Arqit Quantum H2 2025 Earnings Call Transcript

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Provided by Quartr
December 9, 2025

Key Takeaways

  • Positive Sentiment: Arqit says market momentum is accelerating—driven by quantum advances and regulatory pressure—with 12 demonstration and test engagements signed in the first two months of the fiscal year, indicating stronger inbound demand.
  • Positive Sentiment: The company expanded its product suite by acquiring Amplify’s Encryption Intelligence risk‑analysis tools (to discover weak cryptography and generate leads) and announced collaborations with Intel (TDX/confidential computing) and Sparkle (optical‑transport embedding), broadening addressable markets such as data sovereignty and confidential computing.
  • Positive Sentiment: Commercial traction improved: FY25 revenue rose to $530,000 (with H2 acceleration to $463,000), the company closed multi‑year contracts including Sparkle and a Middle East customer, and ended the year with $1.2 million of contractual revenue backlog for FY26.
  • Negative Sentiment: Financials remain a concern—operating loss widened to $38.5 million, administrative expenses increased to $34.7 million (including an exceptional settlement item), and revenue is still modest relative to spending despite $36.9 million of cash, highlighting runway and profitability risks.
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Earnings Conference Call
Arqit Quantum H2 2025
00:00 / 00:00

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Operator

On today's call, we will be referencing to the press release issued this morning that details the company's full fiscal year 2025 results, which can be downloaded from the company's website at arqitgroup.com. At the end of the company's prepared remarks, there'll be a question-and-answer period for selected equity research analysts. Please note that those selected equity research analysts that would like to ask a question in the Q&A session will need to dial into the call rather than joining through the webcast link. Finally, a recording of the call will be available on the investor section of the company's website later today. Please note that this webcast includes forward-looking statements. Statements about the company's beliefs and expectations concerning words such as may, will, could, believe, expect, anticipate, and similar expressions are forward-looking statements and are based on assumptions and beliefs as of today.

Operator

The company encourages you to review the safe harbor statements, risk factors, and other disclaimers contained in today's press release, as well as the company's filings with the Securities and Exchange Commission, which identify specific risk factors that may cause actual results or events to differ materially from those described in our forward-looking statements. The company does not undertake to publicly update or revise any forward-looking statements after this webcast. And now, I'd like to turn the call over to Andy Leaver, the company's Chief Executive Officer. Andy?

Andy Leaver
CEO at Arqit

Thank you. And thank you for joining our fiscal year 2025 earnings call. From my vantage point, fiscal 2025 was a year of building momentum. The issue which Arqit's products and services address, specifically the current weaknesses in encryption and the future threat posed by quantum computers, moved up the risk register of enterprises and governments around the world. It was a year of building momentum for the company as well: momentum in prospective customer engagements across our key markets, momentum in revenue, and momentum in contracted backlog coming into fiscal year 2026. Fiscal year 2025 was also a year of broadening our product and service footprint. Our acquisition of Amplify's Encryption Intelligence product and risk advisory services broadens our engagement with current and prospective customers to address the migration journey to a post-quantum cryptographic posture from beginning to end.

Andy Leaver
CEO at Arqit

Innovative collaborations with Intel and Sparkle broaden our product solution sets to include Confidential Computing, which is an exciting emerging market opportunity, and quantum-secure communications across the optical transport layer. Finally, the year was marked by further building upon past successes, specifically replicating past successes in the telecom network sector and defense sectors with additional contract wins. The need for enhanced cryptography is ever-increasing, particularly with each new announcement of advances in quantum computing capability. Organizations are increasingly aware of the need to address the issue. We have seen a change in the market from awareness of the issue to action to address. The level of action is uneven across and within market segments. However, it is no longer a question of if organizations need to upgrade their cryptographic posture, but when they will upgrade their posture.

Andy Leaver
CEO at Arqit

Arqit recently was invited to present to a leading U.S. securities industry regulatory organization about the rise of quantum computing and the threat it poses to cybersecurity for the financial industry. One of the most interesting questions posed was, "What can we, as a regulatory body, do to support and encourage a transition to post-quantum security?" From Arqit's perspective, the invitation to present and the question asked demonstrated the increasing urgency which is being felt across key market sectors to move to a post-quantum encryption posture. Many governments, security agencies, and regulatory bodies across the globe are mandating or encouraging the migration to post-quantum cryptography. Some are even imposing deadlines. Top-down pressure, plus increased awareness of the issue at the CTO or CISO level within organizations, is driving increased action to address the issue.

Andy Leaver
CEO at Arqit

As a result of this market trend, Arqit's marketing programs and announced successes, we have seen increased activity with prospective customers. The first step with prospective customers is a demonstration and test engagement. In the first two months of this fiscal year, we've already signed 12 demonstration and test engagements. The pace of engagements is running well ahead of fiscal 2025. We believe this is the best barometer of building market migration towards a post-quantum cybersecurity preparedness, and it signals increasing awareness of Arqit's Symmetric Key Agreement Encryption Platform as a compelling solution. We have a proven solution to address the weaknesses of today's encryption and the threat posed by quantum computers. However, we recognize that as an organization that wants to migrate to a post-quantum encryption posture, it needs to understand its current cryptographic landscape, its risk exposure, before it can take steps to upgrade its encryption architecture.

Andy Leaver
CEO at Arqit

We lacked an important capability, namely risk advisory tools, to help organizations take the first important step to understand its risk. In May, we acquired Amplify's product portfolio, IP, and innovations team specializing in encryption risk advisory and AI analytics. Amplify's Encryption Intelligence risk analysis tools, which we acquired, give organizations complete visibility into all encryption technologies in use across the network, automatically identifying weak points and vulnerabilities, including those susceptible to quantum attacks. The Encryption Intelligence risk analysis tools offer CISOs and CTOs an on-ramp for their post-quantum migration. They cannot address issues which they cannot see. Encryption Intelligence shines a light on the problem. While a revenue opportunity in and of itself, Encryption Intelligence is also a sales lead generator for our Symmetric Key Encryption solutions.

Andy Leaver
CEO at Arqit

Our Encryption Intelligence product, combined with Arqit's quantum encryption technology, delivers a comprehensive proposition to identify and mitigate cyber risk exposure from both current and future quantum threats. Arqit can help organizations detect, protect, and comply. What I mean by that is, firstly, we can help organizations detect their cryptographic risk exposure through the use of Encryption Intelligence. Secondly, we can help organizations enhance and protect their networks and IT infrastructure through the use of our quantum-safe Symmetric Key Agreement encryption solutions. And thirdly, organizations can migrate to a post-quantum encryption posture that is compliant with cybersecurity guidance from leading governmental agencies and trade groups, as our Encryption Intelligence tools map against leading security agency recommendations, and our encryption solutions meet all such recommendations, including the National Security Agency's Commercial Solutions for Classified symmetric key management requirements.

Andy Leaver
CEO at Arqit

While a concise marketing phrase, "Detect, protect, and comply," captures the essence of what we do and the value proposition which we offer customers, adding Encryption Intelligence to our portfolio is an important broadening of our offering to assist clients in their end-to-end migrations. Another important point to add, broadening of our product portfolio, was the announcement of our collaboration with Intel to bring symmetric key cryptography into the Trusted Domain created by Intel's TDX Enclave. What that means, to the less technically inclined, is workloads can move between on-premise and cloud environments, which are secure and confidential. Hence, it is called Confidential Computing. The security of workloads in process and transit is of vital importance to CTOs and CISOs. Confidential Computing is increasing in importance as it is an element of the rise in market focus on trust and Data Sovereignty.

Andy Leaver
CEO at Arqit

Trust and sovereignty are the words we hear regularly in our engagements with existing and prospective customers. Data sovereignty is the concept that data is subject to the laws of the country or region where it was generated. It's an issue which is complicated by the continued movement of data and workloads to the cloud, which are often transnational. This is a particularly important issue in the European Union. Recent materials announced by Deutsche Telekom, British Telecom, and Orange focused on their sovereign cloud or network architecture initiatives. Arqit's collaborative solution with Intel and its Intel TDX has significant applicability to the trust and sovereignty issues confronted by organizations seeking to comply with data sovereignty laws. We expect to have additional announcements about offerings and go-to-market strategies targeted to the Confidential Computing and data sovereignty market in this fiscal year.

Andy Leaver
CEO at Arqit

Arqit believes this market represents a meaningful opportunity for the company and will have a strong partner in Intel with whom to attack it. While we have broadened our product offering with Encryption Intelligence and our activities with Intel, we remain focused on building on our recent successes, specifically in the telecom and government and defense markets. In the telecom market, we signed a three-year contract with Sparkle, a tier-one network operator, enabling it to offer a quantum-secure network as a service. Building upon our relationship, we just recently announced in partnership with Sparkle that it had demonstrated embedding Arqit's encryption technology directly into the Optical Transport Layer, validating that sensitive data could be secured at the physical network layer without compromising performance. This demonstration opens the door for additional quantum-secure product offerings for network end users.

Andy Leaver
CEO at Arqit

In addition to activities with Sparkle, Arqit signed additional license agreements or contracts with RSG Telecom and its affiliate Fabric Networks. Our engagement with prospective large telecom network operators is strong. We expect to replicate our success with Sparkle, RSG, and Fabric with other network operators as we have the blueprint which should shorten implementation times for prospective customers. Likewise, in defense, whether militaries or defense contractors, we are building upon our recent success. Our previously announced initial Department of War contract in partnership with a large IT vendor has been a validating event. Since the announcement, we've signed several additional defense-related contracts, including one for integration into unmanned battlefield assets. There is significant opportunity in the defense market. We have undertaken multiple demonstration and test engagements, usually as part of a solution set with partners, with U.S. and foreign military organizations and defense contractors.

Andy Leaver
CEO at Arqit

While sales cycles in defense can be slower than other markets, we believe that this market will represent a large percentage of our revenue over time. In that regard, we've increased and realigned our U.S. operations and personnel to drive our efforts to capture more of this market, whether U.S. military, national security, or government. So, circling back to my introduction, we are experiencing the market momentum to take action to address the weaknesses in today's encryption and the threat of quantum computers. Prospective customer engagements are accelerating. We broadened our product offering to provide a comprehensive solution to detect, protect, and comply. We also broadened our product offering to be a first mover in quantum-secure, Confidential Computing, and data sovereignty. And finally, deepen our success in key network operator and defense markets.

Andy Leaver
CEO at Arqit

Our efforts are beginning to come through in our results, which Nick will talk about in a moment. I will say we believe that fiscal 2025 represents a trough year from a revenue perspective. The company grew revenue materially in the second half of the year as compared to the first half. We ended the fiscal year with executed contracts that represent $1.2 million in revenue that could be recognized in fiscal year 2026. We expect to build upon that foundation through 2026. As momentum in the marketplace for quantum-safe solutions grows, so is our conviction. Organizations are starting the migration journey. We can assist in the assessment of risk exposure, and we offer a provably secure symmetric key encryption solution. We like our position in the marketplace to capture the demand we are building. We are excited about our prospects for 2026. Thank you.

Andy Leaver
CEO at Arqit

With that, I will turn it over to our CFO, Nick Pointon.

Nick Pointon
CFO at Arqit

Thank you, Andy. For the fiscal year 2025, Arqit generated $530,000 in revenue as compared to $293,000 in revenue for fiscal year 2024. The variance between periods resulted primarily from the commencement in March of our previously announced multi-year contract with a customer in the Middle East. In 2025, we generated revenue from seven licenses for our SKA platform and NetworkSecure solutions and professional services. This compares to 13 licenses for fiscal year 2024. While our revenue for the fiscal year is modest, our full-year result does not represent a material improvement from the prior year and a material sequential improvement from the first half of fiscal year 2025 to the end of the period.

Nick Pointon
CFO at Arqit

Recall, our first half of 2025 revenue was $67,000, while the second half of the year saw revenue accelerate to $463,000. The acceleration in second half revenue benefited from, among other factors, commencement of revenue generation from our multi-year contract in the Middle East, which, as previously reported, had been delayed. It also reflects commencement of our multi-year contract with Sparkle. In keeping with Andy's theme of momentum, we previously reported that we ended fiscal year 2025 with $1.2 million of contractual revenue, which may be recognized in fiscal year 2026. While we are still speaking in modest nominal dollar terms, the trajectory of our prospective customer discussions, licensing activity, and now revenue is all moving in a positive direction. Revenue from the Arqit SKA-Platform as a Service and Arqit NetworkSecure products totaled $476,000.

Nick Pointon
CFO at Arqit

Professional services and maintenance revenue in support of contract activity was $54,000 for the period. For fiscal year 2024, Arqit SKA-Platform as a Service and Arqit NetworkSecure contracts revenue totaled $191,000, and professional services and maintenance in support of contract activity was $102,000. Our administrative expenses equate to operating costs for those more familiar with US GAAP. Administrative expenses for fiscal year 2025 were $34.7 million versus $25.4 million for fiscal year 2024. The variance between periods was primarily due to a reduction in foreign exchange gain resulting from strengthening of the British pound against the US dollar. Employee and property costs saw material reductions year over year. Arqit's headcount as of 30 September 2025 was 91 employees as compared to 82 as of 30 September 2024.

Nick Pointon
CFO at Arqit

Administrative expense for the period includes a $5.6 million non-cash credit associated with share-based compensation versus a restated $0.6 million non-cash charge for fiscal year 2024. Operating loss for the period was $38.5 million versus a loss of $26.9 million for fiscal year 2024. The variance in operating loss between periods is primarily an increase in administrative expenses and recognition of an exceptional item for the outstanding class action lawsuit in the period. We previously announced that an agreement in principle has been reached regarding a settlement of the lawsuit. For the fiscal year, loss before tax from continuing operations was $36.5 million. For fiscal year 2024, loss before tax from continuing operations was $37.4 million. The variance between periods is primarily due to an improvement in currency translation differences. As of 30 September 2025, the company had cash and cash equivalents of $36.9 million.

Nick Pointon
CFO at Arqit

With that, I turn the call back to Andy.

Andy Leaver
CEO at Arqit

Thank you, Nick. A final thought. Nick perhaps said it best when he noted that the trajectory of key measures, prospective customer engagements, signed contracts, revenue, backlog are all moving in a positive direction. From my perspective, that is a function of the market beginning to take serious action towards migrating to a post-quantum encryption posture. It is also a function of recognition that Arqit's Symmetric Key Agreement Encryption Platform offers a proven solution today. We're very excited about the market for our products in fiscal 2026. The hard work of the entire Arqit team is beginning to bear fruit. We expect to build upon the momentum that we experienced in 2025. Thank you again. I'll hand the call back over to the operator for Q&A. Thank you.

Operator

If you would like to ask a question, please press star one one on your telephone. If you want a headset, please pick up the headset and then press star one one. If you would like to remove yourself from the queue, please press star one one again. One moment while we compile our Q&A roster. Our first call from today will come from the line of Scott Buck of H.C. Wainwright & Company. Your line is open.

Scott Buck
Managing Director at H.C. Wainwright & Company

Hi. Good afternoon, guys. Thanks for taking my questions. Andy, I'm curious, is there or was there a particular catalyst that's helping drive the higher level of demonstrations and activity here in the last couple of months? Either something external or maybe some change in the selling process?

Andy Leaver
CEO at Arqit

Hey, Scott. Good question. Thank you.

Andy Leaver
CEO at Arqit

So, I kind of looked when I kind of laid out where we're seeing business. I would say kind of thematically what you're seeing is the news flow on quantum and the advances in quantum this year, this calendar year 2025, have been huge, and I think when you see some of the larger players like, sorry, like IBM and Google, when they talk about their hypercomputers and achieving quantum supremacy, and then you also see some of the smaller pure players, which we see a lot, by the way, I think their advances have gotten people to say, "Hey, we can see now that quantum is moving very quick, and we're still actually in the year of quantum." That's the first thing that they're seeing, I would say, thematically.

Andy Leaver
CEO at Arqit

I think also then what we're also seeing is you'll see specifically within the telecom sector is a larger awareness because of, I talked about in my notes earlier, that in some cases, governments, in other cases, regulatory bodies are saying to people, "This needs to be on your risk register, and this is something you need to look at," and I think that's driving a lot of organizations, starting with telco, to say, "Hey, we need to have a position on this, and we need to understand the potential impact and how we can mitigate against that impact," so on one side, it's hugely exciting about quantum arriving in the way that it is because it's a force for good. We all know the benefits of quantum, but in a bad actor's hands, now people are starting to be aware of what the consequences of that are.

Andy Leaver
CEO at Arqit

I would just leave you with one other thing as well. I think it's very well publicized now, the threat of what's being called harvest now, decrypt later, which is people having their information hacked and stolen today to be decrypted later when quantum computing becomes available in a more meaningful way. If that information has a shelf life or has any sort of validity going into the future, then it puts that organization at risk, and I think people are saying, "Hey, we need to guard against that now rather than wait for more and more evidence in terms of the availability of quantum computers." Hopefully, that helps, Scott.

Scott Buck
Managing Director at H.C. Wainwright & Company

No, that's very helpful. It sounds like the market is coming to you guys rather than you having to change any of your kind of internal selling procedures to grab more attention, which is great.

Scott Buck
Managing Director at H.C. Wainwright & Company

I also wanted to ask about Encryption Intelligence. What does the sales cycle look like there versus the legacy product? I would imagine it's significantly shorter and maybe a driver of revenue here in the near term.

Andy Leaver
CEO at Arqit

Yeah. Hey, we're really pleased with the acquisition we made of Encryption Intelligence. For us, this is something that ability to, one, in a sales cycle, show an organization their cryptographic landscape and show where they have potential weaknesses and potential problems in their network, but also identify that against existing regulatory body guidance. But right behind that is we obviously want organizations to use this as an ongoing tool as well to keep themselves safe against any new attacks.

Andy Leaver
CEO at Arqit

So we're seeing, starting particularly with telco operators, them leaning into this and saying, "Hey, this is something that we'd like to use on an ongoing basis." So we're in discussion now with a number of telco operators, not just to do an initial check on their network, but also then on an ongoing basis for them to use the tool. I like the fact now that we can be very specific about what the threat is and be very deterministic about what we can do to help them mitigate against that potential attack and vulnerability. I think this year, as I said, being the year of quantum, we just have a lot more inbound on that side as opposed to before where we were talking about in the market. The market feels like it's a lot more educated now when he's coming to us.

Scott Buck
Managing Director at H.C. Wainwright & Company

Yep. No, that makes sense.

Scott Buck
Managing Director at H.C. Wainwright & Company

I'm curious, Andy, are there additional kind of bolt-on or tuck-in opportunities similar to that asset purchase you made back in May that might make sense to, I don't know, either bring in some additional revenue or expand the potential customer footprint?

Andy Leaver
CEO at Arqit

Yeah. That's a really good question. And I talked about what we're seeing, particularly with data sovereignty and Confidential Computing. And I think those two areas are really coming to the fore now, particularly as you think about a lot of organizations are now thinking about in that kind of detect, protect, comply, where is my data going? How do I need to think about complying against local regulation? And then how do I protect it? So anyone that sits on the periphery of really detect, protect, comply around data sovereignty and Confidential Computing would be great tuck-ins for us.

Andy Leaver
CEO at Arqit

I think anything around particular tech components of that would be interesting, and we've looked at a few different areas already in terms of people that are delivering components of it, but are obviously missing the deep intellectual property that we have around the quantum-safe part of it as well. So absolutely, we've been looking in the market.

Scott Buck
Managing Director at H.C. Wainwright & Company

Great, and then if I can squeeze one more in, and this is probably for Nick. Curious, should we anticipate any change in OpEx for fiscal 2026, or can you support the anticipated growth in the business with this kind of current level of OpEx spend?

Nick Pointon
CFO at Arqit

Yes, so our plan is very much to maintain the cost control that we benefited from in FY 2024 and to keep at the, sorry, 2025, and to keep the same level in FY 2026.

Nick Pointon
CFO at Arqit

So $2.5 million per month is our sort of target maximum cash spend per month. And that we anticipate ahead, and we believe we can deliver the year ahead within those constraints.

Scott Buck
Managing Director at H.C. Wainwright & Company

Perfect. Well, I appreciate the added color, guys. Thank you for the time.

Andy Leaver
CEO at Arqit

Thank you, Scott.

Operator

Thank you. One moment for our next question. And our next question will be coming from the line of Troy Jensen of Cantor Fitzgerald. Your line is open.

Troy Jensen
Troy Jensen
Managing Director at Cantor Fitzgerald

Hey, gentlemen. Congrats on all the great progress here. Maybe, Andy, for you to start with, can we just touch on competition? It seems like six, 12 months ago, there was really nobody, the traditional security vendors talking about post-quantum security, and now I hear them upgrading their algorithms and whatnot. So curious, is that just mainly software-based competition, or just curious if you could touch on the competitive dynamics of it?

Andy Leaver
CEO at Arqit

Yeah, sure.

Andy Leaver
CEO at Arqit

I mean, I think in line with what we're seeing in interest and activity within the market, of course, there's going to be people that are going to look at this as something that they want to lean into as well. So we absolutely see a few different competing ideas in terms of how people view this and how they want to deliver it. Just to kind of shine the spotlight back on us for a second, we've been at this for over five years. We've got 25 patents. We've spent a lot of money deeply thinking about this problem and believe that we've got something very unique. And just to kind of quote a phrase, the gold standard was always symmetric key agreements, which have been used for a long, long time by governments, military, federal defense, etc., because that's what they trust.

Andy Leaver
CEO at Arqit

Having a pure software solution that allows you to model that without hardware, without having to think about distributing keys, and also the fact that it's not mathematical. Anything that's mathematical, obviously, a quantum computer eats up very, very easily. We believe that we've got something that's very light, very flexible, goes all the way to the edge of a network, and extends itself into those kind of data sovereignty and also Trusted Domain conversations that we've been having. So, hey, I'm sure there are people that will come along with slightly different views. We just want to make sure that we make it as frictionless and easy as possible in what we're doing, and that's what we just keep building on.

Troy Jensen
Troy Jensen
Managing Director at Cantor Fitzgerald

Perfect. Great answer. Then, Andy, also for you, just if you look at the success lately, it seems like it's been telco and government.

Troy Jensen
Troy Jensen
Managing Director at Cantor Fitzgerald

I'm curious, can you just talk about the corporate side? Seems like this is something financial organizations and a variety of different kind of corporate American companies should be looking at.

Andy Leaver
CEO at Arqit

Yeah. Hey, that's a really good question, Troy. And so I kind of feel like it's building a bit like the OSI stack, if people know what that is, kind of from the physical level upwards, as I talked about optical transport layers and things like that. They're very basic. So, hey, let's protect the actual fundamentals of how things are connected together. And I feel like now we're getting into the kind of more operational layers. I feel like anybody that is regulated, is critical infrastructure, is heavy in intellectual property, are people that are starting to talk to us.

Andy Leaver
CEO at Arqit

I mentioned that we'd done a briefing to a regulatory body in my prepared remarks, and you can see that now they're building their guidance, saying, "Hey, this is obviously a threat to regulated financial industries." They're ones we're talking to at the moment. We're seeing the people that are actually operating some of the infrastructure are thinking about how to protect that and also to protect against bad actors. Anybody that's doing anything that's rich in IP has got long development cycles. You could think about farmers, life sciences, chemicals companies. They're the people that want to protect their IP as well. Because obviously, if there's a Harvest Now, Decrypt Later, that's got a long shelf life because they're years into development of that. Those are the industries we're seeing coming along next and starting to have conversations with them.

Andy Leaver
CEO at Arqit

The secure compute really leans into financial services as well, obviously being a regulated industry. So we see those kind of going hand in glove, really. Hopefully, that makes sense.

Troy Jensen
Troy Jensen
Managing Director at Cantor Fitzgerald

Perfect. Thank you, Andy. Nick, keep up the good work, guys.

Andy Leaver
CEO at Arqit

Thank you so much.

Operator

Thank you. And there are no more questions in the queue. I would like to turn the call back over to Andy for closing remarks. Please go ahead.

Andy Leaver
CEO at Arqit

Thank you. And again, everybody, thank you for joining us today. We look forward to speaking with you again following the close of our 2026 first half results. We really appreciate your interest in the company. Thank you again for your attendance.

Operator

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for your participation. You may now disconnect. Speakers, please stand by for your debrief.

Analysts
    • Scott Buck
      Managing Director at H.C. Wainwright & Company
    • Nick Pointon
      CFO at Arqit
    • Andy Leaver
      CEO at Arqit
    • Troy Jensen
      Managing Director at Cantor Fitzgerald
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