Is Quantum Computing Stock IonQ a Good Long-Term Investment?

Artificial intelligence has proven revolutionary, but quantum computers hold the promise of elevating the computing industry to unprecedented heights, thanks to the power of quantum mechanics. This makes companies working on the tech compelling investments.

One of the prominent pure-play quantum companies is IonQ (NYSE: IONQ). It's pursuing the use of particles called ions to operate its quantum machines. This is a newer technology compared to the tried-and-true technique of superconducting qubits employed by rivals such as Rigetti Computing.

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IonQ's novel approach is just the start. It's aiming "to build the next generation of the Internet," according to the company's chairman and former CEO, Peter Chapman. But industry estimates indicate it will likely take years for quantum devices to evolve enough to replace today's computers.

So does IonQ's technical achievements make it a worthwhile investment over the long haul as quantum machines gradually gain wider adoption?

Image source: Getty Images.

IonQ's technological advancements

IonQ's ambition to drive the evolution of the internet requires taking on many different pieces of that ecosystem. As part of this, the company plans to be the first to have a quantum computer in space. To that end, it's acquiring Capella Space Corporation, which has been developing top-secret quantum capabilities for the U.S. government.

IonQ also made a series of other acquisitions related to building out a quantum computer network. This network would act similarly to the computer networks that exist today, which make technologies such as the internet and artificial intelligence possible.

By networking quantum computers together, IonQ can amplify their collective power to solve complex problems, such as improving energy grids and developing new medicines. But today, quantum networks can't extend very far. To address this, IonQ is acquiring Lightsynq Technologies, which specializes in equipment designed to extend the range quantum devices can be networked through devices called repeaters.

IonQ's financial performance

IonQ's technology is making progress, and consequently so have its sales. The company has doubled revenue annually since becoming a public company in 2021.

However, that streak may be at risk in 2025. That's because, at the end of the first quarter, IonQ's revenue totaled $7.6 million, essentially flat compared to the prior year. The stalled sales growth comes just as IonQ's new CEO, Niccolo de Masi, took the reins.

Moreover, the company is not only unprofitable, its first-quarter operating loss of $75.7 million was 43% higher than the prior year's $52.9 million. Rising expenses without revenue growth is concerning.

That said, in Q2 IonQ forecasts at least $16 million in sales, up from $11.4 million in the previous year. For the full year, the company expects revenue to reach between $75 million and $95 million. That's an increase of at least 74% from 2024's $43.1 million.

Furthermore, IonQ exited Q1 with a strong balance sheet. Total assets were $850.1 million with a war chest of $588.3 million in cash, cash equivalents, and short-term investments. Contrast this with total liabilities of $85 million.

To buy or not to buy IonQ stock

If IonQ can achieve its forecast sales numbers for the year, that would return it to the strong sales growth rates it has seen historically. That's the kind of increase you want to see in a successful business.

Yet, investing in IonQ entails significant risks. The company is pursuing so many areas to build its quantum internet and network, it may be biting off more than it can chew, and contributing to its substantial rise in costs.

In addition, IonQ is not a cheap stock. You can assess its valuation with the price-to-sales (P/S) ratio. This metric measures how much investors are willing to pay for every dollar of revenue based on the trailing 12 months, and is commonly used to evaluate stocks for unprofitable companies, such as IonQ.

Data by YCharts.

The company's encouraging sales forecasts contributed to its stock price rising in recent weeks, which drove up its P/S multiple to 170. While not quite at the lofty levels seen at the start of the year, it's getting there.

Also, at this point, investors won't know until IonQ's Q2 results whether it can return to strong year-over-year sales growth. So wait for Q2 earnings before deciding on the stock, and even then, only those with a high risk tolerance should consider buying shares.

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Robert Izquierdo has positions in IonQ. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.