Rigetti Computing Stock

Good day, and thank you for standing by. Welcome to the Rigetti Computing Second Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Subodh Kulkarni, CEO of Rigetti. Please go ahead.

Good afternoon, and thank you for joining us for Rigetti's Second Quarter 2026 Earnings Conference Call. I'm pleased to be joined today by our Chief Financial Officer, Jeffrey Bertelsen who will walk you through our financial results in more detail following my overview.

We appreciate your continued interest in Rigetti and look forward to answering your questions at the conclusion of our prepared remarks. Before we begin, I would like to remind everyone that today's call, along with our second quarter 2026 press release, contains forward-looking statements. These statements reflect our current expectations, objectives and underlying assumptions regarding our outlook and future operating results and are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks and uncertainties are described in more detail in our filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2025, our Form 10-Q filing for the quarter ended June 30, 2026, and other periodic reports filed from time to time with the SEC.

Rigetti undertakes no obligation to update any forward-looking statements made during this call, except as required by law. During today's call, we will refer to certain non-GAAP financial measures. For details on these measures and reconciliations to comparable GAAP measures, please refer to today's earnings release on our Investor Relations website at www.rigetti.com and to the 8-K furnished with the SEC. Before I dive into the quarter, I want to frame our discussion around 3 key takeaways. First, we continue to demonstrate technical leadership with our Cepheus-class systems, including ongoing progress to improve the performance of our 108Q, Cepheus-1-108Q platform.

Second, the letter of intent we signed with the U.S. Department of Commerce for up to $100 million in funding over 3 years further validates our superconducting chiplet-based approach and strengthens our ability to invest against our road map to Quantum advantage.

Third, we recently announced an expanded collaboration with HPE and the Pittsburgh Supercomputing Center to develop a hybrid quantum classical supercomputer, reflecting growing demand for our approach and positioning Rigetti to deliver differentiated quantum-enhanced HPC solutions.

Q2 was another important proof point in our strategy to combine technical progress with real-world access and long-term strategic partnerships. Quantum computing remains a long-cycle opportunity, but we are increasingly seeing the ecosystem coalesce around platforms that can scale in a practical way and that are available to users where they already run their workloads.

We believe Rigetti is well positioned in the environment for 3 reasons. We are focused on superconducting gate-based quantum computing, which offers a combination of scalability and speed that is difficult to replicate with other modalities.

We are pursuing an open modular architecture that allows us to integrate innovative solutions from partners to advance our technology faster, such as QEC technology from Riverlane and transduction technology from QphoX. We pioneered and continue to lead in chiplet-based architectures, which we believe provide a more practical path to scaling to 1,000 qubits and beyond than monolithic approaches.

Let me start with our technology and product progress. Cepheus-1-108Q remains one of the highest qubit count, generally available gate-based quantum computers in the world and the largest modular quantum computing system on the market today. The system is built from 12 interconnected 9-qubit chiplets and is accessible to customers via Rigetti Quantum Cloud services and through Amazon bracket, Microsoft Azure Quantum and qBraid. We are just 1 of 3 companies, including IBM and Google, who have delivered gate-based systems with over 100 qubits, and we believe that our modular approach gives us a strong advantage on the path towards higher qubit count systems. Today, Cepheus-1-108Q continues to operate at a median single qubit gate fidelity of approximately 99.9% and a median 2-qubit gate fidelity of roughly 99.1% with gate speeds around 60 nanoseconds. This performance levels at the 100-plus qubit scale are meaningful, and our teams remain focused on improving fidelity throughout 2026 as we refine chip design, materials and fabrication processes and incorporate learnings from our R&D platforms.

From a systems engineering perspective, our work this quarter extended beyond adding qubits. We continue to mitigate coupling interactions between tunable couplers that become more pronounced beyond the 100 qubit scale and to address coherence time limitations that are now the primary constraint on fidelity. As we discussed with investors in May, our current coherence times are in the 25 to 30 microsecond range, and we are executing on a set of chip design and material initiatives intended to roughly double or triple those times over the next several years. This includes joint IP with Fermilab where capping niobium superconducting contacts with tantalum has demonstrated meaningful coherence time improvements in fundamental experiments, and we are now incorporating those learnings into production chip designs.

We are also refining deposition, oxidation and etch processes to smooth interfaces in the Josephs junction area, which we believe will further improve coherence and ultimately gate fidelities. Beyond Cepheus-1-108Q, we remain on track with the chiplet-based road map we laid out earlier this year and have begun investing in dilution refrigeration and infrastructure that can support 1,000 qubit systems.

Our objective remains to reach approximately 1,000 qubits, 2 qubit gate fidelities of 99.9% and gate speed below 40 nanoseconds in roughly 3 years. I would now like to spend a few minutes on the U.S. Department of Commerce letter of intent we announced on May 21. Under this LOI, the department has selected Rigetti for a potential award of up to $100 million in funding over 3 years to accelerate superconducting quantum computing R&D that addresses key technical challenges in scaling and advancing our systems.

The contemplated transaction structure includes a department receiving an equity stake in Rigetti, consistent with the total amount of funding and the funding itself would be allocated under the CHIPS Research and Development Office broad agency announcement pursuant to the CHIPS Act. We believe that this prospective partnership reflects the view that quantum computing will have far-reaching impacts on national security, economic interest and overall prosperity and that superconducting qubit platforms are central to U.S. leadership in this field. It also reflects the administration's broader CHIPS R&D investments in quantum computing and related technologies designed to build domestic industry, create high-paying jobs and strengthen technological resilience.

For Rigetti, this LOI is strategically significant in several ways. It would allow us to tackle key scaling bottlenecks more rapidly associated with multichip architectures. It would enable us to accelerate multiple generations of superconducting quantum processors and associated control electronics at Fab-1, our dedicated quantum device manufacturing facility. It would deepen our collaboration with the U.S. government at a time when global investment in quantum computing is increasing and geopolitical competition in this domain is intensifying. It is important to emphasize that the LOI is not yet a definitive agreement.

Any final structure will also include issuance of securities to the department and will be subject to customary approvals and conditions. We view this prospective partnership as aligned with our long-term strategy and our commitment to disciplined capital deployment. Jeff will provide additional context on how we are thinking about this funding opportunity within our broader capital framework.

Turning to customer momentum and market traction. Our strategy is to meet customers where they are across public cloud, hybrid infrastructure and dedicated quantum systems. On the cloud, Rigetti Quantum Cloud Services, Amazon bracket, Microsoft Azure Quantum and qBraid provide global access to our systems, including Cepheus-1-108Q. We continue to see engagement from researchers and enterprises seeking to experiment on one of the most capable generally available gate-based platforms where they benefit from ease of use and consistent uptime.

In parallel, we are building a growing base of on-premises system deployments. Earlier this year, we outlined 3 systems targeted for delivery in 2026. bit Novera systems and a 108-qubit system for C-DAC in India. We remain on track and are seeing additional demand for Novera QPUs from national labs and universities with recent wins, including the University of Saskatchewan and a research arm of a large Japanese conglomerate. These deployments deepen technical engagement, create multiyear usage pathways and generate high-value feedback that informs our road map.

At this stage of the market, we are prioritizing customers committed to active experimentation and collaboration, and we are deliberate in how we build those relationships. As part of this customer momentum, we recently expanded our collaboration with HPE and the Pittsburgh Supercomputing Center. Rigetti will deliver a 9-qubit Novera quantum computing system into PSC's new TangleLab test bed, which is being funded by a National Science Foundation grant. Working with HPE, this deployment is designed to integrate the Novera system with an HPE-powered supercomputing environment so that researchers and industry users can develop and test hybrid quantum classical workloads on real hardware.

We view this as an important step in moving our HPE relationship from early experimentation toward commercially relevant quantum-enabled HPC solutions. More broadly, global investment in quantum computing continues to expand, led by governments and national labs and increasingly complemented by commercial interest.

Outside the United States, we are seeing structured programs such as the U.K. government's 6-year ProQure initiative, where we intend to invest up to $100 million over time in systems, talent and infrastructure. In India, our 108-qubit C-DAC award reflects national level interest in superconducting platforms. And across Europe and Asia, we are seeing growing number of coordinated quantum initiatives.

Commercial revenue remains early, but engagement is increasing across industries such as materials, logistics and financial services as they explore hybrid and quantum-inspired workloads. As system performance improves and the industry moves closer to quantum advantage, we expect commercial adoption to build on the government and research foundation in place today.

Let me briefly connect these developments back to our long-term road map. We remain focused on a clear sequence designed to position Rigetti to reach quantum advantage in roughly 3 years. Near term, that means driving Cepheus-1-108Q toward a median 2-qubit gate fidelity of approximately 99.5% later this year while maintaining our gate speed advantages. Beyond that, we are working toward deploying higher qubit systems that leverage our chiplet-based architecture as the foundation for scaling beyond 1,000 qubits with fidelities and speed better mitigated and eventually fall tolerant computation. In support of this road map, we continue to invest in Fab-1 and associated refrigeration

infrastructure as well as partnerships with organizations such as Riverlane, Quanta and QphoX to integrate innovative solutions into the stack. The prospective CHIPS Act funding would further reinforce our ability to execute on multiple generations of processes while maintaining prudent capital discipline. We intend to update our published technology road map later this year once we have additional operational data from Cepheus-1-108Q and clearer visibility into subsequent system deployments.

Our objective is to provide investors with a transparent view of the milestones that matter most for Quantum Advantage, including specific targets for qubit count, fidelity, coherence time and gate speed. With that overview, I will now turn the call over to our CFO, Jeff Bertelson, to discuss our financial results and capital deployment in more detail.

Thank you, Subodh, and good afternoon, everyone. I will spend a few minutes walking through our second quarter 2026 financial results, our balance sheet and liquidity and how we are thinking about capital deployment as we continue to execute on the road map Subodh described, including the potential implications of the Department of Commerce LOI.

For the second quarter of 2026, revenue was approximately $5.1 million compared to $1.8 million in the second quarter of 2025. The year-over-year increase was driven by on-premises Novera QPU sales, reflecting recognition of previously announced Novera purchase orders.

Gross margin for the quarter was approximately 43% compared to 31% in the second quarter of 2025, with variability driven by contract mix and pricing and the relative contribution from the Novera QPU sales. Total operating expenses for the second quarter were $30.3 million compared to $20.4 million in the same period last year, with spending concentrated in research and development, including engineering headcount, fabrication, chip design and control electronics development as well as investments in refrigeration and infrastructure to support higher cubic count systems.

Stock-based compensation for the quarter was approximately $7 million compared to $3.6 million in the second quarter of 2025. Operating loss was $28.1 million compared to $19.9 million in the prior year period. On a GAAP basis, net loss for the quarter was $52.6 million compared to a net loss of $39.7 million in the prior year period, with results again impacted by noncash fair value adjustments to derivative warrant and earn-out liabilities. As we have said previously, these fair value adjustments can introduce significant quarter-to-quarter volatility into our GAAP results and do not affect how we operate the business or allocate capital.

On a non-GAAP basis, which excludes stock-based compensation and fair value adjustments to warrant and earn-out liabilities, net loss for the quarter was approximately $16 million or $0.05 per diluted share compared to a non-GAAP net loss of $13.3 million or $0.04 per diluted share in the second quarter of 2025. Let me provide a bit more color on revenue drivers and how we are thinking about the remainder of the year. As we discussed on our prior call, we expected strong year-over-year revenue growth in the first half of 2026, driven by the previously announced Novera purchase orders we received late last year and earlier in 2026.

In Q2, we continued to progress on the $8.4 million C-DAC order for an on-premises 108-quubit system in India, which we still expect to recognize in the fourth quarter of this year following installation and performance acceptance testing. More broadly, our revenue profile continues to be influenced by the timing of system deliveries and government-funded projects. We view this variability as inherent to the current stage of the quantum computing market and not as a driver of our long-term capital allocation or technology strategy.

Turning to the balance sheet. We ended the second quarter of 2026 with approximately $541.3 million in cash, cash equivalents and available-for-sale investments compared with $569 million as of March 31, 2026, and $589.8 million as of December 31, 2025. We continue to operate with no debt. And given our current operating profile, we believe our capital position provides sufficient runway to execute against our technology and system deployment milestones, including continued progress on scale, fidelity, system integration and our planned investment in the United Kingdom.

Capital expenditures in the quarter were primarily driven by investments in Fab-1 and additional dilution refrigeration capacity to support higher cubic count systems. As we noted previously, we expect 2026 CapEx to be elevated relative to prior years, largely due to investments in dilution refrigeration and fab equipment.

Our approach to capital deployment remains disciplined and consistent with what we have discussed on prior calls. The majority of our spending is directed toward core R&D activities that directly advance our technology platform, including our chiplet-based architecture, control systems and cloud integration. We are not managing the business around short-term revenue optimization.

We are managing it around credible long-term progress toward Quantum Advantage and commercially relevant systems. Should we move from the current LOI to definitive agreements with the Department of Commerce, we would expect the CHIPS Act funding to be deployed in a way that is tightly aligned with this philosophy. That means focusing the capital on specific technical programs that address scaling bottlenecks and packaging and enhancements while being mindful of potential dilution associated with any equity issuance.

To close, our financial strategy is unchanged from what we outlined last quarter. We are focused on maintaining flexibility, funding innovation responsibly and aligning capital deployment with the long-term value creation of our technology road map, including the CHIPS Act funding. Quarterly results will continue to reflect the early-stage nature of the quantum computing market and the timing of large system contracts. but we believe our balance sheet and capital discipline position us to execute with patience and control. With that, I will turn it back to Subodh for closing remarks before we open the call for questions.

Thank you, Jeff. We are encouraged by the progress we are making on our technology road map, the strengthening engagement we are seeing from customers across cloud and on-premises channels and the strategic support we are beginning to see from governments such as the United States and the United Kingdom. We remain focused on delivering against the milestones we have laid out, including fidelity improvements on Cepheus-1-108Q, higher qubit systems and disciplined execution of our capital plan. On behalf of the entire Rigetti team, thank you for your continued interest and support. Operator, we are now ready to open the call for questions.

[Operator Instructions] And our first question comes from Brian Kinstlinger of Alliance Global Partners.

On the last conference call, you highlighted coherence time as the primary limitation on your new architecture to fidelity and that you believe you could address that challenge. And then you gave some details around that today. When is a reasonable time frame where we can expect to see that impact fidelity?

Indeed, as we discussed in the call, coherence time is the limiting factor for 2-qubit gate fidelity at this time, and that's why we are so focused on improving coherence time. Right now, it's in the 25 to 30 microseconds range. We want to obviously bump it up as much as possible, but we think a factor of 2 or 3 improvement is practical in the near term, and that's what we are working on. The kind of stuff we are working on, we disclosed during the call, things like smoother interfaces at the Josephson junction level or capping off the niobium and tantalum, which seems to improve the coherence time, and we have published some papers along those lines. Those are the kinds of things we are doing.

We definitely expect fidelity to increase at the 108 qubit level before the end of this year, and we'll update everyone when we are ready to deploy a new system. I just want to put some the developments in a little perspective here. Keep in mind that there are only 3 very capable more than 100 qubit systems with the gate-based world in quantum computing right now. Besides IBM at 120 qubits, we are at 108 and Google is at 105 qubit. Everyone else, even though they may be talking a lot and about road maps in future are well below that. And many companies are well below 50 qubits when it comes to actual systems.

We get incredible feedback from end users who are using our systems every day that our system is one of the easiest to use and has consistent uptime. So we want to be careful that before we upgrade our system, if you will, with higher coherence time and higher fidelity, we have checked off all the other metrics, and we don't inadvertently go backwards in the technical progress.

So we are careful with how we are doing the experiments and how we will deploy it in the actual system that is deployed for the whole world. Hopefully, that answers your question.

Does. If I can just ask one follow-up. A few months back, there was a change in the leadership in DARPA's QBI. Has this had any impact on Rigetti's chances of getting to stage B? And do you think this is still achievable by year-end?

Certainly, there was a change in leadership at DARPA. Our plan stays the same. DARPA gave us a bunch of areas where they wanted to see improvements to get into Phase B. We continue to work with them. We have periodic calls with them and meetings with them, and we will continue to demonstrate improvements in the areas that we pointed out. We still feel optimistic that we will get into DARPA Phase B relatively soon. It's impossible to predict the exact time lines on all these kinds of things, but we continue to make very good progress. and we continue to get -- we continue to believe we will get into Phase B soon. Along with DARPA, there are other initiatives, as I mentioned in my call, there is a U.K. government's procure initiative, which is kind of like the DARPA QBI initiative and some other initiatives across the world.

So we are engaged in multiple initiatives like that. So it's not just DARPA alone. And as you saw, the Department of Commerce in the U.S. created a separate initiative focused on accelerating road maps, and we are definitely part of that. So DARPA is and will continue to be an important player in the quantum computing ecosystem, but it's not the only one. There are multiple areas that we are participating in right now.

And our next question comes from Krish Sankar of TD Cowen.

The first question on the current fab facility in Fremont. The current tooling and your -- what's the annual QPU production capacity? And what kind of CapEx requirement should we expect for that?

So Krish, right now, the fab we have in Fremont is a 150-millimeter fab. Frankly, capacity is not a concern at all. We have plenty of capacity in that fab with 150 millimeters because each quantum chip is capable of significant computation, as you're aware. So we make a number of 9-qubit chips right now. And with our chiplet architecture, we are using 9-qubit chiplets to get a 36-qubit system or 108-qubit system.

In future, we believe we will make things like 36qubit chiplets that will take us to 1,000 qubits and beyond, and we will continue to increase the size of the chiplets in the future. Right now, I mean, to give you a reference, the 9-qubit chiplet is roughly 6 millimeter by 6 millimeter. So as you can imagine, we can build plenty of 9-qubit chiplets in a single 150-millimeter wafer, and we can run a number of wafers a day. So we -- capacity is not an issue at all.

Challenge, of course, is getting the capability out there. And there are some limitations with 150-millimeter equipment and it's not an automated line. And we believe there are some limitations that come with nonautomated line and 150-millimeter size. So we continue to look at alternative options for upgrading the fab, but it's mostly for capability, not for capacity.

Got you. Very helpful, Subodh. And then a follow-up on HPE -- 9-qubit Novera QPU system. Will you be providing this QPU chips only? Or would it be QPU dilution switch controls and other infrastructure? And what is kind of like the timing for delivery on that?

So yes, it's a good question. And we are really excited to partner with HPE and Pittsburgh Supercomputing Center. It's really a great initiative to demonstrate how hybrid computing works. If you go out there right now, a lot of people talk about hybrid computing, but honestly, there are very, very few places, in fact, hardly any where you can go and actually do demonstrate hybrid computing and how it's supposed to work. So we believe we will be one of the first ones to do that along with HPE.

Our contribution to that NSF sponsored project is a full 9-qubit system. So not just the QPU, but the QPU plus addition refrigeration plus control system and everything. Obviously, HPE is a top player in the HPC world. So HPE's contribution is HPC and the interfaces is what we will be working on, and that's really the role of Pittsburgh Supercomputing Center. It's going to be an exciting project to bring in the best of HPCs, the best of quantum computing and allow access to anyone in the world where they can easily play around with hybrid computing and see how hybrid computing works.

In particular, I will bring forth that because we are using superconducting gate technology, we have a huge benefit in terms of speed. Our gate speeds are in the 50 nanosecond, 60 nanosecond range, which are roughly 1,000x to 10,000x faster than trapped Ion or atoms or other modalities. And that really will shine and will come forward when we show the data coming out of hybrid computing because clearly, a trapped Ion or an atom-based quantum computer with its very, very slow speed will have a tough time keeping up with CPU and GPU -- and you can see that in some of the results being discussed when they talk about hybrid computing, whereas with superconducting computing, you will really see the benefit of speed and how speed helps in the overall computation and coming into the correct answer much, much faster than the other modalities. So we are pretty excited about this partnership opportunity and demonstrating how hybrid computing will work particularly with superconducting.

Maybe just to follow up on that with Jeff's last question, timing of delivery and how to think about rev rate for this?

Yes. So we believe the delivery will be sometime in 2027. We don't know the exact quarter yet. The program just got kicked off recently. As we find out, we will be transparent about the time lines. But at this point, it definitely will be a 2027 delivery. We'll let you know once we know exactly when it will happen.

And our next question comes from Troy Jensen of Cantor Fitzgerald.

Maybe a quick question to start with Subodh here. Just any thoughts on the executive order? And has there been any change in kind of government activity post signing of that order? I'm wondering if it's mainly security more or just system level, but just love to get your thoughts and if anything has changed since then.

Sure. So indeed, with the executive order passed by the President, there has been increased emphasis on quantum computing. A number of initiatives have started because of those executive orders. I would say they are still generally in the early stages, but you're already seeing some of them, the Department of Commerce initiative using the CHIPS Act certainly is one of those.

We definitely expect more funding coming into the overall quantum computing ecosystem from the U.S. government because of those executive orders. There are various bills that are being debated as we speak, whether it's the NQR authorization bill that funds the Department of Energy, labs or the NDAA, which funds the Department of Law and there are many line items included in that for quantum computing. So overall, I would say, definitely, the executive orders highlighted the importance of quantum computing for national security and strategic reasons. It is definitely helping free up funding in quantum computing. You are already seeing that a little bit with the Department of Commerce, but definitely expect more of those kinds of things from both from Department of Energy as well as Department of Law.

All right. Makes sense. And then just another one for you maybe. Congrats on the HPE announcement. I think that's huge. Obviously, you're close to them in Quanta. I guess I would assume there's tons of big data center partnerships that you guys could have. Is HPE as much on the networking side? Or is that on the server side, but just any more kind of details on that would be wonderful.

Certainly, we are excited to partner with HPE. They are, as I mentioned, the top player in the world of HPCs. The partnership will certainly evolve as we get into demonstration and what else can we do. It's not an exclusive partnership. We are certainly going to be talking to other HPC players. And certainly, HPE will be talking with other modalities and other quantum computing companies too. I think the exciting part for both of us is truly bring state-of-the-art HPC with a state-of-the-art quantum computer and see how exactly we do the trifurcation of data, if you will, where CPUs do sequential, GPUs do parallel and quantum does simultaneous computing and with superconducting our speeds are commensurate with CPU and GPU, and that's really where it will help to truly show the benefit of quantum computing. So certainly, a lot of applications we will be able to take on with that kind of a setup and show really how quantum computing helps reduce the overall time to results or the accuracy of results or even some applications that are near impossible to solve with the current HPC setup.

So certainly, we are looking forward to putting the system together between now and 2027 and making it available to general public at that time. But we'll continue to talk to HPE and other HPC players on how to leverage quantum computing in different workload applications.

And our next question comes from John McPeak of Rosenblatt Securities.

Great. Excellent. Subodh and Jeff, congrats on the execution here, steady progress. Actually, I have a couple for Jeff. You talked about CapEx. I got that. That was one of my questions. But deferred revenues ticked up more than in any quarter I've seen in the history. And you actually had your largest billings quarter if you just look at the change in deferred and revenues. Could you talk a little bit about what that's about, if anything?

Sure. Sure. That mainly relates to C-DAC, with that order, there were some prepayments and so forth that added to deferred revenue. So that was the main driver there.

Okay. That makes sense. And then one for Subodh. I've heard compliments about your QPUs from some optical interconnect companies. I'm curious if you've had any discussions with respect to with your open architecture potentially at least doing some exploratory work on optical interconnect of your Novera QPUs?

John, for telling us that you hear good things about us from optical interconnect companies. Indeed, we are very proud of the fact that our QPUs are some of the best CPUs, if not the best CPUs out there, and we consistently hear that from end users who use our QPUs. They keep telling us that they are extremely reliable, consistent, very easy to use. So it's not a surprise, but it's always good to hear from third parties. We talk to multiple optical players, the publicly disclosed partnerships among the publicly disclosed partnerships, we have mentioned QphoX where we are working with them on transduction. That's basically converting microwave signals to optical signals and vice versa. The reason that AI is important is because right now, our 9-qubit or even our 108-qubit system does not use any optical signaling.

We are basically relying on coax signaling. And that will continue for a while. We plan to use flex cable technology to get to 1,000 qubits. But beyond 1,000, certainly, when we start talking 10,000 and 100,000 qubits, we cannot rely on flex cables and certainly not coax cables. And that's really where optical signaling comes in.

And so the early research work is what we are doing right now with companies like QphoX, understanding how to convert microwave signal to optical and reverse that without losing fidelity or any other issues. It all shows promising results right now, but I would caution it's still early research before all of that can be converted into road map and definitive time lines. We still have some work to do. But it's encouraging to see that optical signal is going to work out, and that allows us to get to the tens of thousands and hundreds of thousands of qubits.

And our next question comes from Quinn Bolton of Needham & Company.

This is Shadi Mawali on for Quinn. Now that you have your 108 qubit system up and running in the cloud, can you just talk about what you guys are seeing in regard to user engagement? And then I have a follow-up.

As I mentioned in my comments earlier, we are getting excellent feedback from end users who are using our 108 qubit system. They're consistently hearing it's one of the best systems out there. And again, to remind everyone, there's only 3 more than 100 qubit systems out there in the world, IBM at 120 qubit, we at 108 and Google at 105. Everyone else is well below that. And most of the players that are well below 50 qubits.

So really, we are in the top -- we are in the second place right now as far as quantum computing capability is concerned. We get excellent feedback, customers who have used it and thousands of customers are using it through AWS and Azure as well as other cloud platforms. And we consistently hear our system is one of the easiest to use. It's always up and running.

The results are consistent, reliable. So we are really happy to hear that kind of feedback. Most of the work that we are still doing is very much research kind of work. We acknowledge openly that we have not quite close to quantum advantage. We need to get to -- as we have mentioned in the past, closer to 1,000 physical qubits, closer to 99.9% 2 qubit fidelity along with some error mitigation or correction before we can start talking tactical workload applications and demonstrating value with that. So we fully understand that we are building systems right now for research applications. That's exactly what we see customers are doing. They're trying to understand how to design algorithms, how to fundamentally look at quantum computing, how it fits in their ecosystem. But overall, I would say we are very pleased with the feedback we are getting from end users who have been using our 108-qubit system for a while now.

Got it. That's great to hear. And then on the $100 million LOI, it sounds like this will likely be a milestone or technical base. So can you just talk about what Rigetti would need to approve to unlock all of the funding?

Yes. Good question. We are still -- the agreement is not definitive yet. So we are still discussing with commerce department on what exactly is expected when to get the $100 million. Broad-based, we know the areas we are working on. We are working on things like cryogenics. We are thinking -- working on things like miniaturization of electronics in the readout chain, those kinds of things. So we know at a high level -- and basically, it's accelerating our road map. What the overall goal of this $100 million is to accelerate our road map. And that's exactly what we are working on. We are defining exactly what our road map is and which milestones can be accelerated. So it's still a work in progress. Hopefully, it becomes a definitive agreement soon, and then we can disclose in more detail what and when we plan to do.

And our next question comes from Tyler Anderson of Craig-Hallum.

This is Tyler Anderson on for Richard Shannon. So just to start for a very quick question. For the HPE and PSC deployment, is this still fridge in control unit yours? Or is this going to be a third parties?

It's our, Tyler. Basically, it's a full system that we build. We obviously are outsourcing parts of the system. So we are buying dilution refrigerators from vendors. We are -- obviously, we are partnered with Quanta for control system and so on. So we will use third-party components, but the overall system is designed and built by us.

Okay. That's very interesting with the Quanta. And then getting into what's getting your coherence time up or what you are doing to do that. So the niobium caps you had previously done before. And I'm just wondering, was integrating all of these technologies required to get you to the fidelities that you were aiming for originally? Or is this something that you've kind of held in your back pocket and you've been deploying these benefits as you need them to increase the coherence time? And then I have a quick follow-up.

Yes. As you can imagine, Tyler, I mean, when you are doing advanced R&D on these kinds of complicated systems, you never hear anything in your back, right? You pretty much do the best you can and try to put it together and see how the systems are working. We have been working with Fermilab on the capping of niobium specifically with tantalum, and those results show very good promise. There are various reasons why we have not quite deployed it in the system that is available for everyone today. We definitely plan to include that. But as I mentioned earlier, we have to be careful. We don't just throw everything and then turn it on and deploy it right away. Right now, the system is working very, very well right now. And so before we upgrade the system that is on the cloud right now.

We want to test it exhaustively, make sure everything is good. We have not sacrificed something inadvertently in the process. So that's the kind of testing we are doing. We are just being deliberate with every testing, so we don't change something and inadvertently find out that we have deteriorated something else in the process. I hope that answers your question.

That does. And that totally makes sense doing things one at a time and seeing what the impact is. And with that, if we implement all of these things and we start to see a really good impact to the coherence time, these adiabatic gates seem to be doing you pretty well with the fidelity increases with the 36 cubic QPU. Is this something that could potentially accelerate the road map if everything else goes well plus adiabatic gates?

Yes. Certainly, adiabatic gates and we published a white paper on it last year. We definitely see a lot of promise with that. That definitely is a technology we plan to deploy. We are using a version of that right now in our 108-gbit system, but not the full thing that we disclosed in our white paper. There are reasons for doing that. Definitely, work is going on in that area, and we definitely plan to include adiabatic CZ gates as part of our road map for future systems.

And our next question comes from Gary Mobley of StoneX Group.

I know in the past, you've done some work for the U.K.'s NQCC, and I believe that was at one point, a substantial portion of your revenue. What's the prospect for renewal funding -- renewal of the funding for that work and potentially some sort of reengagement there looking forward?

That's a really good segue into the U.K.'s overall deployment of quantum ecosystem. If you notice, the U.K. government has announced a multiyear initiative that they call procure. It's kind of like DARPA QBI, but a little different in the way the U.K. government is defining the milestones. The end goal is roughly similar, both of this DARPA QBI as well as the U.K. procure are targeting fall tolerant quantum computing system is roughly 6 to 7 years. But the path to get there is a little different for the 2 programs, but both have merits about why they are doing what they're doing. We are definitely involved with the U.K. government with those kinds of discussions. We are continuing -- our system is at NQCC right now.

Again, it's a 36-qubit system over there right now, one of the best systems that they have ever seen. So we get very good input from them, again, about how easy our system is to use, consistent the results are and how reliable it is. So they like working with our system. We are definitely working with them on the procure initiative. Hopefully, we'll be able to announce things as the U.K. government announces their decisions. But definitely, our plan is to be in the U.K. ecosystem and continue to be investing in the U.K.

When you examine your pipeline of potential deals, how does it compare today versus a year ago or any other recent point in time? And where does that money trailer lead back to? And what I mean by that, is it disproportionately skewed to commercial experimentation, government-backed funding, university research grant funding or PQC?

Well, we definitely see a lot more interest today in quantum computing than a year ago or certainly 2 years ago. but the interest is coming from all the different areas. Certainly, governments are getting a lot more interested, as you can see from the U.S. government side, things like the commerce initiative and continued discussion on the NQI or NDAA, the recent NSF award we got for -- with HPE to do the hybrid computing. So you are already seeing the U.S. government being a lot more active today than what it was a year or 2 years ago in quantum of today. I just mentioned the U.K. government and the big initiative they have with ProQure.

You saw from our announcement what's happening in the country of India and their government and how they are going about it. But you see across Europe and many other countries in Asia, just about every major economy has a quantum mission or something that they like a quantum mission -- many governments have freed up funding and certainly, they want to be part of at least a leader or the leader in the quantum ecosystem.

So a lot of activities happening at the government level. And certainly, that leads to universities. A lot of advanced universities are very getting more and more active in quantum computing. I mean, there are historical places like Yale University or MIT or for instance, of the world were already there. But now you see broader swath of universities getting involved. I mean you saw us announcing with Montana State University and University of Saskatchewan and those kinds of places. And you will see more and more universities in this.

What is exciting is actually the commercial companies getting more and more interested in quantum computing right now. If you notice, our first 2 9 qubit systems that we delivered this year were both to commercial organizations -- now they are not buying quantum computers on-premise for their data centers to do any practical workload. They fully understand these are research systems. But there's enough interest in understanding the basics of quantum computing that we are seeing increased commercial traction now in addition to the government and university area. And that's where you're seeing sales growth coming for our sales first half of sales growth is primarily driven by commercial organizations buying on-premise quantum computing systems.

So we definitely see that increasing. That wasn't there at all a year or certainly 2 years ago. So that's an exciting development to watch. But overall, we see huge interest in quantum computing across the entire spectrum, government, universities and commercial. The commercial one is a new one, pretty exciting to see.

[Operator Instructions] And our next question comes from Nehal Chokshi of Northland Capital Markets.

It looks like the 36 median cubic gate fidelity did improve from 99.5% in the first quarter to 99.6% in the second quarter. I may have missed this, but could you just say what was the driver of that improvement?

Yes. I mean we do. We continue to work on fidelity just about every day, as you can imagine. There are multiple things we have done in the background to improve our 9 qubit and 36 qubit along with the 108 qubit fidelity. A lot of it goes into the -- in a broad sense, we do change the design of the qubit. We change fab processes along with it and sometimes even the materials that are used in the fab like the tantalum discussion we had earlier.

Most of that improvement -- at the 9-qubit level, we are at 99.8%, 2-qubit gate fidelity and at 36 qubit, you are right, we have improved it to 99.6% median 2 qubit fidelity. Most of that improvement came from design optimization. It's how we -- how the lines are designed and the coupling of the lines with the qubit. That's where we are seeing some of the improvements right now. Certainly, we are incorporating those learnings and we'll continue to do more work to get all that learning incorporate into the 108 qubit systems and in future larger systems.

Got it. So to be clear, the improvements that were implemented to drive that improvement in the 36-qubit system has not been applied to the 108 qubit system yet or it's in flight at this point in time to see if that -- those changes also result in an improvement to 108 qubit system?

In general, you're right. I mean we are, as I mentioned earlier, being deliberate that we don't turn too many norms at the same time and inadvertently hurt the performance. Right now, there are many users who are using our 108-qubit system every day. Obviously, we don't want to tinker around while they're using the system and cause some inadvertent problems. So we are working on other 108-qubit systems independent of the one that is deployed in the cloud. And that's where we are beginning to incorporate the learnings from 9-qubit and 36-qubit systems.

I show no further questions at this time. I'd like to turn it back to Subodh Kulkarni for closing remarks.

Thank you, operator. In closing, we are encouraged by our progress in the second quarter and remain focused on executing against our strategic priorities as we advance Rigetti's position in the quantum computing ecosystem. In the coming months, we will be out meeting with investors at a number of conferences and related events, and we hope to see you there. Thank you for your continued interest in Rigetti.

This concludes today's conference call. Thank you for participating, and you may now disconnect.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Rigetti Computing First Quarter 2026 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. At this time, I would like to turn the conference over to Mr. Subodh Kulkarni, CEO of Rigetti. Sir, please begin.

Good afternoon, and thank you for joining us for Rigetti's First Quarter 2026 Earnings Conference Call. I'm pleased to be joined today by our Chief Financial Officer, Jeff Bertelsen, who will walk you through our financial results in more detail following my overview. .

Also with us is our Chief Technology Officer, David Rivas, who will be available to participate in the Q&A session following our prepared remarks. We appreciate your continued interest in Rigetti, and we look forward to answering your questions at the conclusion of our remarks. Before we begin, I would like to remind everyone that today's call, along with our first quarter 2026 press release, contains forward-looking statements. These statements reflect our current expectations, objectives and underlying assumptions regarding our outlook and future operating results.

These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. Such risks and uncertainties are described and discussed in greater detail in our filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2025, our Form 10-Q for the 3 months ended March 31, 2026, and other periodic reports filed by the company from time to time with the SEC.

We encourage you to review these filings for a comprehensive discussion of these risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Rigetti undertakes no obligation to update any forward-looking statements made during this call, except as required by law.

During today's call, we will refer to certain non-GAAP financial measures. For details on these measures and reconciliations to comparable GAAP measures and for further information regarding the factors that may affect Rigetti's future operating results. Please refer to today's earnings release on Rigetti's website at investors.rigetti.com or to the 8-K furnished with the SEC today after the close.

Before I begin, I want to frame today's discussion around 3 key takeaways. First, with the general availability of our 108 qubit Cepheus-1-108Q system on Rigetti Quantum Cloud Services, Amazon Bracket, Microsoft Azure Quantum and qBraid, we believe we have delivered one of the most powerful generally available quantum computers in the world and the largest modular quantum computing system on the market today.

Second, we are seeing growing adoption of Rigetti systems across government, academic and commercial customers, including new on-premises Novera QPU sales that support meaningful year-over-year revenue growth. Third, we remain focused on disciplined execution against our roadmap to Quantum Advantage continuing to improve Rigetti on Cepheus-1-108Q and advancing toward higher qubit higher fidelity chiplet-based systems underpinned by a strong balance sheet and prudent capital deployment.

Now I'll step back and put the quarter in context. Q1 was an important proof point in our strategy to combine technical progress with real-world use access and usage. Quantum computing remains a long-cycle opportunity, but we are increasingly seeing the ecosystem coalesce around platforms that can scale in a practical way and that are available to users where they already run their workloads.

Our progress this quarter reflects that reality. Let me start with our technology and product milestones. Last month, we announced the general availability of our 108 qubit Cepheus-1-108Q quantum computing system accessible to customers via Rigetti Quantum Cloud Services and through Amazon bracket, the quantum computing service by AWS as well as Microsoft's Azure Quantum service and qBraid.

Cepheus-1-108Q is our highest qubit count system to date and the industry's largest modular quantum computing system built from 12 interconnected 9 qubit chiplets. This system triples the number of qubits and chiplets from our previous 36 qubit Cepheus-1-36Q system, and more importantly, validates some proprietary chiplet-based scaling architecture in a production setting.

Today, Cepheus-1-108Q has achieved a median 2-qubit-gate fidelity of approximately 99.1% with gate speeds of roughly 60 nano seconds and a medium single qubit gate fidelity of 99.9%. These are meaningful performance levels at this scale, and we expect to continue improving fidelity throughout 2026 as we refine the performance of our individual chiplets, innovate across materials and fabrication and incorporate learnings from our prototype and R&D platforms.

We achieved a median 99.8% 2 qubit gate fidelity with 40-nanosecond gate speeds on our 9 qubit system by using a proprietary adiabatic CZ gate scheme. Leveraging the same gate scheme, we also demonstrated 2 qubit gate fidelity as high as 99.9% at 28 nanosecond gate speeds on a prototype system and those advancements are informing how we operate Cepheus-1-108Q and design future systems. From a systems engineering perspective, this launch is about more than just adding qubits. During development, we identified and mitigated coupling interactions between 2-level couplers that become more pronounced beyond the 100 qubit scale.

By defining our chip architecture to address those interactions, we effectively shifted the primary performance limitation from coupler behavior to coherence time, which we are confident we can address as we continue to optimize our entire stack. Also I want to highlight what this means for users. With Cepheus-1-108Q now available on Rigetti QCS, Amazon Bracket, Microsoft Azure Quantum and qBraid, researchers and enterprises can access our highest qubit count system on platforms they already use for classical and Quantum R&D.

Cepheus-1-108 is the first gate-based device on Amazon Bracket with more than 100 qubits offering improved fidelities that enable wider and deeper circuits for applications such as material science, optimization and quantum simulation. AWS is the leader in cloud infrastructure, so extending our relationship with Amazon Bracket and now Azure Quantum and qBraid is an important validation of our technology and our go-to-market strategy.

Stepping back, we continue to believe that superconducting gate-based quantum computing with chiplet-based scaling offers a compelling combination of speed and scalability. Our current systems achieved gate speeds on the order of 50 to 70 nanoseconds, which is roughly 1,000x faster than some other alternative modalities such as trapped ion or neutral atom systems. As we scale, we intend to maintain those speed advantages while driving fidelity higher and integrating error correction ready at operations into the stack.

Let me now turn to customer momentum and market traction. Our strategy is to meet with customers where they are, whether that is on the public cloud, on hybrid infrastructure or in dedicated quantum centers. On the cloud side, the combination of Rigeti-QCS, Amazon Bracket, Microsoft Azure Quantum and qBraid provides global access to our systems, including Cepheus-1-108Q, and we are seeing strong interest from researchers who want to experiment on one of the most capable generally available gate-based platforms in the market today.

In parallel, we continue to expand our base of on-premises Novera QPU. The Novera QPU Is designed to integrate into a customer's existing cryogenic and control systems, providing a high-performance, on-premises platform for Quantum R&D. Recent Novera events include an order from the University of Saskatchewan, where our QPU will support quantum research and education. And we have also announced Novera QPU and Novera system sales to additional research organizations globally.

This optimizes systems deepen technical engagement, create multiyear usage pathways and showcases the flexibility of our product portfolio from 9 to more than 100 qubits. As discussed in our prior call, Novera and other system deliveries contributed to significant year-over-year growth, albeit with some variability quarter-to-quarter based on shipment timing and contract mix.

For example, we expect a meaningful portion of previously announced Novera purchase orders to be recognized in the first half of 2026, and we are executing on additional system-level contracts such as the C-DAC order we announced earlier this year. While the timing of revenue recognition can move between quarters, these contracts underscore growing demand for Rigetti QPUs and systems among national labs, universities and quantum computing centers.

We are also encouraged by continued engagement from commercial customers who are exploring Quantum-inspired and hybrid use cases. While commercial revenue remains early, we are seeing increased interest from industries such as materials, logistics and financial services as they look to understand where quantum computing can augment classical high-performance computing over time.

More broadly, we are starting to see tangible examples of how even relatively small scale quantum systems can impact real-world workloads. For example, a team in China recently demonstrated that a 90-bit quantum system could outperform [ classical reservoir networks ] with tens of loads on a realistic weather forecasting task, highlighting how modest-priced quantum devices can begin to disrupt AI and modeling applications.

We view results like this as early validation of the commercial opportunities like systems like our Novera QPUs and [ CPS ] class devices are positioned to address as they mature. Let me briefly connect this back to our long-term road map. We remain focused on a clear sequence of milestones that we believe positions Rigetti to reach quantum advantage in roughly 3 years.

Near term, that means driving Cepheus-1-108Q to a medium 2 qubit gate fidelity of approximately 99.5% later this year while maintaining our gate speed advantages. Beyond that, -- we are working towards deploying systems that leverage our chiplet-based architecture as the foundation for eventually scaling more than 1,000 qubit with fidelities and gate speeds that support error mitigated and ultimately, fault-tolerant computation.

In support of this road map, we recently announced our intention to invest up to $100 million in the United Kingdom over the next several years to accelerate quantum computing development. This will be our first major investment outside the United States and builds on our existing 36 qubit system deployment at the U.K.'s National Quantum Computing Center as well as U.K. government's multibillion-dollar commitment to quantum technologies.

In parallel, we continue to collaborate with partners such as River Main and others to integrate error correction ready capabilities into the stack. This includes support for high fidelity native gates, improved [indiscernible] compilation and control electronics enhancements that are designed to be compatible with future error-corrected architectures. Our intention is to update our published technology road map later this year once we have incorporated operational data from Cepheus-1-108Q and can provide more detail on the specific steps we expect to take towards quantum advantage.

Turning to the financial framework. Our approach remains straightforward and disciplined. We exited last year with a strong cash position and no debt giving us the flexibility to continue investing behind our technology road map and customer opportunities. Our spending remains concentrated in core R&D, including fabrication, chip designs and control electronics development, along with the CapEx required to support higher qubit count systems and associated cryogenics infrastructure.

While this results in elevated CapEx in the near term, we believe these investments are directly tied to the capabilities that will differentiate Rigetti in the market. We are not managing the business around short-term revenue optimization. We are managing it around credible progress towards large-scale, high-fidelity quantum systems that can deliver commercially meaningful value.

To that end, our capital allocation remains focused on organic execution and you will consider M&A only where we can clearly accelerate our road map without compromising our financial discipline. To close my remarks before turning it over to Jeff, I want to reiterate the 3 key messages we hope you take away from today's call.

First, Cepheus-1-108Q is now generally available through Rigetti QCS, Amazon Bracket, Microsoft Azure Quantum and qBraid, and we believe it represents one of the most powerfully generally available gate-based quantum computers in the world and the largest modular system on the market today. Second, Customer adoption continues to build across cloud and on-premises channels with Novera sales and other contracts, supporting strong year-over-year revenue growth and deepening our engagement with leading research institutions and emerging commercial users.

Third, we remain committed to disciplined execution on the road map that targets quantum advantage in about 3 years, anchored in our chiplet-based architecture, high-speed superconducting qubits, improving fidelity, a strong balance sheet and strategic initiatives such as our planned $100 million U.K. investment that enables us to invest with patients and control. Thank you for your continued support and interest in Rigetti. I'll now turn the call over to our CFO, Jeff Bertelsen, who will walk you through our financial results in more detail.

Thank you, Subodh, and good afternoon, everyone. I will spend a few minutes walking through our first quarter 2026 financial results, our balance sheet and how we're thinking about capital deployment as we continue to execute on the road map Subodh described. For the first quarter of 2026, revenue was $4.4 million compared to $1.5 million in the first quarter of 2025. The year-over-year increase was driven primarily by on-premises Novera QPU deliveries and related contracts as well as certain government and research projects.

Gross margin for the first quarter was 31% compared to approximately 30% in the first quarter of 2025. Our first quarter 2026 gross margin was impacted by contract mix, including a higher contribution from QPU and system deliveries that include lower-margin third-party refrigeration. Total operating expenses for the first quarter were $27.3 million compared to $22.1 million in the same period last year. Spending remains concentrated in research and development, including engineering headcount, fabrication and system integration, consistent with the priorities we outlined on our fourth quarter call.

Stock-based compensation for the quarter was $5.9 million compared to $4.2 million in the first quarter of 2025. Operating loss for the first quarter was $26 million compared to an operating loss of $21.6 million in Q1 2025. On a GAAP basis, net income for the first quarter of 2026 was $33.1 million compared to net income of $42.6 million in the prior year period. The first quarter of 2026 included $53.7 million of noncash gains from the change in fair value of derivative warrant and earn-out liabilities compared to $62.1 million in the prior year period.

As a reminder, these noncash fair value adjustments can introduce significant volatility into our GAAP results quarter-to-quarter and do not affect how we operate the business or allocate capital. On a non-GAAP basis, which excludes stock-based compensation and fair value adjustments to warrant and earn-out liabilities. Net loss for the quarter was $14.7 million or $0.04 per diluted share compared to a non-GAAP net loss of approximately $15.3 million or $0.05 per diluted share in the first quarter of 2025.

Let me provide a bit more color on revenue drivers and how we are thinking about the remainder of the year. As we outlined in our fourth quarter call, we expected strong year-over-year revenue growth in the first quarter of 2026, driven by shipment of a portion of the $5.7 million of on-premises Novera quantum computing system purchase orders announced late last year. The first quarter results are consistent with that view, and we continue to expect the remaining Novera revenue to be recognized primarily in the second quarter of 2026.

We also continued to execute on the $8.4 million C-DAC order for an on-premises 108 qubit system in India, which we expect to recognize in the fourth quarter of 2026 following installation and performance of acceptance testing. As we said last quarter, the initial C-DAC order did not include ongoing maintenance and support. We still expect to receive a separate purchase order for those services.

More broadly, our revenue profile continues to be influenced by the timing of system deliveries and government-funded projects. We continue to do this variability as inherent to the current stage of the market and not as a driver of our long-term capital allocation or technology strategy.

Turning to the balance sheet. We ended the first quarter of 2026 with approximately $569 million in cash, cash equivalents and available-for-sale investments compared with $209.1 million as of March 31, 2025, approximately $589.8 million at the end of 2025. The year-over-year increase relative to Q1 2025 reflects the capital raise and strategic investment activity we have previously discussed, while the sequential decline from year-end reflects ongoing operating spend and capital expenditures.

We continue to operate with no debt. At our current operating profile, we believe our capital position provides sufficient runway to execute against the technology and system deployment milestones we have laid out, including continued progress on scale, fidelity and system integration as well as our planned investment in the United Kingdom.

Capital expenditures in the quarter were primarily driven by investments in Fab-1 and additional dilution refrigeration capacity to support higher qubit count systems over the next several years, consistent with the framework we outlined in the fourth quarter. We continue to expect 2026 CapEx to be elevated relative to prior years, largely due to refrigeration and infrastructure needs rather than major changes to our fab footprint.

Our approach to capital deployment remains disciplined and consistent with what we have discussed on the Q4 call. The majority of our spending is directed toward core R&D activities that directly advance our technology platform, including our chiplet-based architecture, control systems and cloud integration. We are not managing the business around short-term revenue optimization. We are managing our incredible long-term progress toward Quantum Advantage and commercially relevant systems.

To close, our financial strategy is unchanged from what we outlined last quarter. We are focused on maintaining flexibility, funding innovation responsibly and aligning capital deployment with the long-term value creation potential of our technology road map. While quarterly results will continue to reflect the early-stage nature of the quantum computing market and the timing of large system contracts, we believe our balance sheet and capital discipline position us to execute with patients and control. With that, I will turn it back to the operator, who will open the call for your questions.

[Operator Instructions] Our first question or comment comes from the line of Brian Kinstlinger from Alliance Global Partners.

I'll ask 2. The first 1 is can you talk about the announced NVIDIA quantum models when you expect it might be available and when you might begin to test them to see the impact it has on reducing your error rates?

Thanks, Brian. NVIDIA did announce an open source model NVIDIA Async to help out with calibration and bring up of quantum computers as well as error corrections. We continue to look at that as a possible means of accelerating our road map. We continue to talk to NVIDIA, and we also continue to talk to other partners in the industry, such as River Lane in the U.K. where we are partnering to do error correction. They are not replacements for [indiscernible] they can work in a complementary fashion. So certainly, the announcement made by NVIDIA to help accelerate quantum computing in terms of calibration bring up but also error correction, we are taking a close look and we'll definitely take advantage of those tools that are available now. Hopefully, that answers your question.

Yes. Great. My follow-up, the $100 million investment in the U.K. are those people, infrastructure offices? And then will that be expensed or capitalized? And if it's expensed, when will we start to see that begin to increase the OpEx?

So let me put that U.K. investment in context. I mean, U.K. has announced a fairly ambitious program that they call ProQure where it's a multistage program. Right now, the first phase will kick off this July or August for a couple of years, the next phase that the [indiscernible] will kick off at that time for another year or 2 and then GigaQuOp and so on, MegaQuOp means 1 million error-free quantum operations per second, GigaQuOp means 1 billion error-free quantum operations per second and so on. So it's a very well structured layout program right now, applications are being requested.

We will be one of them. Assuming we are chosen for the preliminary phase, we definitely plan to increase our headcount, so there will be additional people cost. We definitely plan to increase the number of quantum computers we have in the U.K. right now, if you visit the National Quantum Computing Center, outside Oxford in the U.K., you will find our quantum computer in that center.

But for the next phase, we definitely plan to include Cepheus-1-108 qubit or higher qubit count, quantum computer source there over the next couple of years as we make it available. So there will be some capital costs involved but also facilities. I mean, right now, our quantum computer sits in the QCC facility, we definitely plan to have -- and we have a relatively small office and right now, we definitely plan to have a bigger facility in the U.K. as we go forward. So the $100 million is over the next few years, but captures all the cost in the rough order of magnitude that we talked about so far. Hopefully, that answered your question.

Our next question or comment comes from the line of Krish Sankar from TD Cowen.

I just wanted to ask you on the integrated error mitigation. Is this an on-chip qubit gate? Or is it a separate control chip? Is it ASIC or FPGA. Can you give us some color on that?

Krish, are you talking about the NVIDIA specific announcement?

Yes, the one integrated error mitigation, yes.

Yes. In general, right now, we don't do error correction on the quantum chip itself. There are approaches that are being looked at to do that kind of stuff. But right now, our quantum chip is not doing error correction at the chip level. So most of the error correction and all the experiments we do are outside in the ambient conditions in the control systems area, and we are sending the signals to the quantum computer and getting them back from the quantum computer.

Got it. Got it. And just a question on the QPU pipeline. How is that looking? How has it evolved? Like is it -- or the last one core I understand, besides the U.S. [indiscernible] is the funnel expanding? Is it stable or how to think about it?

You're talking about the overall demand for QPUs in general, I assume that's what your question is?

That's right. Yes. Yes.

Yes. As we mentioned, interest in quantum computing continues to increase rapidly. And as we start getting closer and closer to that quantum advantage, which we defined roughly a 1,000 qubit 99.9%, 2 qubit gate fidelity, less than 50 second-gate speed and some form of error mitigation or control, and we roughly think that's about 3 years from now. Definitely, we are already starting to see increase in interest from not only academic and government national lab kind of customers, but also commercial customers who want to do quantum computing-related R&D activities, not necessarily use them for their data center operations.

We definitely expect that interest to continue to increase rapidly as we get closer to the quantum advantage milestones roughly 3 years from now. And we're already starting to see that, as you can see in our disclosures and sales numbers. But overall, definitely expect quantum computing interest to increase, even though we are still in the R&D stages.

Our next question or comment comes from the line of Quinn Bolton from Needham and Company.

I guess just maybe a follow-up on Krish's question there just with the adiabatic CZ process that you're already showing on prototypes getting to 99.9% T qubit gate fidelity. How long does that take to get into process? It sounds like you're targeting at 99.9%. And over a 3-year period that would be part of the system that gets to the quantum advantage. Why does it take so long to get there? Or just what are the steps you need to bring that process from sort of a prototype level into kind of higher volume production level?

It's a good question, Quinn. I mean we will obviously push as fast as possible to get adiabatic CZ and fast gates into higher scale systems. We are already using adiabatic in our Cepheus-1-108Q 8, but it's not a very fast gate adiabatic CZ that we have been able to get at the prototype stage. You're right. At the asset stage, we had 99.9% with gate speeds of 28 nanosecond. So you can see that our 108Q is still 2x slower than our prototype system and fidelity is not as high as the prototype system. So we definitely take the learnings from the prototype system and try to include that in our larger scale systems as soon as possible.

It just takes time. I mean, these are extremely complex problems to solve at scale. It's relatively easy to demonstrate on prototype stages. And that's why you see many announcements from many different organizations about quantum computing and they are typically in the sub-10 qubit type level. It's only when you start getting to 100 qubit or above, and you hardly find 2 or 3 companies that have enabled quantum computers at that scale, and we are one of them.

We are proud to be one of them with the 108Q system right now that is available for anyone to use. It's -- that's where the problems becomes quite significant to tackle and solve. So yes, we have demonstrated very, very good performance in adiabatic CZ, fast gates at a few qubit level, being able to take -- we need to take that learning and push it as fast as possible.

Definitely, it will be part of the final system that will approach Quantum advantage in 3 years, but I'm pretty sure it will be included much before that, whatever we will start deploying next year and the year after that. We will definitely see adiabiatic CZ and fast gates coming in there.

Got it. And then I guess sort of related question. As you look to that system that gives you quantum advantage, you expect that system to run quantum error correction? Or would you still be thinking about implementation of on-chip quantum error correction sort of being out beyond the Quantum Advantage chip in 3-ish years.

It's a good question. There's a lot of TBD still right now on when it comes to quantum error correction, specifically we touched upon earlier -- in earlier question that I touched upon NVIDIA Async model and how that could improve -- that could change, improve our road map, accelerate our road map. Our view right now is that the quantum advantage system, roughly 1,000 qubit system at 99.9% 2 qubit gate fidelity level. We'll use some form of error mitigation, not necessarily full fledge quantum error correction, the way we envision, quantum error correction to be in roughly 4 or 5 years.

So our view is, for quantum advantage, we will have some form of error mitigation, error correction. But for full implementation of particularly when we talk about like QLDPC quantum, linear density parity core kind of error correction, we are talking about fault tolerant quantum computing which we are talking about hundreds of thousands of qubits. And that, we think, is in the 5- to 7-year kind of a time line period. That's when you really start looking quantum error correction in its full manner. Quantum advantage, you'll be talking error mitigation and some form of error correction. Hopefully, that answers your question.

That does. I appreciate it. And then maybe just 1 quick 1 for Jeff. You said on the 5.7 of Novera QPU sales that you had announced last year, you expected to capture most of the remainder in the second quarter. Looking at the Q you filed today, it looks like you had about $3 million of hardware-based sales. So is the remainder of that $5.7 million, roughly $2.7 million to be recognized in Q2? Is that sort of the right ballpark to be thinking about how the $5.7 million split between Q1 and Q2?

Yes. Of that $5.7 million, we recognized a little bit less than half of that in Q1. And then we expect the remainder to go in Q2.

Our next question or comment comes from the line of Craig Ellis from B. Riley Securities.

Yes. I want to start following up with some of the comments you made about the 108 qubit Cepheus availability on Rigetti QCS and then on Amazon Bracket and Microsoft Azure Quantum and qBraid. The question is this, as it's attentional availability, what are you seeing in terms of engagement across the various platforms? And are you getting any feedback in terms of what the workload tests are framing up at?

Good question, Craig. It's still relatively early to talk about usage and what we are seeing since we just deployed the system as a month or so ago. Definitely, interest is high. Definitely, we are seeing usage to be quite high but it's too early to make judgments on the basis of early data. Certainly, we expect this to be used very well over the next few months as word gets around and people explore and use it, and we will continue to improve the system, as we mentioned, we'll continue to improve the fidelity, so we'll deploy higher fidelity 108Q system sometime later this year.

And we definitely expect usage to continue to improve as we improve the performance of the system.

That's helpful. And then the follow-up question relates to one of your partnerships. So we established the Quanta partnership in 1Q of '25, the investment in Rigetti was formalized in early 2Q '25. As you look back at the first year of that deal, what would you identify as the top 2 or 3 things that are really going well and helping you in your ambition to scale up qubit account and system capabilities. And what would be the 1 or 2 things that you would hope that partnership could do this year?

Thanks, Craig. That's a really good question. We entered into a strategic partnership agreement with Quanta. As you mentioned, they did invest at that time about $40 million in Rigetti. But more importantly, there was a commitment on both sides to invest. We continue to invest in the quantum computing side onto investments are more on the non-quantum computing, but the rest of the hardware part of the stack.

And they have done that, we -- definitely one of the key accomplishments we can point out to is how well they have designed the new control system that we have started including in our most recent offerings. So our latest deployments that we are talking about to commercial customers and other customers are, we are exploring use of Quanta made control systems instead of our home built systems. And quanta, obviously, is a large company with extremely high capabilities in CPU, GPU cloud servers.

So they know how to bid server boxes control system electronics, and we can clearly see that their professionalism in building those boxes. And they have a dedicated team working on systems that work with our systems. And going forward, we definitely will be using Qanta's control systems as part of our stack. It's not an exclusive arrangement. We will continue to maintain our capabilities in that area, and Quanta will also talk to other quantum computing companies as well.

So it's not like a mutually exclusive thing. But we definitely are benefiting with Qanta's expertise in control systems, and we definitely expect them to be contributing to other parts of the stack. So the first year, I would say, definitely control system next year or 2, we expect them to not only continue to develop better quality control systems, meeting our overall system requirements, but also get into the rest of the hardware stack.

Hopefully, that answers your question.

Our next question or comment comes from the line of Vijay Rakesh from Mizuho.

Just a quick question. So as you look at the Cepheus-1-108 qubit one, any thoughts on how -- what are you getting on the price uplift versus the 36 qubit one? And how the customer response has been on the Cepheus 108 qubit as you show availability on Azure and Bracket, et cetera? And I have a follow-up.

Vijay, it's still relatively early. We deployed the system just over a month ago. So it's still very early to talk about usage and what we are seeing, definitely, interest is high, definitely, we are seeing a lot of customers use the system right now. But it's still early to quantify that and talk about uplift over 36Q in terms of usage. Regarding price, I mean, we really are still talking about research type of customers. So we are not talking about jobs that are very long in duration.

Most of the usage is on order of a few seconds, so a few minutes at the most because people are still experimenting with quantum computing and fundamental understanding of quantum computing, how it can be used, basic algorithm development type research applications. So we are not really seeing commercial customers with data center type operations, trying to engage with quantum computing.

And frankly, we shouldn't be seeing that for the next year or 2. It's only when we start approaching Quantum advantage in about 3 years. Should we expect those kinds of engagements to increase on cloud quantum computers. Cepheus-1-108 is one of the most powerful quantum computers on the cloud that is generally available for anyone right now. So definitely, I think this is what leading usage of quantum computing is what we are seeing right now.

So as we continue to improve the performance, increase the qubit count, increase fidelity, we definitely expect more and more commercial customers to start using quant of computers. Having said that, right now, we are still in the early stages. So hard to quantify the usage and the uplift over 360 qubit rate.

Got it. And then on the C-DAC, the $8.4 million win there, when do you start to see that layering into the guide? Or when do you start to see shipments there?

So our -- as we have stated, when we disclosed the order, our plan is to fulfill that order in the second half of this year, most likely in the Q4 time period, that's when we will physically shift the 108 qubit system. There are -- I mean, quantum computer comprises various parts, [indiscernible] refrigerator, the parts inside, the cables and all that stuff. So overall, our plan is to get them up and running before the end of this year. And that's when we expect most of the revenues to get booked.

Our next question or comment comes from the line of Antoine Legault from Wedbush Securities.

Just could you remind us how you remain confident that the architectural fix that you recently achieved with couplers. How durable is that as you scale beyond 108 qubits to a few hundreds, eventually over 1,000 qubits.

That's a good question, Antoine, and we look at that very carefully as we continue to update our road map. Our fundamental architecture is still continues to be square grid and tunable couplers. By the way, that's what we see. Other large companies due to Google's architecture similar to ours. IBM recently changed their architecture from fixed coupler to tunable coupler technology, so very similar to what we are doing right now.

So all 3 of us are deploying more on a similar architecture at that level. Tunable coupler, we all like them because it gives you an extra degree of flexibility to adjust the coupling between the qubits. So we definitely take advantage of that when it comes to parking the qubits at the right frequency and a couplers at the right frequency to -- as of today, we -- where the difference is coming in is our view is that when we scale up qubit count, we need chiplets. So far, we have not seen IBM, Google or anyone else, at least get data on chiplets. We continue to monitor that area very closely. The reasons for the use of chiplet is because it's fundamentally a lot easier to build a smaller dimension, chiplet than a larger dimension monolithic chip.

We are not seeing any concerns with tunable coupler and a square grid architecture because of using chiplets. So we feel very confident that the road map we have from the current 108 qubit to improve the fidelity as well as the qubit count using chiplets is pretty solid, and we believe we will be able to execute it to get us to quantum advantage roughly 3 years.

Our next question or comment comes from the line of Troy Jensen from Cantor Fitzgerald.

Just going right off of what you just said here. Quantum Advantage is 3 years away for you guys. It is just safe to say that 2 chip cycles away And I guess on that point, can you just talk about chip cycles. Previously, it was probably like in 9 months, you guys were spinning out new chips and is going to be a little slower going forward 12 to 18 months, but any help on that would be great.

Yes. Troy, I mean, as you know, we basically own our own fabs. So we have been operating our fab in Fremont, California for the last several years. So it depends on how many changes we do in the chip when it comes to chip cycle. So yes, we do launch a major revision of the chip once a year. But honestly, because we control our a fab, we can do it much faster if we decide to just focus on some particular aspect of the chip.

So we can turn around chips at a faster rate than once a year, maybe even twice a year. So 3 years gives us plenty of turns of chips in terms of major revisions. Certainly, a big part of getting to Quantum Advantage from where we are today comes from the chip side. But I don't forget there are other components coming on the stack that are quite important when it comes to Quantum advantage. The design part of the chip, obviously, but also the dilution refrigerator, the cabling, the control systems, the other error corrections, the error mitigation parts, the other parts of the software parts of stack all of them contribute in terms of the performance, and we need to keep improving on all parts of those to get to quantum advantage.

So 3 years, we think, is a realistic time line. We have seen some other companies claim quantum advantage faster than that. Frankly, we are a little skeptical if you look at 6 years right now, it's one of the best quantum computers in the world out there, if not one of the probably the best. And we think it still will take us roughly 3 years to get to quantum advantage. So then there are companies out there who are talking about quantum advantage this year. Some of them also talked about quantum advantage last year, to be honest, we remain skeptical when companies make all kinds of claims without the data to support that.

We feel pretty good about Cepheus-1 performance right now at 108 qubit level. We think 3 years is a realistic time line to get all the metrics in the right place to deliver quantum advantage. Hopefully, that answers your question.

Yes, that's perfect. But let me follow up -- you mentioned dilution refrigeration. That's 1 area where your competitor is, not so much IBM and Google but competitive methodologies can to hammer you guys on. Can you just talk a little bit about what needs to happen there? And once you're at this quantum advantage, what is the dilution refrigeration costs because I get it -- if superconducting is the only technology that can commercialize quantum, who cares about dilution refrigeration costs.

But if there's others that can and don't have that. Can you just kind of hit that?

So in superconducting quantum computing, we definitely need dilution refrigeration to cool our chips down to get the superconducting effects. So we are talking about cooling our chips down to 10 milli Kelvin and dilution refrigeration is a critical technology that enables us to get the most extremely cold temperatures. Dilution refrigeration itself, the technology was invented several decades ago.

So it's been around for select military space type applications. It's only finding its way in the commercial world now with quantum computing. So it's not like -- it's a brand-new technology that we are dealing with. It's been around for a while. There are 4 or 5 companies that have entered this area they make dilution refrigerators that we can get off the shelves. We have relationships with 3 of them right now, and we'll continue to discuss with their road maps and how they plan to improve it. If you look at a superconducting quantum computer, whether it's ours or IBM or Google or other companies, dilution refrigerator looks like bit like a large kitchen refrigerator, frankly, about 3 feet by 3 feet, maybe 4 feet by 4 feet and a cylindrical kind of a form factor.

The chip itself is fairly small. Our 108 qubit Cepheus with 12 9 qubit chiplets each of the chiplet is about 6-millimeter by 6 millimeters. So we are not talking large dimensions for 108 qubit. Even when we get -- go to several hundred to 1,000 qubit, we are not going to be talking very large dimensions here, we are talking few centimeters by few centimeters. So to cool that dimension to 10 millikelvin, the road maps that we have seen from commercial companies such as Blue Force or Oxford Instruments or maybe allow us to get the 1,000 qubit on tens of thousands of qubit in the dilution refrigerator along with the road map, we certainly watch developments of those companies very carefully, and we take advantage of their developments as become [indiscernible].

It's a complex technology, but it's clearly not a bottleneck for getting superconducting quantum computing to quantum advantage and beyond. So we realize that other modalities don't have that issue to deal with, with dilution refrigerator. But frankly, when we look at the benefits we get because of superconducting, which are speed and scalability, I mean our speeds at least are 1,000 to 10,000x faster than some of those other modalities that operate at room temperature. And that's a huge advantage when it comes to computing, obviously, when you have 1,000 to 10,000 x speed advantage, but also scalability because we are doing with chips, we can scale them up much faster than eletromechanical things like trapped ion or pure atom.

So we look at the challenges and opportunities that come with superconducting gate and frankly, the challenges with dilution refrigerator are relatively small compared to the benefits we get in terms of scalability and speed.

Our next question or comment comes from the line of John McPeake from Rosenblatt Securities.

Subodh and Jeff, congrats on getting the Cepheus out on the cloud. And I just have a question on that one. You're saying later this year, I think, to get to 99.5% from 99.1% maybe we could just dig in a little bit there on what needs to happen? And then I just have a quick follow-up. I know these questions could have been asked but maybe you can dig in a little bit more.

Sure, John. So as we disclosed in our earnings release, right now, the limiting factor for fidelity, particularly at 2 qubit gate facility, is our coherent strategy. That's the amount of time we can maintain the quantum state. And right now, it's in the 25 to 30 microsecond range. We need to roughly double that ideally triple that to get to the 99.5% type fidelity. So we know exactly where the fidility is being lost, if you will. We have several experiments that we are working on. We will we know what coherence depends on. So we feel pretty good about improving our coherence time and therefore, the fidelity as the year goes on.

Hopefully, that answers your question.

It does. The lab machine at 99.9, I think it was a lab machine. What -- how many physicals were on, is that a 9 qubit.

The prototype was even smaller than 9 qubit, but we recently had data that we discussed with 9 qubit. So we are already with the fast adiabatic CZ scheme, we have reached 9 qubit at high fidelity. We need to get that to 36 qubit next and 108 qubit, so we'll push on that as fast as we can.

Okay. And then the other question is just on DARPA. Any kind of update there? I think you guys were going to reengage.

Well, we continue to be part of DARPA, so it's not a question of reengage. We continue to stay engaged with DARPA, part of the [indiscernible] program. They gave us feedback towards the end of last year, we are working on those things, error correction, the scaling area or some of the challenges we have. So we continue to work on that. We continue to stay engaged with them. So we feel pretty good that way. And it's an open-ended program as we hit certain milestones, they will get us into Phase B and eventually into Phase C and so on. So it's a program that 7 to 8-year time line with milestones-based graduation into the next phase.

if you will. So we continue to stay engaged and we feel confident that as we continue to improve our performance, we'll get to Phase B and eventually to Phase C and beyond.

And you have a full U.S. supply chain, which I'm sure helps. And I did 1 more. The end of the year, I think we were talking about 150 machine. Should I still think about that 150 qubit machine?

Yes. I mean, overall, what we have said is the most important big milestone we have is the quantum advantage, which is roughly 3 years from now. And that's on 1,000 qubit at 99.9%, 2 qubit gate fidelity. So we are clearly, we are right now at 108 Q at 99.1%. If you go smaller, we are at significantly higher fidelity, but they are smaller.

So we need to increase our qubit count roughly by 10x, we need to improve our fidelity from the low 99s to high 99s. So you are going to -- it's going to be a stair casing situation where we will -- there will be times as we increased the qubit count without increasing the fidiity and there will be times when we increased fidelity without increasing the qubit count. Ideally we'll do both simultaneously, but sometimes it gets difficult to do that kind of stuff, both at the same time. So as this year goes on, definitely expect us to introduce a higher fidelity 108 qubit. We will be talking about 150 qubits or higher. We are not quite sure whether we will be able to include the higher fidelity at the 150 qubit levels or not. But definitely, the goal is to try to increase both qubit count tand fidelity.

Okay. It's not easy stuff.

Our next question or comment comes from the line of Richard Shannon from Craig-Hallum Capital Group. We will not be able to pull up Mr. Shannon's line at this time, I would like to turn the conference over to Mr. Subodh for any closing remarks.

Thank you for your interest in Rigetti earnings call and the thoughtful questions and discussions today. We are encouraged by the progress we are making on our technology road map, the growing engagement we are seeing from customers across cloud and on-premises channels and the strength of our balance sheet to support disciplined execution. We remain focused on delivering against the milestones we have laid out and on building a business that can create durable long-term value as quantum computing matures. On behalf of the entire Rigetti team, thank you for your continued interest and support, and we look forward to updating you on our progress next quarter.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day. Speakers, stand by.

Good day, and thank you for standing by. Welcome to the Rigetti Computing Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to your speaker today, CEO, Dr. Subodh Kulkarni.

Good afternoon, everyone, and thank you for joining us for Rigettis' Fourth Quarter and Full Year 2025 Earnings Conference Call. I'm pleased to be joined today by our Chief Financial Officer, Jeff Bertelsen, who will walk you through our financial results in more detail following my overview. Also with us is our Chief Technology Officer, David Rivas, who will be available to participate in the Q&A session following our prepared remarks. We appreciate your continued interest in Rigetti, and we look forward to answering your questions at the conclusion of our remarks.

Before we begin, I would like to remind everyone that today's call along with our fourth quarter and full year 2025 press release contains forward-looking statements. These statements reflect our current expectations, objectives and underlying assumptions regarding our outlook and future operating results. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. Such risks and uncertainties are described and discussed in greater detail in our filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2025, and other periodic reports filed by the company from time to time with the SEC. We encourage you to review these filings for a comprehensive discussion of these risks and uncertainties, that could cause actual events and results to differ materially from those contained in the forward-looking statements. Rigetti undertakes no obligation to update any forward-looking statements made during this call, except as required by law.

During today's call, we will refer to certain non-GAAP financial measures. For details on these measures and reconciliations to comparable GAAP measures and for further information regarding the factors that may affect Rigetti's future operating results. Please refer to today's earnings release on Rigetti's website at investors.rigetti.com. Also [ the 8-k ] furnished with the SEC today after the close.

Now turning to the business. 2025 was a year of technical validation and disciplined execution for Rigetti. We advanced materially across Fidelity, Scale and Architecture, while remaining realistic about time lines and commercialization. Our focus remains reaching true commercially meaningful quantum advantage, not headline milestones. I want to begin by grounding today's discussion in how we think about quantum computing at Rigetti, because that perspective is centered to how we operate, how we invest and how we measure progress.

Quantum Computing is not about replacing classical computing. It is about enhancing it. CPUs will continue to handle sequential workloads, and GPUs will continue to handle parallel workloads, where quantum computing becomes powerful is in simultaneous computation, problems where thousands of variables interact at once and classical systems struggle to converge. That is the problems base we are bidding for. Our strategy has consistently focused on superconducting, gate-based quantum computing because it offers two fundamental advantages that matter at scale, speed and scalability. We are working with electrons, not atoms or ions, which gives us gate speeds measured in tens of nanoseconds. And because this technology is grounded in semiconductor fabrication, we believe it offers the most realistic path to building large-scale systems over time.

Over the past year, we made great progress towards what we define as true quantum advantage. I'm excited to share that Rigetti recently achieved a 2-qubit gate fidelity as high as 99.9% at 28 nanosecond gate speed on a ProDrive platform using our new proprietary Adiabatic CZ scheme. We are still maintaining 99.9%, 1 qubit gate fidelity, and we have also reported median 2 qubit gate fidelities of 99.7% on our 9-qubit system, 99.6% of our 36-qubit system and 99% on our 108 -- qubit system, what we call CPS-108Q. Together, these milestones are a testament to our ongoing progress in materials, fabrication and system level design. They're helping us further narrow the fidelity gap between super conducting systems and other quantum modalities, while delivering speeds that are about 1,000x faster than some approaches like trapped ion or pure atoms.

We successfully deployed multiple systems to the cloud, including an 84-qubit monolithic chip system and a 36-qubit chip-let base system. More importantly, we demonstrated that chiplet timing works in practice. That matters because scaling to thousands of qubits on a single die is not realistic. Chiplets are how we believe quantum systems will scale in the real world. As we pushed beyond 100-qubits, began important insights. On our 108 Qubit System, we identified tunable coupler interactions that emerge at higher scale. We made a deliberate decision to delay general availability and address the issue. The executed architectural refinements that successfully improved system stability and control. That decision reflects our discipline and increases our confidence in our 108 Qubit chiplet base system, as we move towards customer [ readyness ]. That experience underscores how we have our own foundry. Rigetti operates Fab 1, the industry's post dedicated and integrated quantum device manufacturing facility, which allows us to tightly couple design, fabrication and testing under one roof. This enables faster reemission cycles as we scale beyond 100-qubit and drives proprietary advancements rather than incremental work arounds. We see Fab 1 as a durable competitive advantage that accelerates our road map and create a meaningful barrier to Rigetti, as quantum systems grow in scale and complexity.

That combination of scale, control and execution is also what our customers and partners are responding to. We are also seeing increased demand for on-premises quantum systems, particularly for national governments and research institutions seeking direct access to hardware for hybrid computing and systems-level R&D.

In January of this year, we announced an $8.4 million order from India's Center for Development of Advanced Computing, C-DAC, for 108-qubit on-premises quantum computer scheduled for deployment in the second half of 2026. This system will be integrated into C-DAC's supercomputing environment and is based on our chiplet architecture, which is central to our scaling strategy. That order builds on the memorandum of understanding we signed with C-DAC to explore the co-development of hybrid classical quantum systems. Taken together, these efforts reflect how customers are engaging with us not just as a hardware vendor, but as a long-term technology partner in hybrid computing environments.

At the smaller end of the spectrum, late last year, we also announced purchase orders totaling approximately $5.7 million for 2, 9-qubit Novera on-premises systems. These systems are being used as test beds for quantum hardware research error correction and internal capability development. Importantly, they are upgradeable, which allows customers to grow with the platform as their needs evolve. Novera QPU also continues to be ideal solution for customers who want to integrate our technology with their existing cryogenics [indiscernible] controls. We are pleased to announce that we have secured a purchase order for our Novera QPU from a Japanese research organization, which is scheduled to be delivered in April 2026. This will be Rigetti's first QPU to be located in Japan, and we are excited to be expanding into this new geographic region.

A core differentiator for get is our open modular architecture. We do not believe the future of quantum computing will be built by any single company attempting to own the entire stack. Instead, we have designed our platform to integrate best-in-class partners where they can move faster or deeper, than we can alone. We are partnering with Reveriane to advance real-time quantum error correction capabilities, as it is foundational in achieving fault-tolerant quantum computing. Reveriane has demonstrated capabilities that we believe will meaningfully advance that goal.

We are also working closely with NVIDIA to support NVQLink and open platform designed to integrate quantum systems with AI supercomputing. This collaboration reflects our shared view that quantum computers will coexist with CPUs and GPUs in data centers as part of future hybrid computing environments. Another example is our collaboration with QphoX and the U.K.'s National Quantum Compute Center on optical readout of superconducting qubit. This work addresses a fundamental scaling bottleneck by reducing cryogenic heat load and wiring complexity. While this remains early-stage research, it illustrates how our architecture allows us to incorporate novel technologies that could materially improve scalability over time. This ecosystem approach gives us flexibility, accelerate innovation and reduces execution risk as the industry evolves.

The quantum computing market today remains research driver. Most systems are deployed to government labs, national research centers, universities and early commercial researchers. That is not a limitation. It is a reflection of where the technology is in its life cycle. I want to be very clear about how we define Quantum Advantage because this brings our road map and our timelines.

For Rigetti, quantum advantage meets outperforming classical systems on tactical workloads in real computing environment for commercial applicability. We believe in achieving quantum advantage, requires several things to come together, scale, fidelity, speed and error mitigation. Specifically, systems on the order of 1,000-qubit, Two-qubit gate fidelity approaching 99.9%, gate-speeds below 15 nanoseconds and integrated error mitigation. Based on what we know today, we believe we are roughly 3 years from reaching that point. That may sound conservative, but in our technology as complex as quantum computing, prescription and credibility matter more than bold claims.

Looking ahead, 2026 is about execution and scaling. Our near-term priority is completing deployment of the 108 Qubit system at 99.5% median Two-qubit gate fidelity, which we expect around the end of March. Beyond that, our focus is to deploy a system with more than 150-qubits with an anticipated 99.7% median Two-qubit gate fidelity around end of December 2026. As far as we know, no one has demonstrated systems at that scale and fidelity using chiplet based architecture. In parallel, we'll continue advancing our chiplet architecture as the foundation for scaling systems of more than 1,000 qubit with an anticipated 99.8% median 2 qubit fidelity by or around the end of 2027. Chiplets are central to our strategy and represent the most practical path to large-scale systems.

We also will continue working to integrate error correction into the stack. Our work with Reveriane demonstrates ongoing progress in this area. From a market perspective, we expect 2026 to remain focused on delivering on-premise systems across government, national labs and academic institutions with select commercial customers engaged in quantum research. Finally, we strengthened our balance sheet. We exited the year with approximately $590 million in cash, providing us with the flexibility and runway to execute our road map to the quantum advantage time frame.

Our investment focus remains organic. We will consider M&A only if it meaningfully accelerates our road map, but we do not need acquisitions to execute a core strategy. To close, quantum computing is a long cycle opportunity. It requires patience, technical rigor and capital discipline. We are not building for next quarter or next year. We are building for a meaningful durable impact over the next 5 to 10 years. Rigetti's strategy is deliberate. We focus on speed, scalability and fidelity. We leverage a strong ecosystem. We define success rigorously, and we invest with a long-term view. Thank you for your continued support. I'll now turn the call over to our CFO, Jeff Bertelsen, for a review of our financial results.

Jeff. Thank you, Subodh, and good afternoon, everyone. I'll spend a few minutes walking through our fourth quarter financial results, our balance sheet and how we are thinking about capital deployment as we continue to execute the road map you've just heard about.

For the fourth quarter of 2025, revenue was $1.9 million, compared to $2.3 million in the fourth quarter of 2024. As investors have seen over time, our quarterly revenue profile continues to be influenced by the timing of system deliveries and government contract activity. That dynamic remained true in the fourth quarter, while we saw contributions from our contracts with NQCC and AFSOR, revenue variability at this stage of the market is expected and does not change how we manage the business or allocate capital.

Gross margins for the fourth quarter were 35% compared to 44% in Q4 of last year. Margin performance continues to be driven primarily by contract mix. Certain strategic contracts particularly with government and national lab customers carry lower margin profiles, but playing an important role in advancing system validation, ecosystem integration and long-term positioning. Total operating expenses for the fourth quarter were $23.2 million compared to $19.5 million in the same period last year. Spending remains concentrated in research and development, including engineering headcount, fabrication and system integration. Stock-based compensation was $5.6 million for the quarter compared to $3.4 million a year ago. Operating loss for the fourth quarter was $22.6 million compared to $18.5 million in Q4 2024.

Our GAAP net loss for the fourth quarter of 2025 was lower than the GAAP loss for the fourth quarter of 2024, primarily due to the noncash change in the fair value of our derivative warrant and earn-out liabilities. On a non-GAAP basis, net loss was $11.3 million or $0.03 per share compared to a net loss of $14 million or $0.06 per share in the prior year quarter. I want to briefly address the time line for revenue recognition with respect to the $5.7 million of Novera sales we announced late last year and the $8.4 million C-DAC order we announced in January.

Regarding the 2 Novera sales for $5.7 million, we expect a little less than half of that revenue to be recognized in the first quarter with the balance recognized in the second quarter of 2026. -Both Novera sales included lower margin dilution refrigeration systems. Therefore, we anticipate significant first quarter year-over-year revenue growth driven by a portion of the $5.7 million Novera on-premises system purchase orders expected to ship in Q1. Importantly, while individual quarters can move around, these contracts support a growing base of recurring and multiperiod activity.

Regarding C-DAC order, we expect to recognize the revenue from that sale in the second half of 2026, following testing to validate that the system meets its specifications. The C-DAC order announced in January 2026 did not include ongoing maintenance or support. We expect to receive an additional PO for those services later in the year.

Turning to the balance sheet. We ended the year with approximately $590 million in cash, cash equivalents and available for sale investments compared with approximately $217 million at the end of 2024. We continue to operate with no debt. At our current operating profile, we believe our capital position provides sufficient runway to execute against the milestones Subodh outlined, including continued progress on scale, fidelity and system integration. Our approach to capital allocation remains disciplined and deliberate. The majority of our spending is directed towards core R&D activities that directly advance our technology platform. We are not managing the business around short-term revenue optimization. We are managing around credible long-term progress towards quantum advantage.

We continue to evaluate longer-term fab and R&D capital needs, including the need for dilution refrigeration as qubit count scale. Any future investment decisions will be driven by capability requirements and evaluated carefully against alternatives, including partnerships or shared infrastructure. Our currently disclosed road map does not depend on near-term changes to our fab footprint. Our execution path remains primarily organic. We believe we have the available technical depth and internal capabilities required to deliver on our road map. At the same time, we maintain flexibility to evaluate selective opportunities that could accelerate progress in targeted areas, discipline and alignment with our strategy remain the filter.

To close, our financial strategy is straightforward. We are focused on maintaining flexibility, funding innovation responsibly and aligning capital deployment with long-term value creation. While quarterly results will continue to reflect the early stage nature of the market, our balance sheet position us to execute with patience and control. With that, I'll turn it back to the operator who will open the call for your questions.

[Operator Instructions] Our first question comes from Kevin Garrigan with Jefferies.

Thanks for letting me ask a few questions. So I guess just first, on the 108 qubit system, you made some significant progress on the QPU, but what are the key remaining gating items to deliver that as a customer-ready system?

Yes. Thanks for your question, Kevin. So as we said in our press release, we are on track to deploy the 180 qubit system around the end of March, with about 99.5% Two-qubit gate fidelity and 99.9% one qubit gate fidelity. As we mentioned in our prior press release, we intentionally delayed because of some interactions between tunable couplers that happen at that scale, and that's what we are addressing. We have done that. We feel pretty good about deploying the system here so. Hopefully, that answers your question.

Yes, it does. And then as a follow-up, as the [indiscernible] supply chain kind of -- or just as the quantum industry scales, manufacturing capacity could become a pretty big constraint. And given Fab1 is a key differentiator for you guys. Would you ever consider offering foundry or manufacturing capacity to others in the quantum computing industry?

Well, actually, we do offer Fab1 as a foundry to select customers, specifically the DOE, DoD and The U.K. National Government. So these are customers, they use our systems, they have deployed our systems over there. And as part of the overall technology partnership package, we do allow them to run experiments where we become the foundry. So we already do that, and we will continue to do those kinds of arrangements with, for select customers who have interest in developing their own chip architecture, chip designs and so on.

Our next question comes from Troy Jensen with Cantor Fitzgerald.

Congrats on all the progress and milestones achieved last year. But maybe just Subodh for you, I just want to make sure I get this correct, there's been a few different numbers kind of quoted in your press release about the single and dual gate fidelity. So when you launched this chip at the end of March, can you just clarify exactly what you think the fidelity levels will be for single and dual mode?

So when we deploy this 108 qubit systems towards the end of March, our one-qubit gate fidelity will continue to be at 99.9%, and our Two-qubit gate fidelity, the median number is expected to be about 99.5%. The reason we started clarifying one qubit gate fidelity, frankly, because there are many other quantum computing companies that are confusing everyone by reporting one qubit gate fidelity instead of Two-qubit gate fidelity. Historically, as you know, we have always focused on Two-qubit gate fidelity because that's really the most important metric when it comes to entanglement and so on, but some of the other quantum computing companies are routinely reporting one qubit gate fidelity and then comparing their one qubit gate fidelity our gate fidelity numbers. So to avoid that confusion we have started reporting both numbers right now, so again, reiterate our one qubit fidelity has consistently been at 99.9% or better for a few years now.

Its the Two-qubit we'll monitot monitor closely, and that will be about 99.5% median when we deployed the 180 qubit system by the end of March.

Awesome. if I could toss in two more quick ones. But 28-nano second gate speed, where were you guys at previously? And then also just an update on DARPA, where you guys stand with that?

Sure. So probably one of the most exciting parts about our press release this afternoon is the achievement of 99.9% Two-qubit gate fidelity, along with 99.9% one-qubit gate fidelity and 28 nano second gate speed with our proprietary what we call Adiabatic or CZ gate that many of us use in quantum computing for general purpose quantum computing, and this proprietary version of CZ gate allows to get this incredible performance. We really believe this is a great milestone to, for us follow because now we know it is possible to get 99.9% Two-qubit gate fidelity with our current designer architecture. So very important milestone that takes us with the confidence that we will be able to deliver 1,000 qubit system in a couple of years with 99.8% or that kind of gate fidelity. So we're really proud of that accomplishment.

Regarding DARPA, specifically, we continue to work with them. We are confident that we'll get into Phase B, especially as we have discussed in the past, its an open ended program once we reach certain milestones, we'll get us into Phase B. They have given us a list of things that we have to address mostly related to error corrections and a few other things. And we are working on them as we speak. So we feel pretty good that we should be [indiscernible] by the end of this year or thereabouts.

Next question comes from Quinn Bolton with Needham & Company.

I guess just wanted to come back on the 108 qubit system. Obviously, the end of March is just a few weeks away. Are you guys already at the 99.5% meeting qubit fidelity in lab and you're just sort of going through the process of getting the system online? Or is there still work to do on chips, having chips and tuning the process to get to that 99.5% Two-qubit gate fidelity.

Quinn this is a little more complicated than that to give a simple answer like that, partly because when we bring up a new system, there's a lot of qubits obviously, 108, which is a lot of qubits and we bring different parts of the grid up look at different agents and internal parts of the grid. So yes, there are multiple areas where we already are at 99.5% or better, but obviously, the whole grid is not at 99.5% median. Otherwise, we would have deployed it, right away. So we are -- we did a chip redesign to address the coupling issues. We are collecting data, verifying that all the data is consistent. So when we deploy, we will be confident that this is this is the right system to deploy.

Just a little context. 108 qubit system at that level of fidelity and that gate speed about 50, 60 nano-second is a really good system. I mean when you look at the overall industry right now, as far as we can tell, the only one who has anything in that league, or better would be IBM at 120 qubits with their tuneable coupler. They used to have 156 qubit and 6 coupler, but they move to tuneable coupler and they're at 120. Everyone else is much more than that. And certainly, when you see announcements from companies like Trapped Ion or pure atom companies, as far as we know, nobody has even approached 100 qubit yet. Therefore our press releases that go, but when we go and see actual deployments, from any of these companies, no one is in that range. So we -- only the second company as far as I can tell, to reach 108 qubits deployed on a cloud. I just wanted to put that perspective in place.

Right. I appreciate that. The second question is for Jeff. Jeff, you gave us some sense that the gross margin on the 2 Novera sales in the $5.7 million purchase orders. We're going to be carrying lower gross margins because of dilution refrigerators. Can you give us any sense what level of gross margin would you expect on the $5.7 million million? And then I guess a similar question on the C-DAC 108 Qubit System. What type of gross margin would you expect on that system? Is that also low because of the dilution of refrigerator? Or is that expected to be a higher gross margin sale?

Yes. I guess the way I would answer that one is I don't know that we want to get into quoting exactly what the gross margins are for competitive reasons and whatnot. Our typical Novera systems without the dilution refrigeration have very high margins, definitely higher. With the dilution refrigeration, it's a resold item, you really can't mark that up. So they are going to be lower than maybe what we would see with some of our other Novera sales. And regarding the C-DAC system, again, I think for competitive reasons, we won't comment on the gross margin profile specifically. I mean it is a very important strategic account for us, and we're happy to have it. And it will definitely contribute to our sales growth next year, but don't want to get into the margin specifics.

Got it. And then just a final clarification on the C-DAC order. It sounds like does the entire $8.4 million rev rec once validation testing has been complete? Or is there a possibility that the $8.4 million could be rev rec-ed over a couple of quarters in the back half of the year?

No, it won't be spread over time. It will be rev rec all at once at a point in time once we've -- once it's been installed and we're able to demonstrate that's meeting at spec. So it will be more like a traditional system hardware sale as opposed to rev rec over time.

Our next question comes from David Williams with StoneX.

I guess maybe first, if you think about what you're doing with NVIDIA on the NV Link there. Can you talk maybe a little bit about the progress and anything that's maybe developed over the last quarter in that regard?

Sure. Thanks for the question, David. So our view is that quantum computing is not going to exist in a silo. It will be part of a hybrid ecosystem. So as we have said multiple times and even in this press release, we believe that CPUs will continue to be in data centers doing sequential computing addition, subtraction, that kind of stuff. GPUs will continue to be in data centers, doing parallel computing. What quantum computing will take over is simultaneous computing part that is currently handled by GPUs. So effectively quantum computing becomes an accelerator to a GPU for select applications where you have simultaneous computing. That view is consistent with NVIDIA and some other companies, that's where we are partnered with NVIDIA on the NVQLink. A clear path where we think it gives us huge advantage to be doing hybrid computing, superconducting gate-based quantum computing, which is what we do. is it gets to the speedy area.

Because we are dealing with tens of nano-speed in gate speeds, as you see, our standard product is in the 50, 60 nanosecond and with this new gate that we announced, we are talking about sub-30-nanospeed. That's commensurate with CPU and GPU gate speeds, and that really allows a practical hybrid quantum ecosystem to evolve. When you compare that with some other modalities like [indiscernible] or pure atom, they're talking about hundreds of microseconds, if I recorded correctly, the most recent number from [indiscernible] is 600 microseconds. So that's 30,000x slower than where we are. Just to repeat, I mean, we are talking tens of thousands of times lower speed with trapped [indiscernible] modalities. And that creates a significant challenge for them to talk about a hybrid quantum ecosystem. So that's a huge advantage superconducting gate-based quantum systems, and we have tremendous gate speeds coming through the CPU and GPU allows us to do that kind of stuff. So that's why we have partnered with NVIDIA, we demonstrated at GTC in October last year, how a concept would look like. And we'll continue to do that with them. They are not only a company from the HPC environment that shares this view, other HPC builders are also sharing similar views. So you are going to see more and more companies talk about hybrid quantum computing environment with HPC and quantum computers, particularly superconducting gate-based quantum computers coexisting together. Hopefully, that answers your question.

Yes, surely does. And then maybe secondly, just kind of looking at the landscape for M&A or acquisitions. It seems like there's a fairly ripe environment of different enabling type technologies that are out there. So maybe just discussed the landscape, how you see it, if there's areas of the stack where you could benefit maybe that could help accelerate your road map?

Yes. As we mentioned, we would certainly be open to M&A if it helps accelerate our road map. Our road map, again, to repeat, we are talking about more than 1,000 qubit system at sub-15 nanosecond gate speed and 99.8% median Two-qubit gate fidelity in a couple of years. As far as we can tell, that's a very impressive system that we may be one of the only ones, if not the only ones to be able to get a system to that level of performance. So to get a system there and to try to find accelerating points where we can acquire someone to help us accelerate that road map, at least we haven't seen what exactly is out there that would help us accelerate that road map.

Right now, clearly, our chiplet strategy is a critical component of us getting to 1,000 qubits. And there we are the pioneers. We have the IP. We have the know-how. As far as we can tell, we are the only ones who are practicing chiplets in real life. So really, no one else can help us to accelerate that one. When it comes to the other components of the stack on the control system, as we have already disclosed, we are partnered closely with Quanta Computer in Taiwan, and they are a top player in CPU GPU servers in the cloud, and they fully understand that control system part of the stack. So we feel pretty good about who we have partnered with I've already mentioned NVIDIA for NVQLink and the distribution layer software like KuraQuantum. Other areas, we have Reveriane for error correction, QphoX for optical signaling, those kinds of partnerships. So we will continue to monitor the situation. And if we believe that someone can help accelerate our own map faster because we are certainly open. But at this point, our road map clearly is dependent on just executing our plan. So that's what we have said that most of our plan is organic right now, not contingent on M&A.

Our next question comes from Krish Sankar with TD Cowen.

So first one, if I remember right, I think by end of next quarter or so is a time line for making the decision of maybe building another fab or outsourcing it. So I'm kind of curious where we are on that and have the recent acquisition by your competitors kind of changed that decision-making thought process?

Well, we already have our own fab that is existing in [indiscernible] that's producing only for [indiscernible] right now. Regarding the need for a new fab, we have mentioned that there may be a potential possibility that we may have to invest in a new fab, but we have been very clear, Krish, that we do not believe we need a new fab to get to quantum advantage. So we are -- certainly, for the next 3 years, we think our existing fab is capable of getting us to quantum advantage, which is 1000 qubit 99.9% gate fidelity. The fact

that we just disclosed a 99.9% Two-qubit gate fidelity performance with our existing fab is a proof point that our existing fab is clearly capable of taking us there. Regarding our competitors, but buying CMOS foundry for a quantum fab, we are not quite sure how they did that when they had already -- I believe you're referring to Ion-Q buying SkyWater. We are not quite sure why they did that because as far as we knew, IonQ had already invested in a separate fab in Washington State 3 years ago, and then purchasing SkyWater, we are not quite sure and SkyWater's primary business, most of their business is CMOS foundry obviously. So you are not quite sure what exactly the rationale was, you need to talk to them. But we certainly do not believe that -- we need to be using any other fab except our fab for the near term. Longer term, obviously, we have said there is potentially a need for a fab to -- there are multiple initiatives being looked at right now, including there are foundry options out there, and we'll certainly take a look at foundry options, other initiatives that are being looked at and decide what is the next step.

But again, to repeat, we feel pretty good about our existing fab and feel confident that it will take us there to quantum advantage, which is about 3 years from now.

Got it. Very helpful. And so just as a quick follow-up, kind of curious on the government funding thing. Last year, we had DOE announced new funding. Have you seen any activity from them? There's also any latest thoughts on the U.S. NQIRA? And any of the sovereign initiatives that you're seeing that benefit we're getting?

Certainly, there's a lot of initiatives being discussed at the U.S. government level to support quantum computing. But as we can all see, there is no bill that has been signed and appropriated yet. There seems to be bipartisan support for this NQIC Authorization Act different, both the House and Senators seems to be in support, but it hasn't yet led to a bill that is signed and appropriate, which we are all eagerly awaiting for. It looks -- everything suggests that such a bill should be signed here soon, and that will significantly help companies like us, but along with us other companies that play in this ecosystem too. So we certainly are supportive of those kinds of initiatives and hopefully, they happen.

DoD funding continues. As you can see, we clearly are already getting funded from places like Air Force Research Lab part of DoD, and they'll continue to look at other opportunities with DoD and other areas of the government. We certainly are a critical part of the U.K. government's initiative in quantum computing and there are multiple new initiatives being discussed by the U.K. government right now, and we certainly will take a look at those kinds of opportunities. And of course, we announced that, we are the first company that the Indian government has really chosen to get their quantum computer installed. We are really proud of that accomplishment. So when the first quantum computer is procured by the government of India. We believe it will be [indiscernible] before the end of this year. So we feel pretty good about being closely affiliated with U.S., U.K., and now the Indian government, and we'll continue to monitor different initiatives and funding activities going on.

Our next question comes from Craig Ellis with B. Riley Securities.

Subodh, in your prepared comments and in the press release, there was a note of Novera 2P sale to a Japanese research entity. I'm wondering if you could -- just tell us a little bit more about that. And then is that to elaborate on what the pipeline is looking like as you engage more broadly with other international entities?

Yes, sure. Thanks, Greg. So as we disclosed, we did get an order for a 9-qubit Novera from a Japanese research organization. We always ask their permission if we can disclose their name. In this case, they didn't want to for confidential reasons on their side. But it is a premium Japanese organization. And once they give us permission to disclose, we'll be happy to disclose. Overall, we feel pretty good about interest increasing to get on-premises quantum computing. As we have already disclosed, we have 2 upgradable 9 qubit systems that we are going to deliver in the first half of this year and on 108-qubit system to the government of India in the second half of this year. We have disclosed this Novera order and there a few more Novara potential orders here in the pipeline, and we'll disclose them when we get them. And if they give us permission to disclose their name maybe we will obviously do that.

We are certainly talking to different government entities within U.S., U.K., India and some other countries too. And we believe the demand for on-premises system will continue to grow. As you can see, just by adding the numbers that we have disclosed, we want to see significant year-over-year increase in sales this year by just delivering the systems that we have already received orders for, and we'll continue to see that in the future. We believe that as we get closer to quantum advantage, which is about 3 years from now, you are going to see significant spike in interest as we get closer to that milestone. And that makes sense because that's really when people start seeing practical benefits with quantum computing, and you will definitely see more and more commercial authorization starting to show interest in optimizes quantum computing. Hopefully, that answers your question, Craig.

Yes, that's very helpful. And it's nice to see the revenue momentum on the Japanese research sales, Jeff, are you expecting those to rev rack this year? And if so, can you give us a sense for whether that would be in the first half of the year, the second half of the year?

Yes. The Novera to the Japanese organization, we expect that to ship in April and rev rec in Q2.

Our next question comes from Richard Shannon with Craig Hallum Capital Group.

This is Tyler on for Richard. To the Japanese organization that purchased your system, do they already have multiple [indiscernible] fridges installed and are they just testing different components in the stack or different combinations of components in the stack? And I have one more follow-up.

Well, certainly, we know they have 1 dilution refrigerator because they have ordered Novera QPU, not a whole 9 qubit upgrade system. We are not sure of what other modalities they have said and within superconducting if they have looked at any competitive solutions. As you probably know, [indiscernible] the really doesn't offer something like a 9 qubit system, Google [indiscernible] a on-premise quantum computing system. There is an organization -- a couple of organizations in Europe like IQM and Quantum [indiscernible], they can offer smaller cubic count systems. But frankly, our performance is significantly better than those kinds of competitors. So we believe the Japanese organization did their homework and decided superconducting quantum computing is an area they want to invest in. And within superconducting to get started Novera is a perfect solution to get your researchers familiar with quantum computing and starting to learn about quantum computing ecosystem and work on [indiscernible] and applications and stuff like that.

Got it. And you had mentioned you're doing work with -- sorry, I'm at the airport. You're doing work with Reveriane on the scalability of error correction. Could you just elaborate on what that means?

Sure. What we have disclosed is that we have partnered with Reveriane based in Cambridge, U.K. It's a company of probably our size, about 150 employees, excellent quality work they do, error correction software, and we have published some papers that anyone can take a look at. We showed some concepts of how real time error correction will work. We have shown a path to how their error correction hardware will closely integrate with our hardware. So they will be a core part of our stack, if you will, and how that will scale up as we go up to 100 and 1,000 qubit and beyond 10,000 qubits. So our road maps are well aligned. We work very closely with their team. So effectively, we view the error correction as a key part of our stack going forward. Hopefully, that answers your question.

Yes. Is there just any update on like number of qubit for one of their systems? Is there any change in that?

Not in that sense. I mean number of cubits and the raw fidelity, obviously, that all those things come from us, where they start coming in, is error mitigation and error correction area. Obviously, that's the layer that is critical when you start talking about quantum advantage. So really, the benefit that our customers are going to see with Reveriane error correction is when we start approaching quantum advantage. Right now, they can test it, Reveriane offer them their services. They have physical products to ship, if you will, and we can demonstrate that our systems are closely working well together. But clearly, we are not at a point of 1,000 qubits, that 99.9% type fidelity where error correction can really be demonstrated to show practical benefits. So we need to get closer to Quantum Advantage before end users will start seeing the real value of error mitigation and error correction.

Our next question comes from John McPeake with Rosenblat Securities.

Thanks, that's on getting to the error rate that you need to get to by the end of the quarter. Question on the 150-plus qubit system that you guys had originally planned for by the end of this year at 99.7% 2Q gate fidelity. Is that still on cards?

Yes, absolutely. That is our road map. We deployed this 108-qubits system soon and the plan is to get to 150-plus qubit around -- we want to be careful. I mean, any time you say by the end of year, it always creates a challenge for December 31 and so on. I mean, these are extremely complex systems. These are extremely complicated technologies that we are developing. So what we have said is more than 150 qubit, about 99.7% median Two-qubit gate fidelity around the end of this year. That's how [indiscernible]. The bigger one that we are really excited about, and we are focusing very much on that is more than 1,000 qubits, closer to 99.8% median Two-qubit gate fidelity, less than 50 nanospeed gate speed in about a couple of years. So that's where a lot of our work already has started. So we'll certainly get 150 plus delivered around the end of this year, but most of the effort right now has already started on the 1,000 plus qubit in a couple of years. And as I mentioned earlier, I mean, even 150 right now, there is no one our 150-plus qubit system with the exception of IBM's old technology, where they had 156 qubit and certainly 1,000 is going to be a big milestone for the whole industry, certainly for us, but for the whole industry. We don't see how other modalities even though they claim they will be, you look around trapped ion pure atoms or any other modalities, none of them, as far as I can see, have reached even 100 qubits or even close to that. So when they have the road maps talking about getting to 1,000 tens of thousands. It's a road map. In the case because we are using chiplet technology and because we have semiconductor fabrication, that we know how to stack up the chips, we feel pretty good about our executability of our road map.

So yes, to answer your question, absolutely, 150 plus around the end of this year and more than 1,000 around the end of next year. That's the plan.

Great. So the issues you're resolving around the 108, are those critical to reaching these road map milestones? Is that -- is that the way I should think about it like once you resolve the whole coupler...

Yes, absolutely. I mean the issue that we are resolving as we speak with the tunebale coupler and that's why we did the chip reiteration, its is critical not to 108, but 150 and everything beyond that. So every time we advance to a certain level, we take advantage of all that when we go with the mix systems. That's why, I mean, when we hear some companies talk about how they are going to get to 1 million qubits without demonstrating even 10 qubits, we are very skeptical of those kinds of claims.

And frankly, I mean, even if you get -- some companies [indiscernible] companies like IonQ, who acquired Oxford [indiscernible] at a couple of qubits. And that's where they are right now, at a couple of qubits and to certainly say we'll be at 1 million qubit next year. We remain skeptical of those kinds of claims. I mean, unless you can demonstrate 10 and 100, we just don't see how you can go from 2 qubit or 5 gigabits to certainly a couple of million cubics another year or 2 years.

Okay. And then just last one, if I could. The 1,000 cubic machine by the end of 2027. Can you give us some kind of sense as to how many logical you might be able to squeeze out of that? I don't know if you're thinking about the Reveriane error correction solution or some other error correction? Or how should I think about that? Because it's a great physical number, certainly 99.8% that one.

Yes. So really to start talking logical qubits, you need to get to closer to 99.9%, which is the quantum advantage point that I have talked about. In general, in the superconducting gate-based quantum computing technology space, we are in, typically, the number that we use is roughly 10 to 50 physical to logical qubit depending on the exact fidelity and stuff like that. Maybe 10 to 100 in the worst case. But that's the ratio. So you have to divide that number by 10 to 100, 100 to get the number of logical qubits. Once you approach 99.9% level. Now, I know that there's a confusion going around right now in the industry because, again, some trapped ion and pure atom companies have started reporting physical to logical qubit ratio of 2:1 and in some aggressive cases, 1:1, I just want to caution you that they are using a very were definition of logical qubit in that case. They are not talking about the logical qubit as a perfect qubit. They're talking about logical qubit having a fidelity, and in some cases, their logical qubit fidelity is actually lower than the physical cubic gate fidelity. So it doesn't make any sense that they are using that [indiscernible] that's unfortunately confusing a lot of people as to logical qubit and what does it mean and stuff like that. Hopefully, that answers your question, or maybe I confused you more.

Our next question comes from Brian Kinstlinger with Alliance Global Partners.

Well, my question was kind of answered. But I guess I'm curious, about if you can touch on or elaborate on either in Japan or India your customers. What the evaluation process was like. I think you said in Japan, maybe you weren't sure of the other modalities. But what was the competitive landscape in time?

Certainly, almost every National Lab University or any potential commercial customers, they are fully aware of different modalities, the pros and cons. And once they decide to choose superconducting gate-based modality, and usually, the reason is for the obvious things that we have been saying which are scalability and gate speed. Those are the huge benefits with superconducting modality, everyone understands that fidelity is the main challenge in superconducting modality. So usually, that part, most customers that we talk to have done on their own. Usually when we talk to them, they have already gone through that process, but then they are starting to look at different competitors within superconducting gate modality.

Obviously, IBM is always there in the way, some seems to be deals with companies like IQM from Finland or [indiscernible] from Holland or some other companies around the world. The more -- I mean, the main thing that differentiates Rigetti is our open modular architecture. We have this innovative way of incorporating third-party solutions that allow us to come up with innovative solutions faster. Examples being Quanta Computer for control system or NVIDIA NVQLink distribution their software [indiscernible] or Reveriane for error correction. Most customers like that kind of an open approach because usually, they have some ideas on what other things they would like to try and with quantum computing because they're also doing research at this point.

And the other part where we really outshine our competitors is chiplet. Everyone sees that chiplet is very, very possible way to scale up long term. We allow our customers to upgrade as you can clearly see our current 2 orders that we are fulfilling our upgradable 9 qubit systems. So once they get 9 qubit up and running, we fully expect them to ask us to upgrade them to up to 108 qubit, sometime next year because of the same dilution refrigerator with some changes in cables and connectivity will be able to handle 108 qubit or even more in the future. So main differentiator, the reason they choose us is our open modular approach and our chiplet approach and a few other things, but those are the customers that end up choosing Rigetti. Hopefully, that answers your question.

I would now like to turn the call back over to Dr. Subodh Kulkarni for any closing remarks.

Thank you for the thoughtful discussion today. We are excited about the momentum we are building across our technology road map, our partnerships and growing engagement from customers around the world. Our team is focused on executing with discipline and delivering systems that enable meaningful progress in quantum and hybrid computing. We appreciate your continued interest and look forward to sharing our progress in the quarters ahead. Thank you.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Rigetti Computing Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Dr. Subodh Kulkarni, Chief Executive Officer. Please go ahead.

Good morning, and thank you for participating in Rigetti's earnings conference call covering the third quarter ended September 30, 2025. Joining me today is Jeff Bertelsen, our CFO, who will review our results in some detail following my overview. Our CTO, David Rivas, is also here to participate in the Q&A session. We will be pleased to answer your questions at the conclusion of our remarks.

We would like to point out that this call and Rigetti's third quarter ended September 30, 2025 press release contains forward-looking statements regarding current expectations, objectives and underlying assumptions regarding our outlook and future operating results. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described, and are discussed in more detail in our Form 10-K for the year ended December 31, 2024, our Form 10-Q for the 3 and 9 months ended September 30, 2025, and other documents filed by the company from time to time with the Securities and Exchange Commission.

These filings identify and address important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. We urge you to review these discussions of risk factors.

During today's call, we will refer to certain non-GAAP financial measures. For details on these measures and reconciliations to comparable GAAP measures and for further information regarding the factors that may affect Rigetti's future operating results, please refer to yesterday's earnings release on Rigetti's website at investors.rigetti.com or to the 8-K furnished with the SEC yesterday after the close.

Today, I'm pleased to report that during this past quarter, we saw strong momentum with both the demand for our on-premise quantum computers and the development of collaborations to advance our own R&D and the quantum ecosystem more broadly. On the technology front, we remain on track to deliver our 100-plus qubit chiplet-based quantum system with an anticipated 99.5% median 2-qubit capability by the end of 2025. I'm also excited to share our 2026-2027 road map updates. We expect to deploy a 150-plus qubit system by or around the end of 2026, with an anticipated 99.7% median 2-qubit gate fidelity. And by or around the end of 2027, we expect to deploy a 1,000-plus qubit system with an anticipated 99.8% median 2-qubit gate fidelity.

In September 2025, we announced purchase orders totaling approximately $5.7 million for 2 9-qubit Novera quantum computing systems. Both systems are upgradable, allowing the customers to increase the system qubit count for more complex computations and research. One system is being purchased by an [ Asian ] technology manufacturing company. The system will serve as a test [indiscernible] to develop internal quantum computing expertise. They also plan to benchmark and validate their own quantum computing technologies with the Novera system.

The other system is being purchased by a California-based applied physics and artificial intelligence startup. The system will be used for quantum hardware and error correction research. Our open and modular architecture continues to allow us to integrate innovative solutions with our technology stack, including our project with QphoX and the Air Force Research Laboratory, or AFRL, to advance superconducting quantum computer networking.

In September 2025, we announced a 3-year $5.8 million contract from AFRL to advance superconducting quantum networking. Rigetti will be collaborating with QphoX on the project, a Dutch quantum technology start-up developing leading frequency conversion systems for quantum applications.

A key challenge to networking superconducting quantum computers is the need to convert the microwave signals, which are used to control superconducting qubits to optical photons that can travel along those fibers. This project aims to deliver systems providing entanglement between superconducting qubits and optical photons, the essential building block of quantum networking.

Our new collaborations with the Centre for Development of Advanced Computing, or C-DAC, and Montana State University showcase the increasing maturity of the quantum computing ecosystem. MSU is the first academic institution which has on-premises Rigetti quantum computer in 9-qubit Novera QPU, which will be used by researchers to advance quantum computing R&D. We intend to work with MSU on a variety of initiatives, including research projects related to quantum hardware and hybrid quantum systems, and co-development and testing of enabling quantum technologies and quantum system components.

Collectively, these initiatives underscore the importance of public-private partnerships in advancing next-generation quantum technologies.

We also signed a memorandum of understanding with C-DAC, India's premier R&D organization of the Ministry of Electronics and Information Technology. With this MOU, Rigetti and C-DAC intend to collaborate on the design and development of hybrid quantum computing systems and related technologies and bring them to market. We are proud to be deepening our support for quantum computing capabilities in the academic and government sectors.

We are [indiscernible] excited to support NVIDIA NVQLink, NVIDIA's new open platform for AI supercomputer quantum integration. By providing low latency and high throughput integration between quantum hardware and AI supercomputing, NVQLink is a very promising resource to accelerate hybrid computation development on the path towards quantum advantage.

We remain engaged with the Defense Advanced Research Projects Agency, or DARPA, on staging of quantum benchmarking initiative or QBR project. On November 6, DARPA announced the companies initially selected to participate in phase one of the QBR project. Although we were not selected at this time for Phase B, we received constructive feedback regarding our proposal and we will continue to work with their team. We are optimistic that we will be chosen for Phase B in the coming months.

Lastly, I'm also pleased to share that Rigetti plans to open an Italian subsidiary in the coming months. We believe that this development will allow us to accelerate our pursuit of business opportunities and talent in Italy as the region dedicates more resources and funding to bolstering its quantum initiatives. Thank you. Jeff will now make a few remarks regarding our recent financial performance.

Thanks, Subodh. Revenues in the third quarter of 2025 were $1.9 million, compared to $2.4 million in the third quarter of 2024. On a year-over-year basis, our revenue for the quarter was impacted by expiration of the National Quantum Initiative and its pending reauthorization in the U.S. Congress. Renewal of the U.S. National Quantum initiative sales to U.S. and foreign governments and Novera are all important to future sales. The recent sales Subodh noted in his remarks, the 2 9-qubit Novera system sales and the AFRL contract will benefit revenue in the fourth quarter and as we move into 2026.

Gross margins in the third quarter of 2025 came in at 21%, compared to 51% in the third quarter of 2024. The lower gross margins on a year-over-year basis was due to the composition of our revenue and variability in the pricing in terms of our contracts. Our recent contracts with the U.K.'s National Quantum Computing Centre for quantum systems have a lower gross margin profile than most of our other contracts.

On the expense side, total OpEx in the third quarter of 2025 was $21 million, compared to $18.6 million in the same period of the prior year. The increase in total OpEx was due to annual salary increases, new hires and higher stock-based compensation and consulting costs, primarily in research and development. Stock compensation expense for the third quarter of 2025 was $4.3 million, compared to $3.4 million for the third quarter of 2024.

Our operating loss for the third quarter of 2025 came in at $20.5 million, compared to $17.3 million in the prior year period. Our GAAP net loss for the third quarter of 2025 was higher than our GAAP net loss for the third quarter of 2024 primarily due to the noncash change in the fair value of our derivative warrant and earn-out liabilities. We recorded a $10.7 million or $0.03 per share non-GAAP net loss for the third quarter of 2025, compared to a $13.4 million or $0.07 per share non-GAAP net loss for the third quarter of 2024.

As of September 30, 2025, we had approximately $558.9 million of cash, cash equivalents and available-for-sale investments and no debt. Subsequent to September 30, 2025 and through November 6, 2025, proceeds of $46.5 million were received from the exercise of slightly more than $4 million of our public warrants. As of November 6, 2025, cash, cash equivalents and available-for-sale investments totaled approximately $600 million.

Thank you. We would now be happy to answer your questions.

[Operator Instructions] And our first question comes from the line of David Williams of the Benchmark Company.

Maybe first, Subodh, just kind of thinking about the DARPA Phase B, and just can you talk maybe a little bit about that? You said that you've received some nice or constructive feedback. But can you maybe talk around what is maybe holding that up and when you think we might have an answer or you might see that advancement happen?

Sure, David. So as we mentioned in the press release, DARPA did the initial selection of companies that they have got into Phase B. Unfortunately, we were not one of them. But they gave us good constructive input on what we need to do and improve on to get into Phase B. So we are working on that. And it primarily goes into the area of error corrections and some areas of long-range coupling, things that are important in the long term to get to a DARPA [indiscernible] quantum computing milestone in 2033. Not as important in the short term to get to quantum advantage.

So a lot of our focus has been and continues to be on getting to quantum advantage in the next 3 to 5 years with 1,000 qubits and 99.9% 2-qubit gate fidelity [indiscernible] error correction. DARPA's input was more on the FTQC milestone and where we need to increase effort further, specifically in the area of error correction and in long-range coupling. So we are incorporating that input. We will continue to talk to DARPA. We are still part of [indiscernible] of Phase B, and we'll continue to work with DARPA closely. So we're optimistic we'll get into Phase B soon. Exactly when, that's hard to know. But we'll continue to work on that. But I mean, DARPA project, as you know, is a 7-year project. So just because we didn't make the initial cut, it's not a big deal. We feel pretty good that we'll make the cut in the next few months here.

Okay. Great. And it sounds like this is more kind of on a conceptual basis versus actual performance or what you're achieving today, but longer term, conceptually how you would characterize the -- some of the performance metrics. Is that fair to say?

That's fair to say. I mean we -- fundamentally, the data is really good and they liked it, and we are very proud of the data that we have demonstrated both with our Ankaa-3 system, but as more importantly, the [indiscernible] 36-qubit chiplet B system with 99.5% 2-qubit gate fidelity and about [indiscernible]. That data is really impressive, and that's all positive. Where the constructive criticism came is how do we do error correction and things like long-range coupling to enable the FTQC milestone 7, 8 years from now. So it's really the future work that the plan that we have needs further improvement. So it's a fair thing to say, as you correctly pointed out.

Great. And then maybe just secondly here, I think in the past, you talked about 1,000-plus qubits and 99% fidelity and around 50-nanosecond gate speeds to achieve quantum advantage. And looking at your road map into 2027, you're awfully close to that, maybe just a bit short on the fidelity side. So I guess my question is, do you feel -- or what is your comfort level that you can get to that 99% fidelity in '27? And then is that kind of a right way to kind of target in terms of when you think you can reach quantum advantage? Or do you think that pushes out a little bit further?

No, it's a good question. And really, we are excited to disclose that the 2 big milestones, one for '26, we believe we will hit 99.7% fidelity at the 150-plus qubit level. But more importantly, the 2027 milestone when we believe we will get over 1,000 qubits at 99.8% 2-qubit gate fidelity. You're right, I mean, it's a significant jump-up from where we are, and frankly, the whole quantum computing industry is, including peers in superconducting quantum computing [indiscernible] at other modalities, those numbers are impressive, 1,000 qubit, 99.8% at 16-nanosecond gate speed. It gets us awfully close to quantum advantage, but not quite there. Quantum advantage, we still think we need a 99.9% 2-qubit gate fidelity, as well as some form of error correction. So between '27 and '29, which is when we still believe we accomplish quantum advantage, is getting the fidelity to that 99.9% and also error correction. Hopefully, that answers your question.

It does.

Our next question comes from the line of Quinn Bolton of Needham & Company.

Subodh, Jeff, I wanted to follow up on David's question just kind of around the road map, getting to 150 qubits next year and 1,000-plus in 2027. Subodh, can you just walk us through, is this still going to be a chiplet-based approach? Is it going to be on 9 -- sorry, 9 qubit tiles? Or as you get to the 1,000 qubit system, do you see the number of qubits per tile increasing?

And then maybe a related question, given DARPA seems to be interested in quantum error correction and long-range coupling, can you achieve long-range coupling on the tile-based system? Can you give us your thoughts on that?

Sure. So good questions, Quinn. So 150 qubit with 99.7% 2-qubit gate fidelity, we definitely are planning on using 9 qubit chiplets. For the 1,000 cubic, our thinking right now is to go up to 36 qubit chiplets to get to the 1,000 qubit level at the 99.8% 2-qubit gate fidelity by the end of 2027. That's our plan right now.

The main reason we feel confident that we will be able to get to 1,000 qubits at the 99.8% is because of chiplets and the data we are generating with the current 36 qubit system as well as all the experiments we are doing with 100 qubit system that we hope to launch fairly soon.

Regarding DARPA input for error correction and long-range complain, fundamentally, we have not seen any challenges in using chiplets in long-range coupling. The challenges are pretty much the same whether it's a single monolithic chip or chiplet-based system. Long-range coupling is a challenge for the whole industry, not just us. And as far as we have seen, chiplets don't change that challenge. It's still the physical distance between the qubits and how do you couple qubits across the width, across certain width, it's nothing to do with chiplets per se.

So we feel pretty good that we need -- I mean we obviously need to do long-range coupling as part of the input, but it doesn't make it more just because we have chiplets. Hopefully, that answers your question.

That's great. And then one for Jeff. Jeff, I think you mentioned in your script, the AFRL contract as well as the 2 9-qubit Novera sales would start to generate revenue in the fourth quarter and into 2026. I guess maybe on the 2 Novera sales, I think you, in the press release, talked about completion or delivery of those systems in the first half of 2026. Is this sort of a revenue rec that you'd be able to rev rec those sales upon delivery because their systems, maybe not just QPUs, is there a percentage completion accounting that is used for those systems? Maybe just walk us through how you rev rec on the Novera sales if they're systems rather than just QPUs?

Sure. On the 2 Novera system sales, I mean, we anticipate recognizing the revenue for those upon shipment. Right now, it looks like one of them will go in the first quarter, one in the second quarter. But upon shipment would be the manner of rev rec.

Our next question comes from the line of Krish Shankar of TD Cowen.

This is Steven calling on behalf of Krish. Just first question for either Subodh or Jeff, regarding the 2 Novera system sales that you discussed, just kind of curious, like in terms -- just given the size of the orders, are they both complete systems that include [indiscernible] and full control systems, or was one of them potentially just a QPU chip sale? And as far as the upgrade option, is that already currently baked into the price that you guys announced, or is that an additional revenue step-up or rather later on further down the line?

Sure. I'll take that. So the 2 systems include everything from [indiscernible] to control systems. So they're complete systems.

Regarding upgrade, when the customers upgrade them from 9 qubit to, let's say, 36 qubit or something bigger, it will be an additional revenue opportunity, because we have to go and add some cables and those kinds of things inside the [indiscernible] to account for the additional qubits. Certainly, obviously, the chip has to change too. So there will be an additional revenue that comes with the upgrade from 9 qubit to a higher qubit count sometime in the future.

Okay. Got it. And for my second question, I wanted to ask a little bit about the guess upcoming or future support for NVIDIA's NVQLink interface. I guess can you talk about some of the, I guess, software or hardware changes that you need to make to your QPUs or control systems in order to support that? And also related, any thoughts on -- in terms of hybrid quantum computer support? Is this really more just for the supercomputing space? Or do you think that NVQLink could also allow quantum systems to be placed alongside in the AI data centers for GenAI type of applications?

Great question, Steven. So if you look at NVIDIA's NVQLink announcement, it's an open format for quantum computers to basically interface directly with AI supercomputers. So idea is indeed to have quantum computing start being used with GenAI and potentially for AI type applications.

Now from our viewpoint, this was a natural step. We have always said that we believe in the hybrid systems, we have always supported hybrid standards. And that's partly because of the strength of superconducting quantum computing that we have. Speed is around commensurate with CPU and GPU speed. So it's logical for us to try to interface with HPCs. And that's why we believe superconducting quantum computing is most amenable for hybrid computing compared to other modalities which are 1,000 times slower, like [ trapped ion or pure atom ] modalities.

So for us, it was a logical step when NVIDIA started discussing an open platform like NVQLink. We obviously signed up with it. It fits in with our vision and strategy of having a quantum computer as part of a hybrid ecosystem. We certainly expect products like that to start coming into data centers once we get closer to quantum advantage, although interfaces will be worked out between now and then. So the time line for having quantum computers in data centers doing practical applications doesn't change because of the NVIDIA announcement. What it does change is the whole solution of how a hybrid system will work and open standards that support the hybrid systems. Hopefully, that answers your questions.

Our next question comes from the line of Craig Ellis of B. Riley Securities.

I wanted to follow up on a couple of prior questions to start. So Subodh, with regard to NVQLink, NVIDIA is very, very strong in the National Labs. Rigetti has a very strong position in National Labs. So can you talk about what Rigetti's historic strengths with National Labs mean for engaging with ecosystem partners that can help accelerate Rigetti's integration with hybrid compute and getting pulled into various workloads, including AI-related workloads with NVQLink?

Sure, Craig. So you are indeed right, I mean NVIDIA has a very strong presence in national labs, and so do we with quantum computing. So it's logical for the interfaces to be worked out at national labs, whether it's [indiscernible] National Lab or the [indiscernible] National Lab or other national labs. Also the NQI initiative, although not funded at the higher level, the funding has restarted last week, as you probably saw. So it's exciting to have national labs get their funding back again to some reasonable level and this NVQLink platform being launched at about the same time period.

So certainly, we believe, as we have discussed in the past, that in future, CPUs will continue to be used for sequential computing and GPUs will be used for parallel computing as they are being used today. And QPUs, quantum processing units, will be used for simultaneous computing. So everything we have discussed in the past, now we have a chance to start demonstrating it in real life in partnership with NVIDIA with their NVQLink platform as well as the [indiscernible] quantum platform. So definitely expect more work in this direction where we will be able to generate data, where we take generic applications and split them into sequential parallel and simultaneous and show how the 3 respective technologies are suitable and the benefit of having the 3 technologies work together in a complementary way. That we believe is the best way to address future computation needs.

That's really helpful, Subodh. And Jeff, I wanted to ask a follow-up clarification to you. Regarding the AFRL deal at $5.8 million, I think that was 3 million -- or excuse me, a 3-year deal, 3-year deal for $5.8 million, does that rev-rec fairly ratably across 12 quarters? Or how do we think about rev rec? And Is that kicking up in the fourth quarter or early next year?

No. It will be fairly ratable over the 3 years, Craig. And it actually -- we got a little bit of it in the third quarter. So it will be ratable going forward.

Got it. Nice to get that going. And then lastly, if I could, guys, just any commentary on potential exploration of M&A or other inorganic activity with a cash balance of $600 million as something that might either accelerate or add strength to the road map that you just announced the detailed road map out through 2027?

So it's a good question, and we discuss both our current cash balance and what the needs are in the future as well as opportunities to do any M&A to help accelerate our road map. As you saw, we have been able to accelerate our road map quite significantly. We are talking about 99.7% next year with 150 qubit, and more importantly, more than 1,000 qubits and 99.8% at -- by the end of 2027, roughly. And that's really without -- doing everything organically on our own, which obviously we prefer it. We think we have all the necessary technology components internally right now to be able to execute that road map.

And the main reason for that is the success we are having with our chiplet technology. We feel really good about executing that road map right now. If we find someone who could help us accelerate our road map further, we obviously will take a look at it. But right now, we believe we are in a leadership position, and we'll continue to execute well to get to that road map.

That's helpful. And congrats on the road map progress you've done.

Our next question comes from the line of Brian Kinstlinger of Alliance Global Partners.

A follow-up on the road map. I'm curious what progress you are making currently on fidelity and when you expect to achieve 99.7% medium 2-qubit gate fidelity for a 9 qubit chip and when that has to happen in order to start the tiling process to get to 100 qubits by the end of 2026?

So good question here. I mean we are making 9 qubit chiplets right now. We are timing them to get to our milestones for this year, which is 108 qubit -- more than 100 qubit at 99.5% before the end of this year. Certainly, as we are doing that, we are seeing a very good 2 qubit gate fidelity level with the individual 9 qubit chiplets. And that gives us confidence that we should be able to get to 99.7% by the end of next year with more than 150 qubits.

Regarding the 1,000 qubit, that's a little more challenging as one of the earlier questions that come up. We believe we are going to increase the size of the chiplet to about 36 qubits. So we have to prove that out, that at 36 qubit chiplet, we can tie in multiple [ ones ] and still maintain high fidelity. That's the work we'll be doing next year in anticipation of demonstrating more than 1,000 qubits at 99.8% by the end of 2027.

But we certainly, all the data we are generating right now with the 9 qubit chiplet gives us high confidence that we will not only be able to execute this year's road map, which is more than 100 qubit at 99.5%, but more importantly, into next year's road map, which is move to 150 qubit at 99.7%. So data is good enough to give us high confidence with both of those milestones, and that's what we are relying on to get us to 1,000 qubit at 99% by the end of 2027.

Our next question comes from the line of Richard Shannon of Craig-Hallum Capital Group.

Subodh and Jeff, let me ask a couple of questions here. Looking at your 10-Q, and you have a passage in here about you may significantly increase your CapEx, including upgrading our chip fab facility or an entirely new one here. Maybe you can tell us a little bit about what this potential might be, when you might decide this and what's the kind of scale of investment we're talking about here.

So sure. So right now, we have a 150-millimeter chip fab facility in Fremont, California. And it's fairly manual in operation. It's obviously doing a good job of giving us the current data. And we feel very good that that fab will continue to give us good data for the next 2, 3 years, and [indiscernible] our needs for the next 2 to 3 years. including the 1,000 qubit at 99.8% milestone that we talked about by the end of 2027. The challenge we see is getting to more than 99.9% 2 qubit gate fidelity with several thousands of qubits. We believe that the current fab will have limitations, not capacity limitations, but capability limitations, primarily because your tools at 150-millimeter are not as good as they are for 200 or 300 millimeters because the semiconductor industry has standardized around 200 or 300 millimeters.

So we think we are going to need 200, 300-millimeter type tools and more automation in our line for capability, not capacity. And we think we are going to need it for beyond the 3-year horizon. Now typically, it takes a couple of years to build a fab. So if you need something in 3 years, we -- there's a high chance we will have to start thinking about real CapEx needed roughly a year or so from now. That's what the statement was about, that anticipating that we have to invest in a new fab, we will have to start thinking about CapEx needs roughly a year or so from now.

There are various alternatives being discussed by [ commerce ] and other areas with national lab somewhere in the U.S. is being contemplated. And obviously, if any of those initiatives take off, we will be part of those initiatives. So it will not be that Rigetti has to shoulder all the burden for a full 8-inch or 12-inch fab.

To answer your question, I mean, quantum fab is significantly simpler than a state-of-the-art CMOS fab because our lateral dimensions are a lot more forgiving, our challenges are vertical dimensions which come from oxidation and those kinds of things. And also, we have a lot less lithographic steps compared to our CMOS fab. So the combination of forgiving lateral dimensions and significantly reduced number of lithographic steps, you are talking about hundreds of millions of dollars for a brand-new quantum fab of 8-inch or 12-inch, compared to, as you know, we are talking about $20 billion to $25 billion for a brand-new CMOS fab because of the lateral dimensions involved as well as the complexity with litho.

So a quantum fab intrinsically is a lot cheaper if you were -- compared to a brand-new CMOS fab. But still, it is -- we are talking sizable numbers, hundreds of millions of dollars. And that's what the statement in the 10-Q is about, that we may start looking into that if there is no national initiative that commerce or somebody else leads that allows us to be part of. Does that answer your question?

It does, Subodh. Let me follow up on that topic here, which is to what degree do you -- would you wish to have something stand-alone versus shared here, but also sharing IP and maybe even worrying about IP leakage here? What's kind of the puts and takes in that sort of decision?

So the puts and takes are no different than the regular semiconductor industry. I mean as you know, the most advanced fabs right now are done by companies like TSMC, which are foundry type model. And there is no IP leakage, tremendous scale. I mean NVIDIA and AMD are both making their advanced chips at TSMC right now, and there is no IP contamination. So all these have mastered the art of meeting multiple customer design needs without any IP contamination.

And assuming a foundry model takes off and the U.S. as a country, we have a state-of-the-art fab, which already exists too, by the way. I mean so we -- one way or another, there has to be a brand-new fab coming around somewhere in the U.S. for quantum technologies. But assuming a foundry model is established, we would be happy to take a look at it because we know it works.

But at the same time, if it doesn't happen, the numbers are not that daunting. As I said, we are talking hundreds of millions of dollars, not tens of billions of dollars like in CMOS. So it's conceivable that we on our own or we in partnership with some of the company could do this kind of thing without going to a full, all-out foundry model.

Okay. That's helpful detail here. Maybe a follow-on question here for Jeff. A number of questions here earlier in the call here about the future rev rec for both the AFRL contract as well as the system sales here. How do we think of kind of a general profile of gross margins of these additional revenues are? Kind of general thought process here, especially since gross margins here in the third quarter are lower than what you've seen in the past.

Sure. So gross margins were lower, as you pointed out in the third quarter. Really is due to the variability in our contracts, and sometimes we do these contracts for strategic reasons or because they're going to advance our R&D necessarily more than the margin profile. I do think with some of these other sales, particularly some of the Novera sales, margins will be a bit better than, certainly, than what we've seen here in the in the third quarter and even earlier in the year to a certain extent.

Our next question comes from the line of Troy Jensen of Cantor Fitzgerald.

Congrats on all the great progress here. Maybe a couple of quick questions for Subodh. Just curious on the 2027 target of 1,000 qubits, what types of applications would your system be able to run at that status?

Great question, Troy. I mean this is -- I think the exciting part comes in. I mean the announcements we have done with NVIDIA with NVQLink and hybrid systems, I think it's all coming together in about the same time period. So imagine a world where there is a hybrid system offering between us, NVIDIA and a few other companies where you have 1,000 qubit -- physical qubit at 99.8% 2 qubit gate fidelity, interfacing smoothly with the state-of-art CPUs and GPUs, we believe the kind of applications you'll be able to take on would be the complex ones that struggle with CPU and GPUs today.

We are talking about things like drug discovery or financial forecasting, or material synthesis, those kinds of applications. We don't think we will be talking about encryption or decryption still at that point, with those kinds of metrics. But certainly, areas which where you have thousands of variables that are interacting simultaneously on that current CPU and GPU architecture struggle to keep up with -- those applications will start coming our way. So as I mentioned, a lot of forecasting type applications, whether it's financial forecasting or drug discovery type stuff or weather forecasting kind of stuff, is -- are the worlds that I anticipate will start using quantum computing in a hybrid setup in a couple of year time period.

Perfect. All right. And then just a question, I'm just curious here. The customers that are buying these 9 qubit systems, why would they not buy the 36 qubit system now?

Good question. We ask the question to them too. And they are buying physical on-premise quantum computers right now because they want to fundamentally understand how quantum computers work, because they are doing some research on some aspect of quantum computing themselves. But they need to understand how fundamentally the hardware works, what kind of [indiscernible] how do we tune, recalibrate and tune and all those kinds of things.

So 9 qubit is a good starting point for those kinds of things to understand how quantum computer works. But as we discussed, they clearly are interested in upgrading it at the right time. Once they are confident they understand how 9 qubits work. I'm pretty sure they will want to upgrade it to tens of qubits, whether it's 20-odd qubits or 30-odd qubits, you'll see what their interest level is. But they will certainly be interested in upgrading.

And that's why the systems are designed so that they are upgradable. There will be an additional revenue recognition at that point because we have to change the chip, to change the wiring and a few other things. Fundamentally, the systems are designed so they can handle up to 50-or-so qubits.

Our next question comes from the line of David Williams of the Benchmark Company.

Just wanted to ask Subodh, if you kind of think about your foundry as you spoke about earlier, is there a possibility that you could transfer your technology today to an outside fab, slightly more advanced that you could get better fidelity? And just kind of thinking about the 1,000 qubit, is there a potential to maybe get to that 99.9% alternatively using another fab source?

Good question, David. And we are talking to existing foundries that are doing some quantum computing-related work for some of our peer companies. So I mean, we are exploring those options. And certainly, if it gives us [indiscernible] performance, we would love to have it. As of today, we haven't found anyone who's quite that capable of running the types of materials and processes that meet [indiscernible] superconducting gate-based quantum computing. We know in the other forms like superconducting [indiscernible] and some other modalities like photonics, there are some foundry companies that are doing some work for some of our peer companies. And we are talking to them to see if we can use that model.

But as of right now, all the leaders in superconducting gate camp, including us and other companies like IBM and Google, as far as I know, none of us are using a foundry model at this time. But we will continue to explore those options. If an existing foundry meets our requirements, we would love to have it obviously. It saves us a lot of CapEx, if that is the case. But as of today, we are not confident that the existing foundries can meet our requirements.

Okay. And then maybe just one last one here, on Craig's question about M&A earlier. Do you think you have the right kind of path forward on the control side? And you kind of talked about needing to transition to a flexible cabling platform. Is that an area that you could potentially be looked to outside sources for acquiring? Or do you think you have that under control today and have the path forward there?

Well, I mean, on the control system itself, as you know, we are partnered with [ Quanta Computer ] who is a leader in CPU/GPU servers. So we feel very good about our strategic partnership with Quanta Computer for the control system itself.

Regarding the cables that go inside the [indiscernible] refrigerator, you're right, we need to move to flex cables in the next 2 to 3 years. We have good technology ourselves along with some subcontractors that we use right now. We have a lot of IP in that area as well. So we feel generally good about our path forward. But if, again, as I mentioned, if we find someone who can help us accelerate our road map, we will absolutely be willing to take a look at that kind of a company.

Our next question comes from the line of Quinn Bolton of Needham & Company.

Subodh, you mentioned the Energy Department announcing, I think it was $625 million to invest in the National Quantum Research Center. Just wondering how does that affect the business? And do you have any updates what you're hearing in Washington on just the reauthorization of the NQI Act?

So yes. So NQI ran out of -- the original act was signed in 2018, I believe. It ran out of money somewhere towards the end of 2023. [ NQRC organization ] was supposed to be signed at that time. Obviously, it hasn't happened yet. A lot of discussions have happened, multiple versions of the bills have gone between the House and Senate, with numbers as high as $2.5 billion over 5 years. That was practically 4 to 5x higher than the original NQI which was $625 million over 5 years.

Now the latest one that got passed last week is a reinstating the original amount. So at least we are up from [indiscernible] back to $625 million over 5 years, so $125 million per year, which is better than nothing but nowhere close to the $2.5 billion that are being discussed. Now this is just a first step is what we understand. There's still discussions going on. And we definitely expect a much better funding situation for DOE in the next few months. But exactly when that will happen given the current government situation and the time it takes for bills to get signed and appropriated, we can't tell you what exactly the date will be or what amount will be. But definitely, a much bigger amount is being discussed for DOE in the upcoming months here.

But at least it's good to get to the original amount which was $625 million over 5 years.

Our next question comes from the line of Tyler Anderson of Craig-Hallum Capital Group.

This is Tyler Anderson on for Richard Shannon. So I have a housekeeping and a technical question. For Q4, when do you guys expect the share count to be? I noticed there was a few warrants that were exercised subsequent to the end of the quarter.

Sure, Tyler. So I would say it's going to depend on how many warrants get exercised of course between November 6 and the end of December. As of November 6, we had 330 million shares outstanding. So I would probably plan on maybe [ 335 ] or something like that. Again, it could flex a little bit depending on how many warrants get exercised.

Okay. Great. And then, so these tools that you expect to purchase for new foundry, do these -- are you waiting for new tooling to be developed or the tools that you expect to purchase, are those upgradable once you have those and new capabilities become [indiscernible]? And how does that -- if they are -- do plan on upgrading them, how does that change the pace of your road map in terms of qubit density and fidelity?

So the road map is -- right now the road map that we have disclosed for '26 and '27, just to be clear, we are still counting on our Fremont fab to be able to give us those chips. So we are not assuming that we need a new fab or even a new foundry somewhere to help us execute that road map. So the '26, '27 milestones, we feel, are pretty good with the existing fab. As discussed earlier, we are looking at options, including existing foundries that are out there. And if an existing foundry model works, that obviously is the easiest one to execute. Assuming it doesn't, then we are looking at investing in a fab on our own or through some kind of initiatives that the U.S. government initiates. And we are open to options.

There are some -- clearly, a new fab will be either an 8-inch or 12-inch, so it's very unlikely that any of our existing tools, except for [indiscernible] and stuff like that, which are relatively small in the big scheme of things, can be repurposed. Most of the tools will have to be new at the 8 inch or 12-inch level. So it will be a substantial new CapEx. But we are talking about, again, compared to CMOS, very small numbers, hundreds of millions of dollars. And that's assuming that the existing foundry model doesn't work or we have to take the entire [indiscernible] ourselves. Hopefully, we'll find easier, cheaper alternatives here. Hopefully, that answers your question.

Partially. So with the tools that you purchased, would those potentially be upgradable for just quantum add-ons that tooling companies are thinking about?

Yes, they should be. I mean fundamentally, they are very similar kind of tools, so they should be upgradable in the future.

And is there any capability that you would look for in the foundry, if you were to purchase one?

I mean right now, as you know, in the superconducting gate camp, we use what is called as [indiscernible] junctions, and then we create gates between the [ beds ]. So materials themselves are superconducting materials like aluminum and those kinds of materials, which are not normally available in the CMOS world.

The processes, there are some unique processes that we do to enable our superconducting gate chips. Again, so slightly different materials and slightly different processes, that's what we need. Some foundries that are doing like superconducting [indiscernible] type approaches, they have some of the tools that we need, but not all of them. So those are the options we are looking at right now, to see whether we can use some of those models after [indiscernible] before we have to commit to a brand-new fab ourselves.

Congrats on the road map.

Thank you. I'm showing no further questions at this time. I'd now like to turn it back to Dr. Subodh Kulkarni for closing remarks.

Thank you for your interest and questions. We look forward to updating you after the end of next quarter. Thanks again.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.