Rigetti's Q4 Earnings Face High Stakes as Contract Wins Battle Fundamental Weaknesses

What happened

Rigetti Computing's Q4 earnings report will test whether $5.7 million in Novera orders and a $5.8 million AFRL contract can reverse revenue declines and steady margins, as highlighted in a recent Zacks article. The DeepValue master report reveals a troubling foundation: Q3 2025 revenue was just $1.9 million with gross margins collapsing to 21% from 51% year-over-year, amidst an accumulated deficit of $752.8 million and high cash burn. Valuation remains extreme at a ~$6.0 billion market cap, roughly 550 times 2024 revenue of $10.8 million, despite shrinking sales and 89.4% dependence on government contracts that introduce lumpiness and renewal risk. Management's roadmap, including a promised 100+ qubit system by end-2025, faces historical misses and thin backlog, with the Quanta collaboration obligating at least $250 million in future investments. Thus, the earnings must demonstrate that these new wins are more than isolated positives and can drive sustainable growth, or risk exposing the disconnect between hype and financial reality.

Implication

Any failure to report meaningful revenue growth from the Novera and AFRL contracts could trigger severe multiple compression, given the stock's elevated valuation metrics like a negative P/E of -16.8 and EV/EBITDA of -31.33. Continued reliance on government funding, with 89.4% of 2024 revenue from such sources, leaves Rigetti vulnerable to budget cuts and timing delays, undermining revenue predictability. The contractual obligation to invest $250 million over five years in the Quanta collaboration, coupled with ongoing cash burn, raises dilution concerns and could strain the balance sheet despite current cash reserves. Competitive pressures are intensifying, as peers like IonQ reported Q3 2025 revenue of $39.9 million, highlighting Rigetti's lag in commercial traction and execution. Ultimately, if Q4 earnings disappoint, market sentiment may shift from narrative-driven optimism to a fundamental reassessment, accelerating a downward revaluation.

Thesis delta

The Q4 earnings event does not alter the core 'STRONG SELL' thesis, which requires sustained revenue growth above 50% annually with margins over 30% for a rating upgrade. However, it serves as a critical near-term catalyst that could either validate management's commercial push or confirm deep-seated weaknesses, potentially hastening multiple compression if results fall short of aggressive expectations.