, is it all about kind of speed up time, or is it, you know, convenience or just your quantum annealer is just far better than anything out there?

Dr. Alan Baratz, Chief Executive Officer, D-Wave Systems Inc.: Well, I mean, first of all, the annealing quantum systems are the only ones that can actually deliver any commercial value today on real-world problems. They’re the only ones that are used in production by customers today. No other quantum computer is capable of that level of computation and commercial ROI. The way this evolves is that we basically engage a customer on an initial application, and we’ve gotten very good at being able to identify upfront whether the application that they’re interested in or other applications that they’re dealing with will benefit from our systems or not. Now, unlike in the past, when we start an initial application development with a customer, we have a very high degree of confidence that they’re gonna be able to see a very strong ROI.

That is what allows us to basically validate for them the benefits and the value they can get from working with us. That allows us to move more rapidly to getting that initial application into production, that’s what generates interest in other applications. The Fortune 100 deal that we did, that started with a first application. They were blown away by the results that we achieved, including a dramatic improvement in their bottom line based on using this technology. They came back and said, "Okay, we’ve got quite a few other applications. We want an all-you-can-eat license." We are now starting to see some other large companies see similar benefits from the initial application and talking about similar kinds of engagements.

Antoine Legault, Analyst, Wedbush Securities3: Our next question comes from Reuben Roy of Stifel. Please go ahead.

John Markovich, Chief Financial Officer, D-Wave Systems Inc.: Yes, thanks. Congrats, Alan and John, on the progress. Alan, these are probably a little bit longer-term in nature, questions.

Antoine Legault, Analyst, Wedbush Securities5: I’m wondering, with your annealing customers, obviously, you have a lot of commercial customers on the annealing side. Have you started to have some conversations on potential longer-term, you know, roadmap opportunities with gate model, QCI, computing with those, you know, success stories on the annealing side? The second part of that question is, and again, it’s probably pretty early here, but you’ve got the dual platform approach. Are there opportunities, in your view, to combine, annealing and gate, to come up with, unique solutions? Again, you’re the only, compute company, quantum compute company with both, so I’m wondering if there are opportunities longer term to, have hybrid solutions or whatnot, to even expand the TAM further. Thank you.

Dr. Alan Baratz, Chief Executive Officer, D-Wave Systems Inc.: Okay, first of all, yes, a number of our annealing customers have approached us and said: Look, you know, we’ve got some other use cases here that we’d like to look at in the context of your gate model technology. You know, our customers understand the difference between annealing and gate. They understand the types of problems that require annealing versus the types of problems that require gate. We’ve kind of educated them on that. They’re pretty savvy on that. They recognize that they’ve got other problems that potentially could demonstrate... benefit from gate, and they have started to engage us on those discussions.

You know, the only other thing I’ll say relative to your second question, I shouldn’t because we said only one question per, but it’s an easy one. Not yet. There’s some early evidence based on the fact that we’ve integrated some digital controls, read that as some gate operations, into our annealing systems, and we’re seeing some very interesting scientific results, based on that. Maybe, but it’s way too soon to be thinking of that as a viable commercial opportunity.

Antoine Legault, Analyst, Wedbush Securities3: Our next question comes from Troy Jensen of Cantor Fitzgerald. Please go ahead.

Antoine Legault, Analyst, Wedbush Securities6: Hey, gentlemen, congrats on all the momentum here. Alan, I totally agree with you. I guess my best takeaway from Qubits 2026 was there’s just dozens of customers out there that have kind of piloted programs and seem ready to kind of move forward. My question on, it’s multiple 8-figure enterprise QCaaS deals. Can you talk about, how much capacity do you guys have, you know, with your existing annealing computers in the time that they take to launch, you know, more if you need to, you know, ramp quickly?

Dr. Alan Baratz, Chief Executive Officer, D-Wave Systems Inc.: We have plenty of capacity in our Leap quantum cloud service to support, you know, I mean, minimum tens of enterprise deals. You know, our quantum computers are very capital efficient. Each quantum computer can support $25 million-$30 million of revenue per year. We’ve got four of them available today, you know, we’ve got plenty of revenue capacity for these kinds of deals. You know, deploying another system, you know, the capital cost is only about a couple of million dollars and, you know, the build time, I mean, once we have the componentry, is like three to four months. You know, with some lead time, we have no problem deploying additional systems.

Antoine Legault, Analyst, Wedbush Securities3: Our next question comes from Craig Ellis of B. Riley Securities. Please go ahead.

Craig Ellis, Analyst, B. Riley Securities: Thanks for taking the question, guys, congratulations on the real strong execution. Alan, I wanted to ask you a higher-level question, and I’ll rewind the clock a little bit. I think it was three quarters ago, you told us to expect increased R&D and go-to-market spend, and here we are now, able to show proof that we’ve got annealing cryo control applicability to gate. We start the year with, I think, around $45 million in trailing four or five-month bookings, which is extremely robust. The question is: Is that signs of execution of what you were pointing to, or were you expecting something else? As we start the year, if you can give us any color on what you see in the pipeline on the system side, and with that, all you can eat newer offering, it’d be greatly appreciated. Thank you.

Dr. Alan Baratz, Chief Executive Officer, D-Wave Systems Inc.: Sure. The short answer is yes, that, you know, our investments were designed to accelerate work on our Advantage3 system, which includes analog-digital capability as well as multi-chip for scaling to 100,000 qubits, and then to really start accelerating work on the gate model system. One of the key elements that we uniquely were bringing to the table was on-chip cryogenic control. On the R&D side, yes, the investments are playing out as we had planned. On the go-to-market side, you said it. I mean, you know, we’re making really good progress. It’s, it’s robust at this point in time. Our pipeline has grown significantly, and we’re feeling quite good about what we can expect to see this year. The investments in go-to-market are playing out exactly as we expected as well.

Antoine Legault, Analyst, Wedbush Securities3: Our next question comes from Hans Mosesmann of Rosenblatt Securities. Please go ahead.

Hans Mosesmann, Analyst, Rosenblatt Securities: Thanks, guys. Great work. like what you’re doing. A question on Advantage3: Do you have any more information about circuit tests? Any information that you could give us relative to how you’re progressing there and what the capabilities might be relative to Advantage2? Thank you.

Dr. Alan Baratz, Chief Executive Officer, D-Wave Systems Inc.: Yeah. I, I kind of called out the two key elements. You know, one analog-digital, the other multi-chip. Obviously, with each generation of system, it’s more qubits, more connectivity, and higher coherence times. Functionally, the big things for Advantage3 are putting some digital controls into the annealing fabric, as well as a multi-chip for scaling far more rapidly. We’ve got our first chips back that incorporate the analog-digital controls, and we are close to having our first chips that demonstrate multi-chip interconnect. We’re making good progress on all fronts.

Antoine Legault, Analyst, Wedbush Securities3: Our next question comes from David Williams of Benchmark. Please go ahead.

David Williams, Analyst, Benchmark: Hey, good morning. Let me also echo my congrats on the execution here. Maybe, Alan, can you speak to some of the pipeline that you talked about in the script, just the strength there, where that’s coming from, and really what you’re hearing from customers? How quickly can this pipeline turn into maybe confirmed revenue or those orders could come in? Just kind of that life cycle of that, of that pipeline. Thanks.

Dr. Alan Baratz, Chief Executive Officer, D-Wave Systems Inc.: I’m not gonna address the revenue piece because that’s all based on the revenue recognition policies of the company, and different deals have different recognition timelines. As far as closing the deals, I mean, we’ve got a strong pipeline for both system sales. I mean, honestly, you know, when we talked about this at the beginning of last year, I said, "Expect maybe 1 a year for the foreseeable future." You know, our pipeline for system sales right now is very robust. You know, we’re beyond 1 a year, at this point in time. The same is kind of true on QCAS and professional services deals.

I mean, you know, I talked a little bit about it, you know, one of the world’s largest airline companies, one of the world’s largest healthcare companies, largest chemical companies. I mean, we are, you know, closing deals with much larger companies. These are much larger deals from the outset, and we’re progressing through them much faster. Very strong go-to-market, environment for us right now.

Antoine Legault, Analyst, Wedbush Securities3: Our next question comes from Antoine Legault of Wedbush Securities. Please go ahead.

Antoine Legault, Analyst, Wedbush Securities: Good morning, and thanks for the question, and also want to echo my congratulations on the progress in 2025. There’s been recent reports that, you know, The Pentagon’s budget would increase significantly into fiscal 2027, and with some of that budget likely to be allocated to quantum technologies. Can you tell us a bit more about the magnitude of the opportunity ahead and how that might benefit you, particularly given your new government business unit? Thank you.

Dr. Alan Baratz, Chief Executive Officer, D-Wave Systems Inc.: Yeah. So, just, you know, quickly, first of all, we are not primarily pursuing, you know, R&D research grants. This isn’t about the government funding us to build our systems. We’ve got, you know, plenty of liquidity to be able to fund our R&D roadmap. What we are focused on is helping the government solve their hard computational problems today. In fact, you know, we’ve got a very interesting pipeline there. I’ll be very frank with you. When we talked about the Davidson Anduril deal at Qubits and, you know, Anduril talked about what they had seen in using our system, that generated a very significant inflow of interest, in leveraging our systems to solve hard problems within the U.S. government.

We’re feeling, like, you know, we’ve got the wind to our back right now, and with Jack Sears on board and building that the government business, basically having a place where we can engage and deliver for the U.S. government, we’re feeling quite good about the opportunity.

Antoine Legault, Analyst, Wedbush Securities3: Our next question comes from Richard Shannon of Craig-Hallum. Please go ahead.

Antoine Legault, Analyst, Wedbush Securities7: Hi, guys. This is Tyler Anderson on for Richard. Thank you for taking my question. You mentioned that you have 50% of the capacity of your system booked. When we’re thinking about future new systems that are coming online for the Advantage3 and beyond, is there a potential where we see multiple of those systems come online right away, and that way you can have that capacity reserved for customers that you’re talking to today? Are you having those conversations? Just want to get some color on that.

Dr. Alan Baratz, Chief Executive Officer, D-Wave Systems Inc.: Tyler, first of all, when you say 50%, the only time we’ve talked about 50% of capacity was in the Q-Alliance deal in Italy. They purchased 50% capacity of an Advantage2 system. In general, in our cloud service today, you know, we’re not yet even at 50% capacity. We’ve got a plenty of capacity in our Leap cloud service to support our professional services engagements and quantum computers as service customers. When we bring a new system to market, we try to upgrade all our cloud systems as quickly as possible. And because the numbers have been relatively small, we’ve just done them 1 at a time.

Now that we are seeing a lot more interest in system sales, we are making some investment in the team and the capabilities to do installation so that we don’t have to serialize. We can do more in parallel going forward. The answer is yes.

Antoine Legault, Analyst, Wedbush Securities3: Our next question comes from David Lu of Mizuho. Please go ahead.

David Lu, Analyst, Mizuho: Hi, yeah, one for Vijay. Thanks for taking the question, and congrats on the strong momentum here. My question I wanted to ask is, you guys called out the interest and momentum in system sales growth going to 26, as well as the enterprise traction for QCaaS. How should we think about QCaaS and the hardware sales mix going forward? Maybe in relation to that, the OpEx number as well for the year. Thanks.

Antoine Legault, Analyst, Wedbush Securities3: Hey, John, do you want to take that?

John Markovich, Chief Financial Officer, D-Wave Systems Inc.: Sure. As with respect to the OpEx numbers, I articulated earlier, and my comments were based upon our consolidated OpEx. My comments were that we’re expecting OpEx to grow at 15% sequentially, quarter-over-quarter, over the course of the fiscal year. With respect to the mix, the mix is gonna be entirely a function of the composition and magnitude of the bookings, which, as we’ve articulated in the past, you know, we expect that in the foreseeable future to be relatively lumpy, where, you know, we could have a substantially higher QCafé enterprise mix in any given quarter than we have a, you know, systems bookings. As Alan mentioned earlier, each one of these deals has or could have unique revenue recognition elements to it.

For instance, the percentage of completion on a systems installation. The answer is, expect that mix to be lumpy.

Antoine Legault, Analyst, Wedbush Securities3: This concludes our question and answer session. I would like to turn the conference back over to Dr. Barrett for any closing remarks.

Dr. Alan Baratz, Chief Executive Officer, D-Wave Systems Inc.: Thank you. In closing, let me reiterate that D-Wave is different. We’re pulling away from the quantum computing pack, as demonstrated by our undeniable commercial traction and our remarkable technical leadership. D-Wave is the only dual-platform quantum computing company capable of delivering both annealing and gate model systems. The only company with quantum computers that have demonstrated quantum supremacy on a useful, real-world problem. The only company that has customer applications in production now. The only company with highly differentiated gate model technology that delivers the remarkable speed of superconducting and the fidelity of ion trap or neutral atom approaches, a powerful combination that positions D-Wave to win in the error-corrected gate model race. 2026 is the year of D-Wave Quantum, the year we emerge as a defining company in the quantum era.

Thank you all for joining us today, and we look forward to updating you on D-Wave’s progress in the coming months.

Antoine Legault, Analyst, Wedbush Securities3: This concludes today’s conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day!