D-Wave Pushes Back on Short Seller Case With Strong Earnings
After rising by an astonishing 683% in the last year, quantum computing firm D-Wave Quantum Inc. (NYSE: QBTS) has left investors divided. On one hand are the bulls who feel that the company's recent technological achievements have the potential to upend computing as we know it; these investors suspect that, despite signs of being overvalued, D-Wave has ample room to continue to ascend.
[content-module:CompanyOverview|NYSE:QBTS]
On the other hand, bearish investors suspect the company will eventually come crashing down, either due to overenthusiasm by other investors or failure to live up to its hype.
Short sellers have recently made a case against D-Wave, arguing that the company's technology is not likely to usher in a quantum revolution after all and that its path to sustained and growing profitability is fraught.
However, the company's early-May first-quarter 2025 earnings report might be a point in favor of the bulls, as D-Wave posted records in revenue, gross margin, and other metrics.
Solid Revenue Growth May Suggest a Path Forward
Revenue has long been a sticking point for investors hesitant to take up a position in D-Wave. Skeptics question the company's ability to generate revenue—and, more fundamentally, the marketability of its technology and products at this stage. Jensen Huang, CEO of chip giant NVIDIA Corp. (NASDAQ: NVDA), sent quantum stocks sliding in January 2025 when he speculated that useful quantum computers (with broad applications for business and personal use) were likely two decades away. While D-Wave may be at the forefront of one line of quantum technology development, if a solid path to revenue gains is not in sight for many years, investors will shy away.
Fortunately, the company's first-quarter revenue of $15 million is one data point pushing back at this timeline. D-Wave's revenue surged by more than 500% year-over-year (YOY), thanks in large part to the sale of a quantum computing system. A single system sale does not automatically suggest revenue gains are in store going forward, but it may nonetheless provide some reassurance that D-Wave's products have a market. Along with the revenue boost, D-Wave also increased its customer base over this period.
Strong GAAP Gross Profit and Cash Position
Along with concerns about revenue, investors also hesitate regarding D-Wave's path to consistent profitability. While the company posted a net loss of $5.4 million for the first quarter, this is an improvement of $11.9 million compared to the prior-year quarter. Perhaps more importantly, D-Wave's GAAP gross profit came in at $13.9 million, a quarterly record for the company and an increase of more than 700% YOY.
D-Wave's strong GAAP gross profit performance is thanks in part to its higher margin, high-profile sale in the first quarter—GAAP gross margin for the period reached 92.5%, up from 67.3% in the same quarter of 2024. With improving gross margins also comes a more favorable cash position, which is especially important as D-Wave continues to develop new technologies while it is not yet generating substantial revenue.
The company ended the quarter with more than $304 million in cash and equivalents; D-Wave leadership said that this stockpile is sufficient to support the company until it reaches consistent profitability.
[content-module:TradingView|NYSE:QBTS]
In the Clear, or Still Reason to Pause?
While D-Wave's earnings report was sufficiently positive to send shares skyrocketing by about 50% in the days immediately following its release, cautious investors may not yet be fully convinced about the company.
[content-module:Forecast|NYSE:QBTS]
For example, bookings (received customer orders that are expected to generate future net revenues) decreased by almost two-thirds YOY to $1.6 million. And while the company's customer base grew, it still only had a pool of 133 customers as of quarter's end. These may be reminders for some investors that D-Wave's position remains precarious.
In the days following D-Wave's earnings announcement, analysts at both Benchmark and Needham & Co. boosted their price targets for the firm. Even so, with a consensus price target of $10.17, shares of QBTS currently exceed analyst predictions, suggesting that short-term upside potential may be limited or non-existent.
Finally, though D-Wave has noted some promising technological achievements, investors should keep in mind that many experts still believe functional and commonplace quantum computing is still a long way off—and that major tech firms and an array of competitors are also working to be the first to bring these products to market.
Where Should You Invest $1,000 Right Now?
Before you make your next trade, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis.
Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list.
They believe these five stocks are the five best companies for investors to buy now...
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CTV News
an hour ago
- CTV News
Sask. steeling itself for increased U.S. tariffs
Sask. steeling itself for increased U.S. tariffs WATCH: More trade uncertainty approaches as U.S. President Donald Trump threatens to raise steel tariffs. Sierra D'Souza Butts explains.
CBC
an hour ago
- CBC
Manitoba politicians reach deal to speed passage of free trade bill through legislature
Social Sharing Manitoba politicians reached a deal to speed passage of a free trade bill Monday, hours before the legislature was to break for the summer. More than 30 other bills were also set to be approved on the last day of the spring sitting. The trade bill, based on a deal with Ontario, would remove trade and labour barriers for some goods and services between Manitoba and other jurisdictions that pass similar laws. Other provinces have recently joined the effort, as part of a national plan to boost the economy and respond to tariffs imposed by the United States. The NDP government wanted the bill passed quickly, without public hearings that are normally mandatory in Manitoba, in time for July 1. The Opposition Progressive Conservatives initially rejected demands to quickly approve the bill and unsuccessfully proposed amendments they said would have broadened it. One proposal would have reduced the number of provincial Crown corporations exempt from freer trade requirements. It was rejected by the NDP. PC Leader Obby Khan had also hoped for a compromise that would have seen the NDP agree to pass some Opposition bills in exchange for fast-tracking the trade bill. He didn't get that promise, but agreed to pass the trade bill anyway. "These are unprecedented times we are facing," Khan told reporters Monday. "Regardless of your political stripe, we must stand shoulder to shoulder against (U.S. President Donald) Trump's tariffs and for a stronger Canada." Among the dozens of other bills headed to final approval Monday night was one to add gender expression to the human rights code — a move that would include protections for people to be called by their preferred pronouns. The bill, similar to laws already in place in most other provinces, was met with a mixture of praise and opposition at public hearings. Another bill would change highway traffic laws to impose new minimum distances for drivers to maintain when coming across snowplows and emergency vehicles. A change to the Public Health Act would eliminate the option of putting people with communicable diseases in jail, and divert them to a hospital or other health facility instead. The Public School Act was amended to expand school nutrition programs across the province. "We're incredibly proud of the work that we've done," NDP House leader Nahanni Fontaine said. The government did not get all of its legislative agenda passed, however. A bill to enact tax changes announced in the spring budget, including a change to personal income taxes that will no longer raise tax brackets in line with inflation, will not pass until after the legislature reconvenes in the fall. The PCs used their right under House rules to hold back five other bills for further debate when the legislature resumes. One bill includes several proposed changes to observances at schools. O Canada would have to be sung daily, and a little-used provision that required God Save the King to be played would be eliminated. The PCs said the bill would remove the royal anthem as an optional patriotic observance. Another bill held back until fall would lower political donation limits and require political parties to have a code of conduct for election advertising. A third bill would forbid liquor licences in urban convenience stores and gas stations — a move the PCs say will affect small businesses and customer choice in the few locations where such licences have been issued. The fall legislature sitting is scheduled to start Oct. 1.
CTV News
2 hours ago
- CTV News
What doubled U.S. steel tariffs could mean for Saskatchewan
Saskatchewan businesses share concerns about the future of the steel industry as the U.S. plans to raise tariffs to steel imports to 50 per cent. Saskatchewan is preparing for more trade uncertainty as the U.S. announces plans to raise tariffs on steel imports to 50 per cent. On Friday, U.S. President Donald Trump announced he would double the current rate for steel and aluminum imports – potentially increasing the costs for cars, tools, and machines. As a result, the Saskatchewan Mining Association said the future of the steel industry continues to be unclear. 'There's a certain level of uncertainty and unpredictability that has to be costed into projects,' said the association's president, Pam Schwann. With the current tariff rate sitting at 25 per cent, Schwann said companies have already felt the implications and continue to build 'potential increases in tariffs into their cost projections.' 'Everyone around the globe is facing a lot of uncertainty right now with the United States' trade practices,' she explained. 'We are looking at alternate sources as well that maybe aren't coming from the States to help improve our optionality.' Keith Willoughby, professor of management science and dean of the Edwards School of Business at the University of Saskatchewan, said the tariffs may very well lead to economic instability - if they're imposed for a long period of time. 'From a Saskatchewan side thus far, we've been fortunate because 45 per cent of our trade goes to countries not in the United States. We have been good in the past at diversifying our markets and exploring other situations,' he explained. 'The challenge though with steel and aluminum is it's a special case because as far as I understand it most of our trade, over 90 per cent, is going south of the border.' Willoughby said higher tariffs may also affect production costs on both sides of the border. 'Even though steel and aluminum is a fraction of our export equation, it still is a $400 million piece and because of a lot of it is going south of the border,' he said. 'I think that's where we could see some increased turbulence.' He added that a similar situation happened during Trump's first term, where steel and aluminum tariffs were 'reduced largely' after American auto manufactures raised concerns about paying higher prices for Canadian materials. With Trump's plan to impose the 50 per cent tariff rate on steel imports as soon as June 4, Willoughby recommends businesses on both of the border communicate with one another. 'It would be important for the American companies to be aware that if they don't have access to the lower price and better grade Canadian steel and aluminum, they would suffer in terms of their ability for production and fabrication of products,' he said. 'That's why it would be important for our economy, our government, and individuals to continue the conversation.'
