Is IonQ Stock a Buy as Revenue Skyrockets?

For the third straight quarter, IonQ (NYSE: IONQ) saw its revenue more than triple. However, this time, its results were not enough to give the stock a lift, as its shares fell more than 9% the following session after its May 6 announcement. Yet the stock remains up more than 60% over the past year.

Let's look at the quantum computing company's earnings report and prospects to see whether this dip is a good buying opportunity.

Revenue surges again

While quantum computing is in its infancy, IonQ has become one of the early leaders in the field because its trapped-ion technology has proven to be one of the most accurate. This was on display when it hit the milestone of 99.99% 2-qubit gate fidelity (accuracy) last fall. This, in turn, is helping lead to more sales and contacts.

Image source: The Motley Fool.

In the first quarter, IonQ's revenue surged 755% to $64.7 million from $7.6 million a year ago. That was 30% above the midpoint of its guidance range.

About 60% of its revenue came from commercial customers, with the company saying its quantum solutions are moving from the lab to real-world applications. Meanwhile, 35% of revenue came from international markets, while a third came from multiproduct sales.

Remaining performance obligations (RPOs), which can be an indicator of future growth, soared 554% to $470 million. It noted that for every $1 in revenue, it was seeing $2.50 in new RPOs.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), meanwhile, came in at a loss of $96.8 million, compared to a loss of $34.1 million a year ago. It said excluding spending with foundry SkyWater, which it is in the process of acquiring, adjusted EBITDA would have been a loss of $85 million. Adjusted EPS, meanwhile, was a loss of $0.34.

IonQ also continues to burn cash, with negative operating cash flow of $151 million for the quarter, and negative free cash flow of $159.3 million. It ended the year with about $3.1 billion in cash and investments on its balance sheet and no debt.

The company raised its full-year revenue guidance to $260 million to $270 million, up from a prior outlook of $225 million to $245 million. It said that organic revenue growth would double. For Q2, it is looking for revenue between $65 million and $68 million. However, IonQ did maintain its full-year EBITDA guidance of a loss of $330 million to $310 million.

Is the stock a buy?

While investing in the quantum computing sector remains speculative, given that full-fledged commercialization of the technology is still considered many years away, IonQ looks like one of the best horses to bet on. It's at the forefront in terms of accuracy, and the company has been aggressive with acquisitions, looking to build an entire quantum ecosystem. Meanwhile, it remains well-funded, with over $3 billion in cash and investments on hand.

With the company now seeing real-world momentum, investors can consider taking a small, speculative position in the stock.

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