IonQ Q1 2025 Earnings Report

IonQ EPS Results

• Actual EPS: -$0.14
• Consensus EPS: -$0.28
• Beat/Miss: Beat by +$0.14
• One Year Ago EPS: -$0.19

IonQ Revenue Results

• Actual Revenue: $7.57 million
• Expected Revenue: $7.51 million
• Beat/Miss: Beat by +$57.00 thousand
• YoY Revenue Growth: -0.20%

IonQ Announcement Details

• Quarter: Q1 2025
• Date: 5/7/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, May 7, 2025
• Conference Call Time: 4:30PM ET

IonQ (NYSE:IONQ) is a quantum computing company founded in 2015 by Jungsang Kim and Chris Monroe. The company is located in College Park, Maryland. Thanks to its innovative technology and talented team of scientists and engineers, it has quickly emerged as a leader in quantum computing. Quantum computing is a new technology that has the potential to revolutionize many industries, from finance and healthcare to logistics and transportation. Unlike classical computers, which use bits to store information, quantum computers use qubits, which can represent both 0 and 1 simultaneously. This allows quantum computers to perform tasks much faster than classical computers, making them ideal for solving complex problems such as optimizing supply chain management or simulating complex chemical reactions.

IonQ's technology is based on trapped ion technology, which uses ions to store and manipulate quantum information. This technology is one of the most promising approaches to building a scalable, fault-tolerant quantum computer, which is the holy grail of the quantum computing industry. IonQ's team of scientists and engineers has made significant progress in this area. In January 2021, the company announced that it had built the world's most powerful quantum computer, with a quantum volume of 4 million. This breakthrough has put IonQ at the forefront of the race to develop a scalable, fault-tolerant quantum computer.

The company's leadership team is led by Chief Executive Officer Peter Chapman, who joined the company in 2019. Chapman brings a wealth of experience to the company, having previously served as the CEO of two successful startups, including the 3D printing company Formlabs. Other key leadership team members include Chief Technology Officer Jungsang Kim, a renowned physicist and professor at Duke University.

Financially, IonQ has seen lackluster growth over the past few years, with no positive net income in the past several years and widely varying net income numbers. The company's valuation is estimated to be over $2 million, partly thanks to its promising technology and the growing interest in quantum computing. Regarding market performance, IonQ has yet to show a profit, but it has been making headlines in the tech world. In addition to building the world's most powerful quantum computer, the company has also announced partnerships with many high-profile companies, including Amazon Web Services and Goldman Sachs. These partnerships have helped to raise the company's profile and position it as a leader in the quantum computing industry.

The quantum computing industry is still in its early stages but is expected to grow rapidly over the next decade. According to a report by MarketsandMarkets, the quantum computing market is expected to grow from $472 million in 2021 to $1.7 billion by 2026, representing a compound annual growth rate (CAGR) of 29.04%. IonQ is well-positioned to take advantage of this growth, thanks to its talented team and groundbreaking technology.

However, the quantum computing industry has challenges. Building scalable, fault-tolerant quantum computers is one of the biggest challenges facing IonQ and other quantum computing companies. While IonQ has made significant progress in this area, there is still a long way to go before quantum computers are ready for mainstream use.

Other risks facing IonQ include competition from other quantum computing companies such as IBM, Google, and Rigetti Computing. Additionally, there is the risk of regulatory and political changes that could impact the quantum computing industry, such as changes in government funding or regulations around the use of quantum computers.

IonQ Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Hello, and welcome to the IONQ First Quarter twenty twenty five Earnings Call. All participants will be in listen only mode. Should you need assistance, please listen to a conference specialist by pressing the star key followed by zero. Please note, this event is being recorded. I would now like to turn the conference over to our host today, Jessica Hawkenallen.

[Operator]

Ma'am, please go ahead.

[Jessica Hocken Allen, Staff FP&A Business Partner at IonQ]

Good afternoon, everyone, and welcome to IonQ's first quarter twenty twenty five earnings call. My name is Jessica Hawkenallen, and I am a member of the Investor Relations team here at IONQ. I'm pleased to be joined on today's call by Niccolo DeMasi, IONQ's Chief Executive Officer Peter Chapman, our Executive Chairman Thomas Kramer, our Chief Financial Officer Jordan Shapiro, our President and General Manager of Quantum Networking and Dean Kassman, our Senior Vice President of Engineering and Technology. By now, everyone should have access to the company's first quarter twenty twenty five earnings press release issued this afternoon, which is available on the Investor Relations section of our website at investors.ionq.com. Please note that on today's call, management will refer to the adjusted EBITDA, which is a non GAAP financial measure.

[Jessica Hocken Allen, Staff FP&A Business Partner at IonQ]

While the company believes this non GAAP financial measure provides useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. You are directed to our press release for a reconciliation of adjusted EBITDA to its closest comparable GAAP measure. During the call, we will discuss our business outlook and make forward looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our 10 Q that we have filed with the SEC today.

[Jessica Hocken Allen, Staff FP&A Business Partner at IonQ]

We undertake no obligation to revise any statements to reflect changes that occur after this call, except as required by law. Now I will turn it over to Peter Chapman, Executive Chairman of IONQ.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

I'd like to begin today's call by covering some of the high level themes. First, allow me to say that I've been delighted with the seamless transition to Niklo as our CEO. We have been able to divide and conquer this quarter to accomplish a tremendous amount, precisely as I had hoped and our board envisaged. I was delighted to represent INQ in both Japan and Korea for World Quantum Day. We signed an MOU with GQuad, a division of AIST in Japan, to work towards bringing our quantum compute to this great new market.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

We also signed an MOU to begin an exciting partnership with Toyota Tsusho and with Intelion in Korea to begin work on quantum networking in space. At NVIDIA's GTC, we showcased progress with AstraZeneca and ANSYS, where we demonstrated a 12% simulation time improvement using their engineering design software. IMQ's path to tens of thousands and ultimately millions of qubits is to photonically interconnect qubits across a network to run applications across multiple QPUs acting as one large single quantum computer. This has been our plan since the company's inception. Quantum computers offer potentially game changing solutions to many of today's largest problems.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

But like many new technologies, there is a dark side too. With a large enough quantum computer, one of the earliest known quantum applications is factoring prime numbers. Factoring prime numbers, or more specifically, the difficulty for classical computers to do so, is the basis for much of today's technical infrastructure to encrypt data widely used to secure the Internet and other digital systems. Computers are used as the books and records for modern life, and quantum computers will put that all at risk. As we work towards building such a quantum computer, we have the responsibility to provide solutions to protect society from the negative aspects of quantum.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

With our previous acquisitions of Entangle Networks, Qubitech, and a majority stake of ID Quantique, we announced our attention to be the leading player in quantum networks and to build the next generation of the Internet that is quantum safe. Our interest in distributed quantum computing using photonic interconnects is highly synergistic with our plans for quantum networking and the quantum Internet. And our interest in quantum networking is highly synergistic with quantum computing. To build the next generation of the Internet, all the same pieces of hardware need to be developed, from building inter satellite communications from satellite to the ground, frequency down conversion to our commercial fiber across the ground, routed by quantum optical switches to their final destination, and in military applications, all the way over the air to drones on a battlefield. This is our vision.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

Under Niccolo's leadership, we have today decisively accelerated our quantum computing roadmap, as well as our capabilities to create the quantum Internet. INQ's architecture and ecosystem allow unique synergies with today's edition of what I believe is the world's leading quantum memory solution. I am proud of the pace at which Niccolo has commenced his tenure as CEO and his ability to bring out the best of our leadership, the board, and indeed, I and Q as a rapidly growing public company. It's with this context that I will give the floor over to Niccolo to discuss today's latest announcements.

[Niccolo de Masi, CEO at IonQ]

Thank you, Peter, and thank you all for joining us today. Let me begin by saying I've had a fantastic first seventy days at INQ. I want to sincerely thank all of our shareholders, customers, and team members for their warm welcome and enthusiastic support. I've now completed my listening tour of all stakeholders, and I'm pleased with the reinforcement of our technical and commercial priorities this has provided. In short, INQ is focused on being the leading quantum computing and networking company.

[Niccolo de Masi, CEO at IonQ]

Our top two priorities in 2025 are delivering on revenue expectations for the year and delivering AQ64. We have some amazing people at INQ globally in all functions, but particularly our physicists and engineers who have worked hard on our systems and are now reaching the inflection point they have always envisioned. We will always prioritize and ensure that at all times, the world's greatest quantum talent makes a tone at IONQ. I wanna warmly welcome our newest colleagues in Geneva, Switzerland, and Seoul, South Korea at ID Quantique. We closed our purchase of our majority stake on April 30, and we are excited to have the ID Quantique pioneers and leading practitioners of quantum networking headed up by Gregoire Ribourdie as part of the INQ family.

[Niccolo de Masi, CEO at IonQ]

In order to coordinate our roadmap and global quantum Internet strategy, we today congratulate our colleague Jordan Shapiro on his promotion to become INQ's first president and general manager of quantum networking. Jordan has been instrumental in both our CubeTech and ID Quantique acquisitions, we look forward to his continued strategic contributions to our growth. We are indeed in the business of quantum and believe that running applications and delivering commercial advantage for our customers is our North Star. As many of you have seen, we've had a busy quarter expanding our ecosystem and delivering on yet more global firsts. Peter outlined our expanding traction in Asia this quarter.

[Niccolo de Masi, CEO at IonQ]

I would add to these achievements our selection by DARPA for its quantum benchmarking initiative. We are all proud that in q one, we sold a Forte enterprise system to EPB of Chattanooga, Tennessee. EPB and its visionary CEO, David Wade, have been pioneers of bringing new technologies to their constituents. Most well known perhaps is their blisteringly fast fiber, which was well ahead of its time and continues to provide the local economy with a foundation for growth. EPB already has a quantum network powered by our Tuba Tech team.

[Niccolo de Masi, CEO at IonQ]

Last month, EPB purchased half of the compute capacity of a Forte enterprise system for $22,000,000, bringing our latest quantum computer to their city and customers. This makes EPB the first commercial customer with both a quantum network and computer. We look forward to working with EPB in their broader ecosystem, Oak Ridge National Laboratory, to pioneer energy grid distribution optimization, as well as support entrepreneurs building their startups in Chattanooga on I and Q's quantum computer and quantum network. We celebrated National Quantum Day at the New York Stock Exchange last month and unveiled two quantum machine learning breakthroughs from our applications teams for the industrial AI sector. Our own internal research in quantum AI is showing very encouraging signs of improving prediction accuracy in large language models, as well as using quantum data analysis with sports data to highlight performance gaps.

[Niccolo de Masi, CEO at IonQ]

Today, we're also proud to announce two exciting acquisitions that accelerate our commercial quantum computing road map, extend our leadership in quantum networking, and position INQ to play a key role in creating the quantum Internet. I consider today's acquisitions to fundamentally evolve the chessboard in quantum even more in our favor, increasing INQ's leadership in the business of quantum. We laid out a road map when we went public to become the leader in quantum computing by scaling our systems using our unique quantum networked multicore architecture. Our organic investments in this interconnect led to our AFRL contract last year, an expansion worldwide in quantum networking by Incubatec and iD Quantique. We're delighted today to announce the proposed acquisition of Boston based Lysinc.

[Niccolo de Masi, CEO at IonQ]

Lysinc's founders built the first ever quantum repeater capable of extending the range of quantum networks, a key technology enabling the quantum Internet. Core mission is to use the same memory technology to build the world's best quantum interconnects that link I and Q's quantum processors at high speed. LightSync was spun out of Harvard University research and AWS by its remarkable cofounders, Mihir Bhaskar, Bart Machiavelli, and David Lavonian. The team is deeply impressive and will make an immediate contribution towards achieving our technical milestones by its quantum memory IP expertise and architecture. Lysync owns or controls over 25 patents and patent applications, which will add to INQ's robust patent portfolio upon closing of the transaction.

[Niccolo de Masi, CEO at IonQ]

A key synergy for INQ is that Lysync's technology is expected to accelerate INQ's existing photonic interconnect activities and enable our commercial systems to scale to tens of thousands and eventually millions of qubits. The LifeSync architecture is uniquely powerful and will underwrite our quantum computing leadership for decades to come. The parallels are strong, so I would not be surprised if in the fullness of time, LifeSync becomes as accretive for I and Q as Mellanox has been for NVIDIA. Equally exciting and importantly, LifeSync technology will also power the future quantum internet by allowing repeaters to ultimately be spaced over 100 kilometers apart. Last year, a pioneering paper of theirs was published demonstrating over one second storage time and over 35 kilometers of deployed fiber.

[Niccolo de Masi, CEO at IonQ]

Our commitment to creating the quantum Internet underlies our second announcement today. As Peter previewed in his opening remarks, today we unveiled the continued expansion of our networking vision to incorporate the most vulnerable portions of our world's modern communications. Our CubeTech team members began forging a path for us in this direction organically once they formally became part of INQ. Peter signed a pioneering MOU with Intelion last month to begin work on quantum key distribution, also known as QKD, in space. Having seen the tremendous reception from our government agencies, researchers, and commercial customers, we recognize the need to accelerate our quantum computing capabilities in the vital frontier of satellite communications.

[Niccolo de Masi, CEO at IonQ]

China has announced progress on QQD in space, and it's imperative for economic and national security that we lead in all dimensions, theaters, and segments of quantum networking. To accelerate our organic plans for quantum networking, and someday also quantum computing in space, we announced the planned acquisition of Colorado based signals platform Capella. This acquisition will bring INQ a platform of capabilities for signals, communications payloads, and top secret contracting expertise. Capella's well known leader, Frank Bacchus, will head up INQ's quantum space initiatives, as well as bring an injection of top secret cleared personnel, a facility security clearance, and strong three letter agency relationships around the globe. INQ systems are already leading the world in manufacturability and cloud access.

[Niccolo de Masi, CEO at IonQ]

Today's expansion brings INQ new growth vectors for our customers to benefit from, as well as complementary expertise and world class team members. I couldn't be more proud of our team's effort in my first seventy days and the speed at which we've been able to bring these unique networking and computing accelerants into the fold. Moving on now to Q1 financials at a high level. We're pleased to have delivered a solid quarter and starts to 2025, above the midpoint of our revenue guidance range for Q1. Thomas will cover our results and details in our guidance in a few minutes, but I'll say upfront that the geopolitics of our age are a net benefit to I and Q.

[Niccolo de Masi, CEO at IonQ]

We ended the quarter with just shy of $700,000,000 in cash equivalents. We have a fortress balance sheet and are investing to win and truly become the leader of quantum. Our investments are not only to accelerate our quantum computing and quantum Internet roadmaps, but to ensure that INQ is the only ecosystem any customer needs in the business of quantum. Every commercial customer, researcher, student, and government lab that learns on INQ, we expect will stay in INQ. Our early mover advantage will compound as our ecosystem breadth and depth grows relentlessly.

[Niccolo de Masi, CEO at IonQ]

I look forward to updating you later in the year as we close and integrate Whether on the ground or in space, INQ solutions are poised to be there and lead. We believe our now near boundless photonic interconnect scalability provides INQ customers with the winning quantum computing and Internet ecosystem, not just this decade, but we expect for the entire twenty first century. I am pleased to now hand you over to my colleague, Jordan Shapiro, to say a few words about our quantum networking plans.

[Jordan Shapiro, President & General Manager - Quantum networking at IonQ]

Thank you, Niccolo. I look forward to taking on a larger role in shaping the future of INQ and the quantum industry as a whole. We have a fundamental strength in quantum networking at INQ, being the only quantum computing company that planned on utilizing it to scale from day one, which has led to a clear advantage as we recognize the early commercial potential of this field. Quantum networking will naturally be the foundation of the quantum Internet, which will be a watershed achievement in creating a worldwide, ultra secure communications grid. We've made several crucial acquisitions of some of the most advanced quantum networking companies in the world.

[Jordan Shapiro, President & General Manager - Quantum networking at IonQ]

First, Entangled Networks, followed by Cubitech, then a majority stake in IDQ, now LightSync and Capella. I was involved in the conception and execution of each acquisition. Now I am excited to take the next steps towards the quantum Internet by connecting our customers' quantum computers and data centers together to transmit secure communications and allow for massively powerful blind quantum and distributed compute. Now I'd like to hand the call over to our CFO, Thomas Kramer.

[Thomas Kramer, CFO at IonQ]

Thank you, Jordan, Pierre, and Niccolo. It has been a truly exciting quarter on the commercial front, and our financials are no exception. Let's walk through this quarter's financial results in more detail. As Nicolas mentioned, we had a solid quarter, recognizing revenue of $7,600,000 beats the midpoint of the guidance we previously provided. Moving down the income statement, our total operating costs and expenses for the first quarter were $83,200,000 up 38% from $60,500,000 in the prior year period, but within our plan for the year.

[Thomas Kramer, CFO at IonQ]

To break this down further, our research and development costs for the first quarter were $40,000,000 up 23% from $32,400,000 in the prior year period. Recall that we are investing heavily in R and D and growing our R and D headcount to support our roadmap and customer commitments. Our sales and marketing costs in the first quarter were $8,600,000 up 28% from $6,700,000 in the prior year period. This increase was due to us growing both our marketing and our sales teams, as we continue investing into our commercial efforts. Our general and administrative costs in the first quarter were $23,800,000 up 70% from $14,000,000 in the prior year period.

[Thomas Kramer, CFO at IonQ]

These increases were primarily driven by an increase in payroll related expenses. All of this resulted in a net loss of $32,300,000 in the first quarter, compared to $40,000,000 net loss in the prior year period. Accounting for warrants can be confusing, we have always pointed out the impact they have on our results. This Q1 loss includes a non cash gain of $38,500,000 for the first quarter related to the fair value of warrant liabilities. This is a pure accounting artifact that is not representative of the operating performance of our business.

[Thomas Kramer, CFO at IonQ]

These results also include growth in stock based compensation expense related to our headcount growth, which was $33,300,000 for the first quarter, compared to $22,100,000 in the prior year period. We saw an adjusted EBITDA loss for the first quarter of '30 '5 point '8 million dollars compared to $27,000,000 loss in the prior year period. As Niccolo mentioned, we are making additional investments to accelerate our roadmap, as well as entering new segments of the market, and we expect to continue to invest in the ecosystems that support our customers. Given our expansion, we are also prioritizing bringing acquired entities up to US public company reporting standards. All of this means we expect to see an increase to our cost basis for the year.

[Thomas Kramer, CFO at IonQ]

We envision this increasing our adjusted EBITDA loss, previously projected $120,000,000 by approximately 35%. Turning now to our balance sheet, cash, cash equivalents and investment as of March 31 were at $697,100,000 Continuing on to our financial outlook, we are reaffirming our revenue guidance for the full year 2025 and expect revenue for the second quarter of between $16,000,000 and $18,000,000 Back to you, Nicola.

[Niccolo de Masi, CEO at IonQ]

Thanks, Thomas. We at INQ have begun 2025 with strong momentum. To recap, we announced a fantastic accelerant to both our quantum networking and quantum computing roadmaps, the proposed acquisition of Boston based LifeSync, whose quantum memory is leading globally and whose team are almost all Harvard researchers. We announced the proposed acquisition of Colorado based Capella, bringing INQ a platform of capabilities for QKD in space, top secret contracting expertise, and building the quantum Internet. We've successfully sold another cutting edge four d enterprise system, which will be used to establish the first quantum computing and networking hub in partnership with EPB.

[Niccolo de Masi, CEO at IonQ]

And we have moved on to the first stage of DARPA's quantum benchmarking initiative. Forte Enterprise now offers global access and increased quantum computing capacity through AWS, empowering customers with real world business oriented solutions. Our technical excellence shined at NVIDIA's GTC, where our collaboration with ANSYS outperformed classical methods for real world applications, while our AstraZeneca partnership advances drug discovery, demonstrating quantum's impact in multibillion dollar markets. Closing our acquisition of ID Quantique solidifies our global dominance in quantum networking. I'm privileged to lead INQ with the support of our talented team as we advance the quantum revolution and our commercialization leadership.

[Niccolo de Masi, CEO at IonQ]

I'm also highly confident the acquisitions announced today will evolve the chessboard of Quantum significantly even more in INQ's favor, ensuring a long term leadership in both quantum computing and creating the quantum Internet. INQ now benefits from an accelerated path to tens of thousands of qubits and a clear path to millions of qubits. Long distance quantum repeaters allow the quantum Internet to be built. Operator, please hand the call over now for q and a.

[Operator]

Yes. Thank you. We will now begin the question and answer session. Today's first question comes from David Williams with Benchmark.

[David Williams, Equity Research Analyst at The Benchmark Company LLC]

Hey, good afternoon, everyone. Thanks for taking my questions and congratulations on the all of the success here this quarter for the entire team there. Maybe first, if we're kind of thinking about these acquisitions that you've made and that your the recent acquisitions, but also the ones that you just closed. Can you maybe give us any update in terms of the revenue we should expect from that or maybe any of the cost structure that we should think about for our models there? Thanks.

[Thomas Kramer, CFO at IonQ]

So we believe that all of these moves that we have made will fundamentally strengthen our ability to grow our revenue into the future in manners that are similar to what you've already seen. And we will also believe that we are going to do this in a manner that is accretive, we have good gross margins. In an interim period, of course, when we make investments, we will have to continue to fund them in some cases where they're, when they have expenses that exceed revenues, but at the same time, this is a relatively modest amount compared to these three great companies that we have announced that we will be acquiring. We did say on the previous call that the revenue guidance for the year included organic and inorganic sources, that we expect that these will be fundamental to delivering revenue into the future as well.

[David Williams, Equity Research Analyst at The Benchmark Company LLC]

Great. Thanks. Appreciate the color there. And then maybe secondly, if you could just kinda help me understand the the quantum Internet and and how you maybe envision that playing out longer term into the future? Thanks.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

Yeah, so a major piece today, we've got, at the moment, EPB in Chattanooga, and also with SK Telecom, there's existing networks, quantum networks, which are being used commercially. The problem with those networks, if you will, is that they didn't have a repeater. They don't have the technology at the moment to go more than roughly 20 miles. And then after 20 miles due to signal loss, then what you need to do is to build a repeater in. That's where the quantum memory comes in.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

So the quantum memory from LightSync will allow us to build networks that extend over great distances. As an example, our hope would be to connect up Chattanooga to Oak Ridge National Labs. That's about 100 miles away. So with today's technology, you would need roughly four repeaters, five repeaters to be able to hit that distance. The light sync suddenly will allow that to happen in the near future.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

So that was a critical piece of the puzzle. The other one is in the other acquisition, which is space based. So ultimately, what you need to do, and you're seeing this now in China, and also the EU has announced a project to start to build this as well, which is to build quantum networks in space from satellite to satellite, and ultimately from satellite to ground station. And so in protecting that with a QKD network as well. And with the acquisition of Capella, it gives us an environment, if you will, to be able to get the hardware working there.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

Obviously, in space, it's in a very different environment than in your average data center, so it's a harsh environment and making sure, and Capella has the experience for building hardware that works in that environment. And with the goal, ultimately, to take our experience there and then to sell it to other communications satellite companies that want to protect their communication infrastructure. So in some sense, ID Quantique gave us access to real world environments in South Korea with SK Telecom. With Cubitec, it gave us access to EPV's network in a real world environment. And now with Capella giving us access to a real world environment in space.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

And so all these things, it's one thing to get it working in a lab, it's another thing to get it working in a busy city with trucks driving over your fiber and all the rest of that. So all these things are about building out the capability and making sure they work in the real world.

[David Williams, Equity Research Analyst at The Benchmark Company LLC]

Great. Thanks so much for the help and all the color, and best of luck on the quarter. Thanks.

[Thomas Kramer, CFO at IonQ]

Thanks, David.

[Operator]

Thank you. And the next question comes from Quinn Bolton with Needham.

[Shadi Mitwalli, Equity Research Analyst at Needham & Company]

Hey, guys. This is Shadi on for Quinn. Thanks for taking my questions and congrats on all the exciting announcements. Starting with the LightSync announcement, you guys highlighted the importance of the Quantum repairs, but just curious if there was any other technology or IP that drove the acquisition.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

So there's actually multiple aspects here, which is we said it was synergistic to the quantum compute side. And the things that we've done with photonic interconnects before required two photons to come together at exactly the same time. And with this, with quantum memory, it allows the photon to be held for some period of time and to be matched up with the other photon to be able to do entanglement. And so this will also, not only for quantum repeaters, but also for our compute strategy in doing distributed quantum computing. So it will increase the throughput of the connectivity of the systems and the error rates that we get therein.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

So it's significant kind of from both sides of the house, both from the quantum networking and also for the quantum compute side.

[Niccolo de Masi, CEO at IonQ]

I'd say it's all sides of the house. It works on the ground, it works above the ground, It helps our computing roadmap, helps our quantum internet roadmap. So it's really quite a remarkable synergistic fit for us.

[Shadi Mitwalli, Equity Research Analyst at Needham & Company]

Got it. Yeah, lots of interesting stuff there. And then my follow-up is on the development with EPB. Sounds like the two of you had an established quantum network, which ultimately led to the development of the Quantum Center. So just curious if I can quantify the number of quantum networks it currently has, and then if you're able to talk about who or how many different providers these networks spend.

[Jordan Shapiro, President & General Manager - Quantum networking at IonQ]

Yeah. This is Jordan. We today have, four quantum networks, via our acquisition of ID Quantique, and these are serving defense, the US Air Force that we're building. They're serving EPB in the enterprise and energy sector. They're serving SK Telecom and Singtel in South Korea and Singapore respectively, both in the telecom sector.

[Jordan Shapiro, President & General Manager - Quantum networking at IonQ]

So a diverse set of customers and a diverse set of use cases building on top of these quantum networks.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

And these are those are commercial quantum aspects. Obviously, the company itself has other quantum networkings up and running internally as well.

[Shadi Mitwalli, Equity Research Analyst at Needham & Company]

Awesome. Thanks for all the color, and congrats on the progress.

[Jordan Shapiro, President & General Manager - Quantum networking at IonQ]

Thank you.

[Operator]

Thank you. And our next question comes from Tyler Anderson with Craig Hallum Capital.

[Tyler Anderson, Equity Research Associate at Craig-Hallum Capital Group LLC]

Hi, guys. This is Tyler Anderson on for Richard Shannon, and congrats on the quarter. So I know LightSync has really good diming quality and error correction capabilities, and I believe they can connect to neutral atoms and ion traps. Could you highlight which modalities they're able to connect to and for which capability you plan on integrating your PIX for? Is it is this the frequency conversion?

[Tyler Anderson, Equity Research Associate at Craig-Hallum Capital Group LLC]

And then with the error correction capability with your capabilities, is this gonna be a gen two device when it comes out?

[Dean Kassmann, Senior Vice President of Engineering & Technology at IonQ]

Great question. This is Dean Kasman.

[Tyler Anderson, Equity Research Associate at Craig-Hallum Capital Group LLC]

Hi, Dean.

[Dean Kassmann, Senior Vice President of Engineering & Technology at IonQ]

The diamond memory is based off of diamond silicon vacancies. Those vacancies have long coherence times, which is what makes them kind of attractive for both the computing as well as the networking side.

[Dean Kassmann, Senior Vice President of Engineering & Technology at IonQ]

They have been able to mature that technology over the last, I would say, three to five years to where they have been, as you said, been able to look at integrations with multiple modalities. So any modality that needs a photon to be able to transmit over fiber, the overall quantum memory can be used with. And so there is a frequency conversion component to make that work. Frequency conversion technology that they have is very well matured, it's very robust, and it's very performant. And so at this point we're looking to leverage both the frequency conversion technology as well as the core quantum memory capabilities into all of our product work, our computing, our photonic interconnects, as well as the networking side.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

And if you remember, last year at AR Parral, we won a contract to go do frequency conversion piece, and also the optical switch, so just other pieces of the story. And those two were one of the things that we would do with that is to make it work with multiple modalities. So obviously with ions in our modality, but also other modalities as well.

[Niccolo de Masi, CEO at IonQ]

All I would add to that is you raised a strategic question, obviously, behind, I guess, the question upfront, which is licensing standalone business plan is obviously probably different than what it is as part of I and Q. So we're gonna be prioritizing, of course, our machines and our technical roadmap. Think it's sort of priority one and two will be that. Priority three or four, we'll discuss whether or not we want partnerships with other modalities. But most interestingly with LightSync beyond our own quantum computing roadmap is, of course, some of their existing customer partnerships on the networking side and quantum internet side.

[Niccolo de Masi, CEO at IonQ]

And a number of those are confidential, but you should assume that they run into the same sorts of customers that Jordan just mentioned a few seconds ago with IEPontique. They also run into some of the three letter agency players from Capella. So really quite happy with the strategic flexibility we're getting from this deal as well as, you know, the optionality and acceleration we're getting from them as well.

[Tyler Anderson, Equity Research Associate at Craig-Hallum Capital Group LLC]

Awesome. And then just very quickly so I can ask a follow-up. Is this gonna be a gen one or two device for repeater?

[Dean Kassmann, Senior Vice President of Engineering & Technology at IonQ]

Not right now ready to kinda speak to the kind of the the generation of the hardware. Right? We have to go through integration activity, of their technology with ours. We already have work internally, and so it's not something I'm speaking to at the moment.

[Dean Kassmann, Senior Vice President of Engineering & Technology at IonQ]

How are you defining gen one and gen two?

[Tyler Anderson, Equity Research Associate at Craig-Hallum Capital Group LLC]

Error correction. Can you guys hear me? Error correction?

[Dean Kassmann, Senior Vice President of Engineering & Technology at IonQ]

Understood. I think we're still communicate that larger product component the different generations in our upcoming discussion on our our networking road map.

[Tyler Anderson, Equity Research Associate at Craig-Hallum Capital Group LLC]

Great. And then could you highlight how Capella's signals improve your platform? And and just noting, I've seen deployments with IDQ in The EU. I'm sure if you highlighted that one as well, but I I believe those are ground stations. And then just noting that the hearing today highlighted the need for for these space capabilities.

[Tyler Anderson, Equity Research Associate at Craig-Hallum Capital Group LLC]

Could you describe the size and the growth of space based network the space based network opportunity?

[Jordan Shapiro, President & General Manager - Quantum networking at IonQ]

We'll we'll defer this is Jordan. We'll defer to kind of how we described last quarter, the networking opportunity, which we believe and and McKinsey believes, if if you read the recent McKinsey report on quantum networking, is just as large as quantum compute. And so we expect some of that to be, you know, land based, some of

[Jordan Shapiro, President & General Manager - Quantum networking at IonQ]

that to be space based.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

And I'll just add a little bit too, which is Capella has an application today which is revenue generating. It's commercial, but it's also military. And the military side would like to have secure communications. That would be an added benefit to their capability. So our first kind of Not only will this give us access to an environment to get the hardware to work in space, but it also gives us our first application and first customers to actually validate this in a real world application as revenue generating.

[Niccolo de Masi, CEO at IonQ]

I think you're spot on that the geopolitics of today's world favor everything INQ is doing. People need sovereign systems. They need local systems. And that's true across all oceans with all friendly governments that we're working with. Licensing is going to help, by the way, our business, I think, from my perspective, as you defined it, throughout gen one and gen two.

[Niccolo de Masi, CEO at IonQ]

They're going be integral part of our scaling system henceforth. And you can assume that there is a detailed integrated technical roadmap that exists behind the scenes, and we'll be revealing more of in due course.

[Tyler Anderson, Equity Research Associate at Craig-Hallum Capital Group LLC]

Awesome. Thank you, guys. I'm going hop back in the queue.

[Operator]

Thank

[Operator]

you.

[Operator]

And the next question comes from Alex Flatt with D. A. Davidson.

[Alexander Platt, AVP & Research Analyst at D.A. Davidson Companies]

Yeah, thanks for taking my questions. And congrats, Jordan, on the new role. So I just had two. I guess, first, just any updates you could sort of give us on tempo and around the technical roadmap?

[Dean Kassmann, Senior Vice President of Engineering & Technology at IonQ]

So this is Dean. So the tempo design and development is continuing. Right now, we're actively working on our performance metrics that, Nicolo alluded to at the very beginning of the call, our definite work on AQ and fidelity to try to hit those internal targets on those platforms. We're going through engineering design and build of the tempo system. And right now we're on target for our current delivery plans that we have out there in the market.

[Alexander Platt, AVP & Research Analyst at D.A. Davidson Companies]

Okay, great. Was great. Thank you. And then I guess just secondly, if you could just maybe expand more on the licensing Capella acquisitions, maybe how they help accelerate the timeline on some of your sort of longer term ambitions beyond what you've already mentioned. I mean, quantum networking Internet, I guess, should we view this as you putting focus on that and quantum computing or I guess is like the networking Internet side, maybe the largest opportunity that's sort of achievable in the near term and that's sort of where the majority of focus is right now?

[Jordan Shapiro, President & General Manager - Quantum networking at IonQ]

Alex, this is Jordan and thanks for the kind words and for the question. The story here is everything is coming together and converging, which is the interesting thing about these acquisitions. The synergies are between compute and networking on ground in space. Right? And that is this vision of the quantum Internet that we're working towards.

[Jordan Shapiro, President & General Manager - Quantum networking at IonQ]

So it's this idea that you can connect your quantum computers and have the the compute technology, have the reputers to take those over large distances, to take them into space as needed. And that's that's the story that we're looking towards. And it's a balance between both compute and networking, which we view to be incredibly strong markets, and we're making headway in both.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

And and I'll have to admit, it it's a little confusing, and we maybe haven't done a great job at this. Last year we announced that we were doing quantum networking, but it required two quantum computers to be built. So we announced it as a networking project, but we actually built two quantum computers to network the two quantum computers together. So you're busily pushing the compute side so that you can do the networking. And so networking in this case sometimes means distributed quantum computing across multiple QPUs, or in QKD where you don't need a quantum computer at either end and you're doing key distribution.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

Sometimes we talk about it and you might not give enough detail that says, we'll put it under the label of networking, but actually requires us to build a quantum computer sometimes, depending on the customer.

[Niccolo de Masi, CEO at IonQ]

Yeah, so all I'd add to that is, look, the business' focus on quantum computing remains. So we're determined to be the ultimate ecosystem there. We've expanded our ecosystem to do quantum networking, obviously, organically and inorganically. As Jordan mentioned, the quantum internet requires pretty much all the pieces that we've assembled. So you need the nodes to be computers.

[Niccolo de Masi, CEO at IonQ]

You need repeaters to have any kind of distance between the nodes. You need QKD to be able to actually send information securely. And of course, you need to to do that as an integrated communications network on the ground and in the heavens. And so we continue to lead in our breadth and depth of quantum as a business. And we see growing opportunities in computing and growing opportunities in networking, both short term, medium term, and long term.

[Alexander Platt, AVP & Research Analyst at D.A. Davidson Companies]

Sounds great. Thanks, guys, and congrats on the quarter.

[Alexander Platt, AVP & Research Analyst at D.A. Davidson Companies]

Thank you.

[Operator]

Thank

[Operator]

you. And we have a follow-up question from Tyler Anderson with Craig Hallum Capital.

[Tyler Anderson, Equity Research Associate at Craig-Hallum Capital Group LLC]

Hi, guys. Thanks for taking my follow-up again. The pulled in acquisition of IDQ, does that benefit your guidance for the year? Our guidance for the year September.

[Thomas Kramer, CFO at IonQ]

Sorry. Can you repeat that?

[Tyler Anderson, Equity Research Associate at Craig-Hallum Capital Group LLC]

I I recall the the latest date was September.

[Thomas Kramer, CFO at IonQ]

So our guidance for the year, has included both organic and inorganic growth. We continue to think that we have abilities to both outperform over time, but also that what we're doing right now is fundamentally making us stronger for what's going to be 2026 revenue picture.

[Jordan Shapiro, President & General Manager - Quantum networking at IonQ]

This is Jordan. I I just add, September was our latest date that we thought the acquisition closed, and, you know, we had kind of baked it in our internal estimates as a weighted average of what we expect, a company like IDTQ to contribute. And so this is always basically to plan for for I and Q.

[Tyler Anderson, Equity Research Associate at Craig-Hallum Capital Group LLC]

Okay. And then the I may have heard you wrong on this, so correct me if I'm wrong. But did I hear that EPB purchased half of the computing power? Is that correct? Just so you guys know, and I'll have a follow-up.

[Tyler Anderson, Equity Research Associate at Craig-Hallum Capital Group LLC]

Yeah. And so then so with that, and we're talking about the the quantum network and they're purchasing a computer, so then would that be another computer to be purchased to be connected over the network? And if so, do you have a timeline on that?

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

So you have insightfully To have a quantum network for quantum computing, not QKD, you need to have two. So Chattanooga now has one, and it'd be nice if somebody else had a second one within distance of Chattanooga, within distance now within repeaters. Up till today, that distance had to be roughly 20 miles. But now it could be several hundred miles away. So I don't have a timeline for that, but clearly, I think there's lots of people, us included, who would like to see The United States have a demonstration of quantum network using quantum computing and doing distributed quantum computing.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

And so both locally and nationally, and many government agencies, I think, would like to see that. China has already made great progress there, both in space and in the ground, and we're in the middle of doing catch up. So we don't have an announcement today, but it's a great insight. Just like anything else, to do quantum networking for compute, you need to have a computer at either end. So having one phone is not useful, two phones is very useful.

[Thomas Kramer, CFO at IonQ]

Hey, Tyler, this is Thomas. What this also does is that it's part of our distributed data center strategy. It means that we can service our customers from our data center in College Park, Maryland, or in Seattle, or we can now also do it out of Tennessee. This gives us additional failover

[Thomas Kramer, CFO at IonQ]

support and capacity.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

And we have been traditionally constrained on capacity because we have not had enough, compute available for customers. So it's exciting to be able to bring on not only here, but also in Basil to bring on, you know, new systems.

[Tyler Anderson, Equity Research Associate at Craig-Hallum Capital Group LLC]

Great. And then just one last follow-up, and I'll let you guys be. So for this quantum network opportunity, would you agree that this is going to be mainly labs, academics, and critical infrastructure to start before we see broader adoption?

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

No, I'll just jump in on that one. We're now starting to see some of the leading companies in the world to start seriously looking at building networks with QKD to secure them. As you saw in my introductory note, as we get closer to breaking encryption, this will become something that everyone will have to do. And so the And what we have seen, and we're not very good at this as a species, is sometimes being able to predict how quickly something pops into existence. I don't think many people expected OpenAI to do what they did, and suddenly it was here.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

And so my guess is that there will be a breakthrough in breaking encryption, and then everyone will go, Oh my gosh, what am I going to do? So leading companies now are starting to invest in building out a quantum network. And so we see great potential there.

[Jordan Shapiro, President & General Manager - Quantum networking at IonQ]

And, Tyler, this is Jordan. Of the four deployments of quantum networks that I mentioned, three of those are enterprise. So that should give you some, impression of it.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

Right.

[Niccolo de Masi, CEO at IonQ]

Yeah. And, look, in just in general, we're we're not in the business of sort of theory, and r and d here on its own for the sake of it. Right? So everything we do here is commercial, and we do here has customer demand. We announce significant contracts.

[Niccolo de Masi, CEO at IonQ]

We announce what we can. Obviously, we don't announce what we can't and what is confidential or protected for national security reasons or otherwise. But I think it's safe to say that what we're building at INQ doesn't exist anywhere else, even though pieces might. We've stitched this together rapidly as a whole, as an intact vision. And we're a big enough company to pursue all of these growth vectors in parallel.

[Niccolo de Masi, CEO at IonQ]

So nothing's the exclusion of anything else, and it's not splitting focus. It's all an integrated whole here. And the company's headcount's obviously grown from about 35 people when I first met Peter to around 800 today. And so as our balance sheet grows and our headcount grows, of course, the vision has expanded a long way. But we're excited about the inbound interest that we receive.

[Niccolo de Masi, CEO at IonQ]

And we're also, of course, watching moves of big tech companies and bigger tech companies alike as they watch what we're building here turn into a reality that will pressure core business lines for some of them and create new markets for all of us that we intend to lead in.

[Tyler Anderson, Equity Research Associate at Craig-Hallum Capital Group LLC]

Awesome. Well, thank you, guys. I'm very happy we're saying repeat around the call. Congratulations on everything, and congratulations, Jordan.

[Peter Chapman, Executive Chair & Chairman of the Board at IonQ]

Thank you. We'll see you at the next launch.

[Tyler Anderson, Equity Research Associate at Craig-Hallum Capital Group LLC]

Looking forward to it.

[Operator]

Thank you. And this concludes our question and answer session. I would like to turn the conference back over to Nicola Domasey for any closing remarks.

[Niccolo de Masi, CEO at IonQ]

Thank you. Well, I want to thank everyone for joining us on our call today. And of course, I want to thank our team for all of their hard work and our shareholders for their support. We look forward to speaking with you soon and updating the entire financial community on our next earnings call. Thank you, and have a good afternoon.

[Operator]

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Participants

Executives

• Jessica Hocken Allen, Staff FP&A Business Partner
• Peter Chapman, Executive Chair & Chairman of the Board
• Niccolo de Masi, CEO
• Jordan Shapiro, President & General Manager - Quantum networking
• Thomas Kramer, CFO
• Dean Kassmann, Senior Vice President of Engineering & Technology

Analysts

• David Williams, Equity Research Analyst at The Benchmark Company LLC
• Shadi Mitwalli, Equity Research Analyst at Needham & Company
• Tyler Anderson, Equity Research Associate at Craig-Hallum Capital Group LLC
• Alexander Platt, AVP & Research Analyst at D.A. Davidson Companies