D-Wave (QBTS) Q3 2026 earnings review
D-Wave's cloud sales climb, but its order backlog shrinks
D-Wave grew cloud and consulting sales fast enough to beat a tough hardware comparison, while its order backlog shrank and losses widened. The quantum computing company raised total revenue 21% to $4.5 million even though hardware sales dropped by $1.5 million. Chief executive Alan Baratz pointed to year-to-date order growth, yet new bookings fell 19% this quarter and gross margin slid 19 percentage points on lower-margin consulting work.
| Revenue excluding hardware systems | $4.2M +121% from a year ago by our math |
|---|---|
| Total revenue | $4.5M +21% from a year ago |
| Contract backlog (RPO) | $38.3M down 6% from last quarter |
| 12-month backlog conversion outlook | Unchanged 59% of backlog (~$22.6M by our math) |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because growing cloud adoption and new partnerships were offset by a second straight drop in the contract backlog and a much wider cash burn. D-Wave proved it can lift revenue between machine shipments and locked in up to $100 million of conditional U.S. government funding in exchange for an equity stake. The bad news: quarterly free cash flow burn more than doubled from a year ago to $43 million by our math, and an acting finance chief replaced the chief financial officer on the call notice.
The question now is whether consulting partnerships with firms like CGI and LG CNS will replenish the shrinking contract backlog before machine deliveries wind it down. Optimists see consulting revenue quadrupling as the entry point for long-term cloud subscriptions; skeptics note that quarterly bookings of $1.9 million barely cover two weeks of operating expenses. Fourth-quarter bookings and system installation revenue will show which side is right.
🐂 Bull Case
Cloud and Services Carried Revenue Past a Hardware Comparison
D-Wave sells access to its quantum computers over the cloud, called quantum computing as a service (QCaaS), alongside consulting services and full hardware machines. In the third quarter of last year, a hardware upgrade at the Jülich research centre in Germany lifted revenue. This quarter, D-Wave beat that tough comparison without relying on machine sales, which fell by $1.5 million.
- Total revenue: $4.5 million, up 21% from a year ago and up 47% from last quarter by our math
- Cloud service revenue (QCaaS): $2.2 million, up 57% from a year ago by our math
- Professional services revenue: $2.0 million, up 300% from a year ago by our math
Excluding hardware, revenue from cloud access and consulting more than doubled to $4.2 million by our math. Customers are moving beyond test projects: Japanese mobile operator NTT DOCOMO put a second D-Wave application into daily operations, cutting peak network signals by 65%, and D-Wave signed go-to-market partnerships with consulting firm CGI and South Korea's LG CNS.
What to watch: the significant-customers footnote in the upcoming third-quarter filing. It will show whether cloud growth came from many new enterprises or still rests on one large contract that made up 41% of revenue last quarter.
New Simulator and Hardware Delivery Keep Dual-Platform Plan on Track
D-Wave builds two types of quantum computers: annealing systems, which solve scheduling and routing problems today, and gate-model systems, which it is developing after buying Quantum Circuits in January for chemistry and artificial intelligence. Chief executive Alan Baratz promised to open a gate-model software simulator before year-end and to secure chip supply from foundry partner SkyWater.
The quantum group delivered on both items this quarter. It launched a test version of its gate-model simulator so customers such as bank BBVA and Florida Atlantic University can "experiment with error-aware programming and develop quantum applications in preparation for the Company’s forthcoming gate-model systems". It also shipped an Advantage2 annealing machine to Como, Italy, and signed a multi-year manufacturing extension with SkyWater after proving its software could cut factory delays at SkyWater by up to 30%.
What to watch: delivery of the 17-qubit gate-model hardware system promised before the end of 2026. Meeting that fourth-quarter target would show the acquired Quantum Circuits hardware stays on schedule alongside the software simulator.
🐻 Bear Case
Order Backlog Shrank Again as Quarterly Bookings Fell
"Our triple-digit increase in year-to-date bookings and robust pipeline reinforce our confidence in the opportunity ahead," chief executive Alan Baratz said. Bookings measure new customer orders, while remaining performance obligations (RPO) track the backlog of signed contracts not yet turned into revenue. For the first nine months, bookings rose 562% from a year ago to $35.1 million by our math, after stripping out $2.3 million acquired at the close of the Quantum Circuits deal.
That nine-month figure rests on two big deals signed in the first quarter, and the flow of new orders has slowed since then. Third-quarter bookings fell 19% from a year ago to $1.9 million, down from $2.1 million in the second quarter. Because new orders came in at less than half of quarterly revenue, D-Wave ate into its backlog.
The contract backlog fell by $2.4 million from last quarter to $38.3 million by our math, marking its second straight quarterly drop from the $42.4 million peak in March. A shrinking backlog means consulting partnerships have not yet turned into large signed contracts.
What to watch: fourth-quarter bookings and contract backlog. Without another multi-million-dollar machine or cloud order, the backlog will shrink faster once D-Wave recognizes revenue on its existing hardware contracts.
Operating Losses Widened to Nine Times Revenue
Headline net loss dropped from $140.0 million a year ago to $48.2 million, but that improvement is an accounting quirk because D-Wave redeemed its public warrants last November and eliminated a $121.9 million non-cash warrant charge. Excluding that one-off charge from last year's comparison, the third-quarter net loss more than doubled, rising 166% by our math.
- Operating expenses excluding one-offs: $40.5 million, up 72% from a year ago and nine times quarterly revenue
- Research and development spending: $31.5 million, jumping by 323 percentage points of revenue from a year ago by our math
- Free cash flow: negative $43.3 million in the third quarter by our math, more than double the $20.2 million burned a year ago
D-Wave said it spent the extra money on salaries and chip work to "support the Company’s accelerated product development and go-to-market initiatives" after buying Quantum Circuits. Meanwhile, acting finance chief Greg Golkov replaced chief financial officer John Markovich on the earnings call notice without an explanation in the release.
What to watch: quarterly operating expenses excluding one-offs in the fourth quarter, alongside any filing on the finance chief transition. If spending keeps climbing from $40.5 million while revenue stays in the single-digit millions, cash burn will stay above $160 million a year.
Lower-Margin Services Pulled Gross Margin Down 19 Points
D-Wave expects cloud subscriptions to lift profitability over time because cloud access costs less to deliver than hands-on consulting. This quarter moved the other way. Gross margin fell 18.5 percentage points from a year ago to 52.9%, and gross margin excluding one-offs dropped 14.1 percentage points to 63.6%.
Cost of revenue — the direct cost of running the quantum systems and paying consulting staff — rose by 18.5 percentage points of revenue from a year ago to 47.1% by our math. The company said the drop was "due primarily to a revenue mix with a higher proportion of professional services revenue that carries a lower margin" as well as higher stock-based pay. Even though revenue grew 21%, gross profit in dollars shrank 11% to $2.4 million.
What to watch: gross margin excluding one-offs when customer test projects convert into cloud subscriptions. A rebound above 70% would show consulting work is only a temporary onboarding cost rather than a permanent drag on profit.
Risks this quarter didn't answer
Three standing concerns from last quarter remain open after the third-quarter release and presentation.
- Single-customer reliance: the release notes revenue from over 100 customers, but only the quarterly filing will show if one customer still accounts for around 41% of sales.
- Fourth-quarter hardware revenue: D-Wave shipped the Italian system in the third quarter, yet hardware revenue fell and the release gave no update on when the $20 million Florida Atlantic University system will be recognized.
- Long wait for gate-model sales: the presentation still puts gate-model production readiness more than five years away, with 100 logical qubits targeted for 2032.
👓 Other Themes
US Government Takes Equity Stake in $100 Million Funding Deal
D-Wave signed a final agreement with the U.S. Department of Commerce for "access to up to $100 million of U.S. CHIPS and Science Act funding, in installments upon satisfying specified milestones and conditions" to help build its 100,000-qubit annealing and 10,000-qubit gate-model machines. In exchange, the government received a minority, non-controlling equity stake, recorded on the balance sheet as $100 million of uncollected equity proceeds until D-Wave hits the milestones.
💲 Other KPIs
Total cash and marketable securities fell by $42.9 million from last quarter's $546.2 million, matching the quarter's free cash flow burn. Since December 2025, the cash pile has dropped by $381.1 million, mostly because D-Wave paid $252.8 million in cash to buy Quantum Circuits in January.
Inventories — parts and quantum systems being built for customers — more than doubled from $2.78 million in December to $6.38 million, up 83% from June alone as D-Wave prepares hardware shipments. Meanwhile, total deferred revenue — cash collected ahead of service delivery — fell 19% from last quarter to $8.59 million by our math.
Diluted share count rose 9.3% from a year ago and 0.9% from last quarter by our math, following last year's warrant exercises and stock issued to buy Quantum Circuits. That total does not yet reflect any dilution from the new minority stake granted to the U.S. Department of Commerce.
🔮 Guidance
Unchanged in dollar terms. The plan expects about 59% of the $38.3 million contract backlog — or $22.6 million by our math — to turn into revenue over the next 12 months, and 71% over 24 months. That 12-month figure is nearly double D-Wave's $13.2 million of revenue over the past four quarters, because it includes installation of the Florida Atlantic University machine.
❓ Key Questions
Why Did Acting Finance Chief Greg Golkov Replace John Markovich?
The release names Greg Golkov as Acting Chief Financial Officer for the conference call without mentioning John Markovich, who served as finance chief last quarter. Investors need to know when and why Markovich stepped aside.
How Many Shares Did the US Government Receive for $100M?
D-Wave gave the Department of Commerce a minority equity stake and recorded $100 million of uncollected equity proceeds on its balance sheet. Management has not disclosed the share count, the price per share, or the milestone schedule.
When Will the Italian and Florida Systems Count as Revenue?
D-Wave delivered an Advantage2 machine to Como, Italy in the third quarter, yet hardware sales fell by $1.5 million and inventory jumped to $6.4 million. Management has not said whether both the Italian and Florida machines will pass calibration in the fourth quarter.
Did One Customer Still Make Up Over 40% of Revenue?
Last quarter's filing showed a single customer accounted for 41% of revenue. Without the third-quarter filing table, investors cannot tell how much of the 57% cloud revenue growth came from new customers.