Is It Time to Consider Rigetti Computing as Revenue Soars?

Despite its revenue surge, Rigetti Computing's (NASDAQ: RGTI) share price fell after the company reported its Q1 results. The stock is one of a group of quantum computing stocks that have captured the imagination of investors about what the future may hold for the emerging technology.

Not surprisingly, the stock has been volatile. Its share price is up around 60% over the past year but down nearly 70% from its 52-week high.

Let's take a closer look at the company's results and prospects to see if this is a buying opportunity.

Image source: The Motley Fool.

Revenue surges, but questions remain

After its revenue tumbled last quarter, Rigetti saw it triple to $4.4 million in Q1. It also came in above the analyst consensus of $4.09 million. Most of the revenue came from Rigetti's Novera quantum processing unit (QPU), as it completed the sale of a system to the University of Saskatchewan.

Meanwhile, Rigetti's gross margins rose from 30% to 31%, and its operating expenses jumped 24% to $7.3 million. Its adjusted EPS loss of $0.04 narrowed from a $0.06 loss a year earlier and also topped the $0.05 consensus.

After previous delays due to accuracy issues, the company made its Cepheus-1-108Q quantum system available to customers across several quantum platforms. The company said Cepheus-1-108Q is the world's largest generally available modular quantum computing system.

Rigetti's systems are best known for their speed, but they have tended to lag behind in accuracy. It said Cepheus-1-108Q's 2-qubit fidelity is currently around 99.1%, while single-qubit fidelity is 99.9%. While that may sound accurate, it is actually extremely error-prone in the world of computing. Meanwhile, even after the delay, it missed the 99.5% median 2-qubit gate fidelity it had been hoping to achieve.

In comparison, rival IonQ has been able to achieve 99.99% 2-qubit fidelity. While the difference may sound small, it's actually enormous and allows IonQ to focus on other error-correcting techniques to improve its performance.

Looking ahead, the company still has another Nuvera system to deliver this year and an $8.4 million 108-qubit system order.

Should investors buy the dip?

Even after the dip, Rigetti has an over $6 billion market capitalization, with analysts projecting 2026 revenue of less than $24 million. For a company struggling with fidelity (accuracy), that's a huge valuation that doesn't make much sense. As such, I'd avoid the stock.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends IonQ. The Motley Fool has a disclosure policy.