By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panel is bearish on D-Wave (QBTS) due to its high valuation (445x P/S), unsustainable cash burn, and the risk of enterprise procurement cycles stalling revenue growth. The AT&T partnership, while validating D-Wave's technology, does not guarantee a path to profitability.
Risk: The risk of enterprise procurement cycles stalling revenue growth and leading to a terminal cash burn trajectory.
Opportunity: A multi-year, eight-figure contract with AT&T post-Aug 6 results.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
AT&T (NYSE: T) recently announced it's expanding its use of D-Wave Quantum (NASDAQ: QBTS) technology, just months after it began testing the quantum computing company's services.
AT&T said the expansion will focus on integrating D-Wave's annealing quantum computing technology into some of its artificial intelligence tools to improve network operations and outage detection.
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D-Wave shareholders were understandably excited about this and pushed the stock higher on the news, but does AT&T's move make D-Wave stock a buy right now? Probably not, and here's why.
Let's start with the good news first, because AT&T's announcement is good for D-Wave. AT&T clearly sees value in D-Wave's quantum computing technology and wants to put it to use in more applications.
The telecom giant wants to see how quantum computing can improve its outage detection and response, manage technician routing, plan new network builds, and manage traffic. This expansion comes on top of the initial results of using D-Wave's tech, in which processing times for AT&T's network optimization were reduced to just 15 seconds -- down from one hour.
AT&T's director of data science, Lucus Haugen, said in a press release that D-Wave's tech "has the potential to help us optimize faster, increase efficiency and scale more real-time operations, making quantum a practical tool for advancing how we run and modernize our network."
Practical quantum computing is a difficult goal to achieve, so AT&T saying that D-Wave's tech is useful is a big win for the company. AT&T also said that it will evaluate D-Wave's forthcoming gate-model systems for potential use in quantum security and quantum communications that the telecom giant is exploring.
In short, D-Wave's tech has already been helpful; it's now being used in additional applications and is open to further testing for more use cases down the road.
Unfortunately, the news of AT&T expanding its use of D-Wave's technologies doesn't mean you should run out and buy shares of the quantum computing stock right now.
D-Wave is still in the very early stages of earning revenue from its tech, and even what it has earned is fairly negligible. The company had just $2.9 million in sales in the first quarter, an 81% drop from the year-ago quarter, due to a $12.6 million one-time system sale in the year-ago quarter.
Investors will get more insight into the company when it reports its second-quarter results on Aug. 6. And analysts' consensus estimates are for revenue of about $43 million, a 75% increase from the year-ago quarter.
While that's steady growth, the high price tag should give investors pause about buying D-Wave stock. D-Wave shares have a price-to-sales (P/S) ratio of 445, which is staggering given that the tech sector average P/S ratio is just 7. That's a very hefty premium to pay for a segment of the technology sector that's still in its early stages. D-Wave would have to grow incredibly fast for a long time to justify that price tag, and right now it's nowhere near that pace.
What's more, D-Wave is currently unprofitable. The company reported a net loss of $18.4 million in the first quarter, with just $2.9 million in sales. D-Wave's research and development costs more than doubled to about $26 million for the quarter, and General and Administrative costs jumped by 150% to over $20 million.
Given its unprofitability and its high price tag, D-Wave stock isn't a buy. It's worth keeping an eye on the quantum computing space, and D-Wave specifically, as practical use cases expand, but buying D-Wave stock right now still looks like too much of a risk.
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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"AT&T validation is real but insufficient to justify QBTS's 445x P/S given narrow applicability, persistent losses, and superior competing quantum architectures."
AT&T's expansion of D-Wave's annealing quantum tech for network optimization, outage detection, and routing—slashing processing from 1 hour to 15 seconds—is tangible validation of near-term commercial use. QBTS revenue may inflect as more telcos and logistics firms adopt, but the article's focus on a 445x P/S multiple (vs. sector 7x) and $18M quarterly losses correctly flags valuation risk. Q2 results due Aug 6 could show if the $43M consensus revenue is real or lumpy. Quantum annealing has narrow but valuable optimization niches; gate-model progress mentioned is still years away.
D-Wave's annealing approach is increasingly seen as a dead-end versus gate-model systems from IBM, IonQ, and Google; AT&T's pilot may remain a narrow proof-of-concept while the company bleeds cash and dilutes shareholders, making the current premium unsustainable even if revenue grows 75%.
"D-Wave’s astronomical P/S ratio reflects speculative hype rather than the underlying reality of its cash-burning business model."
The AT&T partnership is a classic 'proof of concept' win that fails to move the needle on D-Wave’s (QBTS) fundamental insolvency. While reducing optimization latency from one hour to 15 seconds is impressive, the P/S ratio of 445 is detached from reality, pricing in perfection for a company burning cash at an unsustainable rate. R&D and G&A expenses are ballooning relative to revenue, signaling a company struggling to scale commercialization. Investors are effectively buying a lottery ticket on quantum supremacy, ignoring that D-Wave’s annealing approach faces stiff competition from gate-model architectures. Until we see a path to positive free cash flow, the stock remains a speculative trap for retail momentum traders.
If D-Wave’s annealing technology becomes the industry standard for specific combinatorial optimization problems in telecom and logistics, the current valuation could be viewed as a 'cheap' entry point for a future monopoly in quantum-as-a-service.
"D-Wave's technology validation from AT&T is real, but the stock's 445x P/S requires proof of recurring revenue scale, not just pilot expansion, to justify holding."
The article conflates two separate things: D-Wave's technology being *useful* (AT&T's 15-second result is real) versus D-Wave's stock being *investable*. The valuation math is damning—445x P/S against $2.9M quarterly revenue and $18.4M net losses. But the article misses a critical detail: AT&T's expansion isn't a one-off PR win; it signals willingness to scale from pilot to production. If Q2 revenue hits $43M consensus and AT&T signs a multi-year contract (not disclosed here), the denominator changes materially. The real question isn't whether quantum works—it's whether D-Wave can convert pilots into recurring revenue faster than burn rate accelerates.
AT&T testing D-Wave doesn't mean buying it; every major tech vendor has 'partnerships' that never scale. D-Wave's R&D and G&A costs are exploding while revenue collapsed 81% YoY—the burn trajectory suggests the company may need capital raises that dilute shareholders before profitability arrives.
"QBTS's current valuation cannot be justified by near-term revenue prospects or a pilot with AT&T; sustained multi-customer adoption and margin expansion are prerequisites for a meaningful re-rating."
AT&T’s expansion is a credible validation of D-Wave’s practical angles, but it doesn’t alter the fundamental math. QBTS’s revenue remains tiny (Q1 sales about $2.9M; close to break-even on R&D), and the stock trades at a sky-high P/S (~445). The real earnings hook would be broad, multi‑customer adoption and durable margin improvements from gate-model or cloud access, which are far from guaranteed. Also, competition and customer procurement cycles in enterprise quantum are long and lumpy. The article glosses over how slowly enterprise pilots convert to scale, the timing of profitability, and the risk of a pullback if AT&T’s pilots stall.
But AT&T's expansion could become a meaningful revenue stream if it scales regionally, potentially improving the upside path and compressing the profitability timeline.
"Imminent dilution from cash burn is the overlooked valuation killer even if AT&T scales the pilot."
Claude correctly flags the pilot-to-production risk, but everyone underweights second-order dilution: QBTS cash burn at $18M/quarter with only $2.9M revenue implies another equity raise by Q4, cratering the 445x P/S further. Gate-model critiques miss that annealing already solves real telecom routing; the real near-term catalyst is whether AT&T converts to a $10M+ annual contract post-Aug 6 results.
"The enterprise procurement cycle for quantum services is too slow to prevent a liquidity crisis before meaningful revenue scales."
Grok and Claude are missing the structural risk: procurement cycles for enterprise telco software are notoriously rigid. Even if the AT&T pilot succeeds, the transition to a multi-year, eight-figure contract is not a linear Q3 event. It is a multi-quarter bureaucratic slog. Expecting a revenue inflection by Q4 ignores the reality of internal vendor onboarding. QBTS is betting on a sales cycle that they cannot control, making the current cash burn trajectory a terminal threat regardless of technical success.
"AT&T's expansion could trap D-Wave in perpetual pilot limbo rather than accelerate to production revenue."
Gemini's procurement-cycle realism is sharp, but both Gemini and Grok anchor too hard on Q4 timing. The real risk nobody surfaced: AT&T's 15-second win may be *exactly* what keeps D-Wave alive without ever scaling. A perpetual proof-of-concept customer—one that validates the tech but never commits to eight figures—is D-Wave's worst outcome. It justifies continued R&D burn while revenue flatlines. That's slower death than outright failure.
"Even scaling pilots may fail to translate into durable profitability, leaving D-Wave exposed to continued burn and dilution."
Claude highlights pilots scaling; I’d stress the flip side: even a regional AT&T contract may be non-binding or heavily discounted, leaving D-Wave stuck with chronic burn and dilution. The market treats 43M revenue as a wake-up, but enterprise pilots often stay lumpy and non-recurring. Without durable gross margin expansion or cloud-pricing leverage, the 'production' signal may never translate into profitability, just longer cash burn.
The panel is bearish on D-Wave (QBTS) due to its high valuation (445x P/S), unsustainable cash burn, and the risk of enterprise procurement cycles stalling revenue growth. The AT&T partnership, while validating D-Wave's technology, does not guarantee a path to profitability.
A multi-year, eight-figure contract with AT&T post-Aug 6 results.
The risk of enterprise procurement cycles stalling revenue growth and leading to a terminal cash burn trajectory.