D-Wave's Milestones Highlight Growth but DeepValue Exposes Valuation Bubble Risks

What happened

GuruFocus published an article questioning if D-Wave Quantum's recent quantum computing milestones and new commercial contracts signal a breakthrough or an inflated bubble. While the company touts growth from deals like Florida Atlantic University's $20M system, DeepValue's report reveals a ~$7.7B market cap vastly outstrips D-Wave's tiny $21.8M YTD 2025 revenue. Filings show deferred revenue collapsed from $18.7M to $3.4M in 2025, indicating weak backlog and reliance on sporadic, lumpy sales rather than sustainable recurring income. Despite improving gross margins to 71.4%, operating losses hit -$27.7M in Q3 2025 with free cash flow averaging -$18-20M per quarter, funded by heavy dilution from equity raises. This contrast between market optimism and fundamental fragility underscores that current valuation multiples are unsustainable without accelerated, contract-driven growth.

Implication

The positive news on milestones and contracts does not alter DeepValue's bearish stance, as D-Wave's stock remains driven by speculative sentiment rather than solid financials. With a 'STRONG SELL' rating and base case implied value of $16 versus the current $20.97, the risk/reward is heavily skewed to the downside. Persistent cash burn and declining deferred revenue signal operational instability, likely necessitating further dilution if losses continue. Investors must closely monitor bookings and backlog metrics; any stagnation could trigger a sharp re-rating. Long-term viability hinges on converting technical lead into scalable, recurring revenue, which remains unproven given episodic deal patterns.

Thesis delta

The GuruFocus article raises awareness of D-Wave's progress but does not shift the core bearish thesis from DeepValue's report. It reinforces the dichotomy between market hype and fundamental weaknesses, such as high valuation, cash burn, and deferred revenue decline. Investors should maintain skepticism until clear evidence of sustainable growth and backlog rebuild emerges.