Rigetti's Partnership Push Fails to Mask Underlying Financial Woes

What happened

Rigetti Computing announced it is deepening strategic partnerships with AI, academia, and government entities to validate its quantum roadmap. However, the company remains a pre-commercial player with 2024 revenue of only $10.8 million, over 90% government-funded, and facing declining sales. DeepValue's report highlights a $201 million net loss in 2024, ongoing cash burn of $8-20 million quarterly, and intense competition from better-capitalized rivals like IBM and Google. While partnerships could provide non-dilutive funding and technical credibility, they are part of Rigetti's existing strategy and have not yet translated into sustainable commercial growth. The current $7.8 billion market cap embeds optimistic assumptions, making the equity a speculative option rather than a value investment.

Implication

For investors, this development underscores Rigetti's continued reliance on external collaborations to advance its technology, but does not mitigate the fundamental risks. The company's heavy cash burn and need for future capital, including a $250 million Quanta commitment, heighten dilution risks for equity holders. Partnerships may aid in securing grants or validation, yet they fail to address the competitive disadvantages against giants like IBM in achieving quantum advantage. Without evidence of scalable revenue or technical milestones, the stock's premium valuation remains unjustified based on current fundamentals. Monitoring should focus on tangible outcomes like qubit system deliveries and funding stability rather than partnership announcements.

Thesis delta

The deepening of partnerships does not materially shift the investment thesis, as collaborations were already a core part of Rigetti's strategy outlined in the report. The STRONG SELL stance remains intact, emphasizing that partnerships alone cannot overcome the challenges of cash burn, competition, and lack of commercial traction. Investors should await concrete evidence of scalable revenue or technological breakthroughs before reconsidering the high-risk assessment.