TD Cowen has initiated coverage of D-Wave Quantum Inc. (NYSE: QBTS) with a Buy rating, issuing the call on Thursday while noting that the share price currently sits notably above a published Fair Value estimate based on an analysis of the company’s fundamentals.
In its initiation, the research team pointed to D-Wave’s leadership in quantum annealing technology as a primary driver of future growth. The firm expects high-margin sales of the company’s Advantage systems and expanding cloud services to support profitability and top-line expansion. Those expectations are supported by D-Wave’s reported 82.82% gross profit margin and a 156.2% increase in revenue over the last twelve months.
TD Cowen also highlighted recent technology additions that it believes strengthen D-Wave’s technical roadmap. The firm cited the company’s acquisition of QCI DRQ technology as accelerating the development of a superconducting gate program, noting reported fidelity rates above 99.9% as an important threshold for broadening the addressable market.
Balance sheet strength was another central element of the initiation. The research note observed that D-Wave’s available liquidity provides optionality for further mergers and acquisitions and could speed time to market for product development and deployment. Reported balance sheet metrics show the company holding more cash than debt, an exceptionally strong current ratio of 54.68, and a low debt-to-equity ratio of 0.06.
Founded in 1999 and headquartered in Burnaby, Canada, D-Wave develops quantum computing systems, software and services. Its Advantage quantum computer is available through the company’s Leap quantum cloud service. The company’s market capitalization is reported at $7.26 billion and the stock has produced a 225.17% return over the past year, figures included in the firm’s overview despite recent share price volatility.
Recent operational signals cited in the note point to accelerating customer uptake. Usage of D-Wave’s Advantage2 annealing quantum computers increased by 314% over the past year, while utilization of the company’s Stride hybrid solver rose 114% in the last six months. These usage metrics were presented as evidence of greater adoption of the company’s quantum computing capabilities.
TD Cowen’s initiation also referenced a $10 million, two-year enterprise Quantum Computing as a Service (QCaaS) contract with an unnamed Fortune 100 customer. The agreement is described as focused on developing and deploying multiple quantum-powered applications.
On the corporate real estate front, D-Wave announced plans to relocate its headquarters from Palo Alto, California, to the Boca Raton Innovation Campus in Florida by 2026. The new headquarters is slated to function as a principal research and development hub. In connection with the move, Florida Atlantic University committed $20 million to purchase and install an Advantage2 annealing quantum computer on its nearby campus.
Summary
TD Cowen’s Buy initiation on D-Wave points to the company’s market position in quantum annealing, strong gross margins, rapid revenue growth and a solid balance sheet as reasons to back the stock despite it trading above a published fair value estimate. Rising system and solver usage, a sizeable enterprise QCaaS contract and a planned headquarters relocation tied to a university purchase of hardware were all cited as supporting signals.
Key points
- D-Wave reported an 82.82% gross profit margin and 156.2% revenue growth over the last twelve months, supporting high-margin expectations.
- Operational adoption is accelerating - Advantage2 usage rose 314% year-over-year; Stride hybrid solver usage increased 114% in six months.
- Balance sheet metrics are strong, with more cash than debt, a current ratio of 54.68 and a debt-to-equity ratio of 0.06, and a $10 million, two-year QCaaS agreement with an unnamed Fortune 100 company.
Risks and uncertainties
- The stock is trading significantly above a published Fair Value estimate, indicating valuation risk for equity investors and potential sensitivity to shifts in market sentiment - relevant to technology and growth-oriented equities.
- While the company reports fast revenue growth and rising usage metrics, continued customer adoption and successful deployment of quantum-powered applications remain necessary to sustain the growth trajectory - relevant to enterprise IT and cloud services procurement.
- Planned corporate moves and large equipment commitments, such as the headquarters relocation and the university purchase, introduce execution risk tied to capital deployment and project timelines - relevant to corporate real estate and R&D investment plans.