Where Will D-Wave Quantum Stock Be in 5 Years?

D-Wave (NASDAQ: QBTS) already has something that matters in industries at the bleeding edge of science: technology customers are willing to pay for. This has won D-Wave many fans, but with annual sales still measured in the tens of millions, its enormous valuation assumes a whole lot more is coming. Will it?

And five years from now, where will D-Wave stock be?

How quantum computing differs from traditional computing

First, a short primer on quantum computing: The phone or laptop you're reading this on processes information using bits -- 0s and 1s. Quantum computers use quantum bits, or "qubits," which can exist in a combination of those two states. That gives them a fundamentally different way to process information, and that means quantum computers could tackle problems that are more or less impossible to solve by traditional methods.

Image source: Getty Images.

Of course, "could" is doing a fair amount of work here. Building the kind of mature, powerful, and widely useful quantum computer that the industry hopes to build is still a real engineering challenge.

D-Wave's approach to commercial quantum computing

D-Wave's "quantum annealing" approach is especially good at optimization. Think problems like scheduling workers across multiple factories or improving routing for a fleet of delivery trucks.

And critically, this approach has yielded more real-world results more quickly than much of the competition. D-Wave already offers its annealing technology commercially. However, there's a catch: Annealing is widely considered to have less upside than other approaches, trading long-term potential for near-term utility.

The company is now pursuing an alternative gate-based approach after the recent acquisition of Quantum Circuits, but it has traditionally been focused on optimization and commercialization.

D-Wave's revenue, bookings, and continued losses

This strategy means that, unlike some of its peers, D-Wave has a real -- albeit modest -- business. Its sales clocked in at $3.1 million last quarter, flat year over year. However, there are signs of better times ahead.

The company's backlog stands at $40.7 million. That includes a single $20 million system sale booked in the first quarter (Q1).

While revenue could pick up, D-Wave is still struggling on the bottom line, losing $48 million in Q2.

The company does, however, have a decent financial cushion, ending June with $546.2 million in cash and securities.

Two scenarios for D-Wave's growth through 2031

For these scenarios, let's start with roughly $42.5 million in 2026 revenue, close to the current analyst consensus.

A bullish scenario

• D-Wave's annealing systems gain wider adoption as customers find meaningful advantages in scheduling, logistics, and other optimization tasks.
• Its gate-based technology progresses, opening up additional applications.
• Sales grow at 50% annually, reaching about $323 million in 2031.
• The company moves closer to profitability but continues operating in the red as it scales.

A bearish scenario

• Annealing finds some useful applications, but adoption remains limited as traditional computing proves competitive.
• Its gate-based systems remain largely confined to research and experimentation.
• Sales grow at 15% annually, reaching about $85 million in 2031.
• The company remains deeply unprofitable and eventually turns to further stock sales to help fund the gap.

Where could D-Wave stock be in five years?

Honestly, I see D-Wave looking a lot more like the latter case five years from now. The company already has some practical applications, but turning those into a large, profitable business and continuing to scale is another matter.

In that scenario, I doubt investors will be willing to pay anywhere near today's enormous sales multiple. Even at 10 times sales, D-Wave would be worth only $850 million, significantly less than the nearly $4.5 billion valuation it carries today.

Of course, I could be very wrong. Adoption could accelerate, and D-Wave's technology could improve faster than I expect, and its annealing approach could find wider commercial use than I assume. But I'm skeptical that its business will grow nearly as quickly as many investors assume.

Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.