IonQ Shares Surge as Revenue Soars. Is It Too Late to Buy the Quantum Computing Stock?

While an investment in IonQ (NYSE: IONQ) is largely about the long-term future of quantum computing and its potential to become one of the top companies in this nascent field, the company is starting to deliver impressive revenue and growth right now.

IonQ has proven to be one of the early leaders in quantum computing, with its trapped-ion technology supplemented by microwave antennas embedded directly into its chips, achieving the highest fidelity (accuracy) in the space at 99.99%.

Meanwhile, it recently made a breakthrough in quantum error correction (QEC), developing an end-to-end real-time QEC decoder using an off-the-shelf central processing unit (CPU). At the same time, the quantum computing company has been aggressively making acquisitions in the quantum space, as it looks to take a page from Nvidia's book and become a complete ecosystem player.

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Let's take a closer look at the company's Q3 earnings report and prospects to see whether the stock's rally can continue or if it's too late to buy.

Surging revenue

The past few months have been important for IonQ. It closed its acquisition of quantum foundry SkyWater at the end of July, advanced to Stage 3 of the Defense Advanced Research Projects Agency's (DARPA) Quantum Benchmarking Initiative, and acquired zero-trust network security company Elisity to bolster its cybersecurity capabilities.

In the third quarter, IonQ's revenue soared 336% to $173.8 million from $39.9 million a year ago. That was well above the $141.6 million analyst consensus.

IonQ platform revenue jumped 127% to $90.3 million, powered by deployments of its Tempo systems and sensing products. SkyWater, meanwhile, contributed $83.5 million in sales from its two months under IonQ. It said SkyWater's revenue growth was strong, as it added new customers and expanded existing relationships.

About 65% of its revenue came from commercial customers as they began using its solutions for real-world purposes. Meanwhile, 35% of revenue came from international markets, while 40% came from multi-product sales.

Remaining performance obligations (RPOs), which can be an indicator of future growth, came in at $1.2 billion, with $479 million from SkyWater. IonQ platform RPO jumped 42% sequentially to $689 million. The company signed $290 million worth of contracts in the quarter, including $180 million for quantum computing systems.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at a loss of $133.68 million, compared to a loss of $48.9 million a year ago. Adjusted EPS, meanwhile, was a loss of $0.29 versus a loss of $0.17 a year ago. However, that topped the analyst consensus for a $0.38 loss.

IonQ also continues to burn cash, with negative operating cash flow of $570.3 million over the past nine months, and negative free cash flow of $605.2 million. It currently has around $3.7 billion in cash and investments on its balance sheet and minimal debt, after a $2 billion equity offering in October after the quarter.

The company raised its full-year revenue guidance to $505 million to $515 million, up from a prior outlook of $280 million to $290 million before the SkyWater acquisition was completed. It now expects quantum computing growth of 110%, up from a prior outlook of 100%. Meanwhile, it is sold out of capacity for its new sixth-generation Superion 256 systems for 2027.

Is the stock a buy?

IonQ has become a clear leader in the quantum computing space, and this is starting to show up in real revenue. The company has one of the most accurate systems, which positions it well to eventually create a fault-tolerant system.

That said, with quantum computing stocks, I'd still prefer a basket approach that includes multiple stocks, as betting on a single technology and company at this stage carries significant risk. While IonQ's systems lead in accuracy, they're not as strong in QEC as some other players, and the trapped-ion technique is not as fast as other approaches, such as superconducting qubits. Nonetheless, given the company's strengths, this is definitely a top quantum stock to own; it just wouldn't be my only bet on the future of quantum technology.

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