D-Wave Quantum Inc. (QBTS) used its second-quarter 2026 earnings call to outline two central priorities: expanding commercial adoption of annealing quantum computing and progressing toward fault-tolerant gate-model systems.
President and CEO Alan Baratz said D-Wave is targeting a gate-model system with 100 logical qubits and more than 1 million reliable operations by 2032, which management views as the threshold for initial commercial applications.
Baratz said the company expects a 17-physical-qubit system later in 2026, followed by 49 physical qubits in 2027 and 181 in 2028, with a 10-logical-qubit system targeted for 2030.
He highlighted peer-reviewed work showing roughly 99.9% fidelity for a two-qubit entangling gate with gate times of about 500 nanoseconds, supporting D-Wave’s dual-rail architecture and error-correction roadmap.
On the commercial side, Baratz pointed to six customer applications now in full production, with production applications contributing 37.3% of first-half QCaaS revenues, up sharply from 9.8% a year earlier.
Baratz highlighted AT&T, where an optimization application reduced processing time from about one hour to less than 15 seconds, and Optum, which had run about 30,000 jobs by mid-June.
During the Q&A session, Baratz told a ROTH Capital analyst that about 25% to 30% of commercial discussions now involve a line of business directly or from the outset, versus none a year earlier.
CFO John Markovich said third-quarter revenues should rise modestly from the second quarter, while fourth-quarter revenues should increase significantly and account for the majority of 2026 revenues.
Markovich said D-Wave still expects to ship two annealing systems during the balance of the year, both in the fourth quarter, with some installation and calibration revenues carrying into 2027.
He also noted $40.7 million of remaining performance obligations at June 30, with about 57% expected to convert to revenues within 12 months and 72% within two years.
Second-quarter revenues of $3.1 million were essentially flat year over year, while bookings rose 59% to $2.1 million and average booking size increased more than 87%.
GAAP gross margin fell to 55.4% from 63.8%, which Markovich attributed to higher personnel costs, and adjusted EBITDA loss widened to $37.1 million from $20 million as spending on product development and go-to-market efforts increased.
Adjusted loss came in at 10 cents per share, compared with the Zacks Consensus Estimate of a loss of 8 cents, while revenues of $3.1 million fell short of the $3.8 million consensus estimate.
An Evercore analyst asked when gate-model milestones could begin contributing meaningful revenue, and Baratz said government contracts are already generating initial gate-model revenues with more than one company expressing interest in buying a dual-rail system.
A Benchmark analyst asked about annealing system economics, and Markovich said pricing ranges from $20 million to $40 million, with revenue recognition generally spanning about two quarters once a site is ready.
Baratz also said the Quantum Circuits integration is progressing well and reiterated that the 17-qubit dual-rail system remains on track for delivery before year-end.
QBTS currently carries a Zacks Rank of No. 2 (Buy), though its Value Score is F, Growth Score is D, Momentum Score is C, and VGM Score is F, presenting a favorable rank alongside weak style readings.
