Xanadu Quantum Technologies Limited Class B Subordinate Voting Shares Q3 2026 Earnings Results & Report

Xanadu Quantum Technologies Limited Class B Subordinate Voting Shares EPS Results

• Actual EPS: -$0.11
• Consensus EPS: -$0.09
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: N/A

Xanadu Quantum Technologies Limited Class B Subordinate Voting Shares Revenue Results

• Actual Revenue: $1.31 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Xanadu Quantum Technologies Limited is a Canadian quantum computing company that develops quantum computers based on photonics, using particles of light to process information. Its work includes building quantum hardware and developing software intended to help researchers and businesses create and run quantum applications.

The company also develops PennyLane, an open-source software library for quantum computing and quantum machine learning. Xanadu has made quantum computing tools and hardware available through cloud-based services, supporting users beyond its home base in Toronto, Canada.

Xanadu was founded in 2016 by physicist Christian Weedbrook, who serves as the company’s chief executive officer. Its long-term goal is to develop fault-tolerant photonic quantum computers.

Xanadu Quantum Technologies Limited Class B Subordinate Voting Shares Q3 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Xanadu reported technical progress toward its fault-tolerant quantum-computing roadmap, including a 7-millidecibel optical switch the company says is a world record for its class, alongside lower losses in its homodyne detector and fiber delay line. It reiterated targets of up to 200 logical qubits in 2029 and 500 in 2030, while saying it will report its aggregate loss metric annually.
• Positive Sentiment: The company announced partnerships with GlobalFoundries, ASML, and Bluefors to support chip manufacturing scale, lower waveguide loss, and more compact detector cooling. Its new 158,000-square-foot Inception facility is expected to begin operations early next year and expand packaging, testing, and integration capacity.
• Positive Sentiment: Xanadu said it began generating revenue from commercial software offerings, though it described the customer base as small and growing. PennyLane has about 1.1 million monthly package installs, and Backline—launched with AMD—demonstrated error-correction processing round trips under three microseconds using commercial hardware.
• Negative Sentiment: Revenue was $1.3 million, down from $1.5 million in Q2, while adjusted EBITDA loss widened to $26.3 million from $21.3 million as R&D investment increased. Management expects costs and capital expenditures to rise in Q4 with hiring, equipment purchases, and foundry work.
• Neutral Sentiment: Xanadu ended the quarter with $286.5 million in cash and said it did not use its synthetic ATM in Q3. It also announced approximately CAD 140 million in Canadian government funding, paid over time as qualifying R&D investments are made, and provisional approval for up to $10 million in additional DARPA funding.

Presentation

[Operator]

Thank you for standing by. My name is Jordan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Xanadu Quantum Technologies Q3 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. All participants are limited to two questions only. Thank you. I would now like to turn the call over to Brett Harriss, VP Investor Relations. Please go ahead.

[Brett Harriss, VP of Investor Relations at Xanadu Quantum Technologies]

Thank you. Good afternoon, everyone. Welcome to Xanadu's third quarter earnings conference call. Joining me today are Dr. Christian Weedbrook, Founder and Chief Executive Officer, Michael Trzupek, Chief Financial Officer, and Rafal Janik, our Chief Operating Officer. This call is being webcast live and will be made available on Xanadu's investor relations website. This call contains time-sensitive information accurate only as of the date of this live webcast on this call, November 11, 2026. This call may include forward-looking statements and information, which are based on current expectations. These expectations and information are subject to significant risks and uncertainties, and actual results may differ materially from the conclusions, forecasts, or projections in the forward-looking statements and information. Certain material factors and assumptions were applied in drawing the conclusions or making the forecasts and projections reflected in the forward-looking statements and information.

[Brett Harriss, VP of Investor Relations at Xanadu Quantum Technologies]

These risks, factors, and assumptions are discussed in our periodic filings with the SEC and applicable Canadian securities regulators, including our most recent quarterly and annual reports, and should be reviewed by anyone considering an investment in our securities. Management disclaims any obligation to update these forward-looking statements and information, except as required by law. Now, I would like to turn the call over to Dr. Christian Weedbrook, Founder and Chief Executive Officer of Xanadu, who will walk you through our hardware progress, our technical roadmap, and our partnerships. Rafal will then cover software, and Michael will take you through the financials. With that, Christian.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

Great. Thank you, Brett, and good afternoon, everyone. We always like to begin with our mission, which is to build quantum computers that are useful and available to people everywhere. Xanadu was founded in 2016 to build fault-tolerant quantum computers using photonics, and today we have three generations of hardware released, over 160 PhDs, more than 150 patents and patents pending. We are proud to work alongside leading industry partners and end users. At the heart of our strategy is the conviction that photonics is the right foundation for a scalable quantum computer, and a decade of peer-reviewed research has reinforced that view. Our chips compute without coolant, which can be made with silicon manufacturing processes and a compatible telecom infrastructure. Photonics also gives us faster clock speeds, flexibility in how we do error correction, and a computer that is modular and networkable by design.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

We believe photonics offers advantages over competing modalities across key metrics, including clock speed, logical overhead, fidelity, connectivity, and room temperature operation. Collectively, these advantages position our approach to achieve fault tolerance and build commercially viable quantum computers. We believe quantum computing represents a significant long-term opportunity with the potential to create value across a broad range of industries. Realizing that opportunity requires more than developing the technology. We are working with partners and customers across multiple industries to develop real-world applications and demonstrate where quantum computing can deliver meaningful value. Xanadu is building the full quantum computing stack as an integrated platform spanning photonic chips, manufacturing, networking, and error correction, software, and end-user applications. By developing each layer together, we can manage loss across the entire system, tightly integrate hardware and software, and optimize performance from the chip to the full computer.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

Since our last earnings call, the Xanadu team has delivered several exciting achievements that have furthered this mission, and I would like to highlight five of them. First, on the technology front, we set what we believe is a world record for photon loss in an optical switch, an incredible step forward on our loss roadmap. Second, we signed hardware partnerships with GlobalFoundries, ASML, and Bluefors, which will help us scale our manufacturing capabilities. Third, on the software side, we launched Backline with AMD and hosted our latest QHack developer conference, which drew a record number of attendees. Fourth, we are deepening our work with industrial and institutional partners. With Mitsubishi Chemical, we demonstrated quantum algorithms for modeling advanced semiconductor materials. RBC and Booz Allen are using our software for workforce training alongside our work with Lockheed Martin.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

Finally, we added resources to keep executing, including new support from both the Government of Canada and DARPA. We are making strong progress in scaling our R&D capabilities and accelerating iteration. All of this puts us on the path to a commercially viable quantum computer by 2029, 2030. Before I go through the details, let me reiterate our philosophy and approach. To achieve our mission, we are pursuing a full-stack strategy that integrates our proprietary photonic quantum hardware with PennyLane, our modality-agnostic software platform. That path defines our core focus, building a fault-tolerant, large-scale quantum computer. This is the defining opportunity for Xanadu and requires our best people, resources, and attention. Pursuing revenue before meaningful quantum utility or selling systems prematurely would ultimately divert talent and resources from our most important priority, delivering the hardware roadmap.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

We measure progress through execution against that roadmap and our key technological milestones, followed by partnerships that accelerate adoption of future commercialization. At this stage, these are far more meaningful KPIs than quarterly revenue. Having said that, we believe there may be opportunities to generate revenue from products or licensing built on the components we are already developing or have already developed on our path to building a large-scale quantum data center. We see this as a low-distraction way to build a customer base, bring those customers into our ecosystem, and introduce them to our broader offerings, including PennyLane. Coming back to the hardware, our roadmap puts numbers on that focus. We target up to 200 logical qubits in 2029, with an error rate as low as 10 to the -8.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

The following year, we target up to 500 logical qubits with error rates as low as 10 to the -16. We believe error rates at this level could be industry-leading and would open up more use cases than are currently available to other quantum companies. By 2031 and beyond, we are targeting 1,000 or more logical qubits. We have a proven track record of delivering on our technological milestones. Our Aurora system, published in Nature, linked four server racks into one fully networked quantum computer using optical fiber. Our earlier systems, X8 and Borealis, were published in Nature as well. We believe that combination of room temperature operation, manufacturability, and networking gives photonics a clear path to a quantum data center. Reaching those targets comes down to loss, which remains our most important engineering challenge.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

If we reduce loss below our critical threshold and combine that with error correction, we expect logical error rates to fall dramatically. Add the networking we have already demonstrated with Aurora, and that should let us scale to logical qubits without a hard ceiling. This is primarily a challenge of engineering, not physics. At our technology roadmap event in August, we published our loss roadmap for the first time. It tracks the aggregate of 17 key optical components, expressed as a ratio of our hardware loss to the loss required for fault tolerance. So, a lower number means we are closer. Before I go further, I want to clear up any potential ambiguity in the loss roadmap we published in August. The loss plot behind it was drawn so that each year marks the beginning of that year, not the end.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

That means we expect to reach 10.2 times by the beginning of 2027, rather than the end of 2027. The plot itself has not changed. We are simply making the timeline it implies clearer. The rest of our roadmap was built on that same loss plot and remains the same. We continue to expect up to 200 logical qubits in 2029, up to 500 the following year, and 1,000 or more by 2031 and beyond. I am pleased to say we have made significant progress against this goal so far, and we will look to provide an update in the first quarter. Because loss reduction is an iterative engineering process that does not progress in a straight line or necessarily show measurable improvement every quarter, we plan to report our aggregate loss metric annually. Let me walk through some of the components of that progress, starting with our optical switch.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

At 7 millidecibels, or mdB, we believe it is a world record, the lowest reported loss for an electro-optic switch of its class, and down from roughly 20 mdB that we reported last year. To our knowledge, it is the lowest reported loss for electro-optic switch of this class. We would also like to share loss updates on two other key optical components that make up our loss roadmap. First, our on-chip homodyne detector, which extracts the result of a quantum algorithm, has shown a two times loss reduction since this time last year and now sits at 77 mdB. Second, our fiber delay line, which serves as a quantum memory in our computer, has shown more than three times loss reduction since the start of the year. Behind these results is a simple strategy: running more wafers.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

Every wafer run and tape-out, meaning each time we send a chip designed to be fabricated, is another cycle of learning. More cycles gives us more data, lets us validate performance across a broader range of devices, and helps us turn design improvements into manufacturing results faster. We use two major materials for our wafer runs: silicon nitride and thin-film lithium niobate. Year-to-date, we have doubled our silicon nitride wafer runs and increased our thin-film lithium niobate wafer run by 15% sequentially. That creates a positive feedback loop on loss reduction. More wafer runs speed up our learning, and faster learning drives progress. Our partnerships built on that momentum, and this quarter, we highlight three. Each addresses a significant part of our roadmap: manufacturing scale, waveguide loss, and cooling. First, GlobalFoundries.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

This multi-year partnership will scale our ultra-low-loss silicon nitride chips and our superconducting nanowire single-photon detectors on GlobalFoundries' 300 mm manufacturing line in Malta, New York. These faster detectors raise our clock rate and reduce the physical footprint and resource requirements of our qubit factory, which is part of our system that generates our GKP qubits. A high clock rate also lets us use less optical fiber, which reduces total path length and brings us closer to fault-tolerant threshold. Second, ASML, the world's leading supplier of semiconductor lithography equipment. To our knowledge, Xanadu is the first quantum computing company to establish a direct technical collaboration with ASML. We expect ASML's expertise in advanced lithography to help us reduce waveguide loss, which is the number one cause of optical loss of our integrated photonic circuits. Finally, Bluefors, to develop compact modular cryogenics that bring detector cooling into a data center footprint.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

It's important to note that our architecture requires minimal cryogenics compared with most other approaches to quantum computing, and this work reduces the size and cost even further. This design is expected to eliminate the need for large cryo plants and make quantum computers easier to scale. As a reminder, our qubits, gates, and measurements all operate at room temperature. Cooling is required primarily for qubit generation, which is essentially the initialization stage of our computer. Partnerships are one way we are building capacity externally. The other is in-house. This quarter, we took a major step with Inception, our new 158,000 sq ft advanced photonics research and manufacturing facility in Toronto, supported by the Canadian federal funding under Project OPTIMISM. This facility will feature advanced clean rooms, heterogeneous integration, and packaging capabilities, which are critical technologies for both AI and quantum computing.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

Our existing packaging facility has already reduced packaging turnaround times from as long as three months to approximately eight hours. Inception is designed to bring the same order of magnitude efficiencies, testing, measurement, and assembly. We expect to begin using Inception early next year. Taken together, these steps gives us a manufacturing foundation for a commercially viable quantum data center. Now let me turn the call over to Raf to walk you through our software and partnership progress. Thanks, Raf.

[Rafal Janik, COO at Xanadu Quantum Technologies]

Thank you, Christian. Our software strategy is closely aligned with our hardware roadmap Christian just outlined. We are building the software ecosystem, developer community, and enterprise relationships that will drive adoption of our fault-tolerant quantum computers as they become available. Today, our priority is to grow adoption, establish our platform as the foundation for quantum application development, and build commercial relationships early. We believe this approach positions us to capture a meaningful share of the quantum computing market as the technology matures. PennyLane remains at the center of that strategy. It is one of the most widely used open source platforms of quantum computing. According to the Unitary Foundation, approximately 30% of all quantum developers used PennyLane in the past year. Across the PennyLane family, including Lightning and Catalyst, we are seeing approximately 1.1 million package installs per month. PennyLane has also been cited in more than 2,500 academic papers.

[Rafal Janik, COO at Xanadu Quantum Technologies]

Our developer community continues to grow. This year's QHack, our seventh global quantum coding challenge, attracted record participation with more than 3,500 participants. These numbers show that developers are already using software to learn quantum computing, develop algorithms, and explore applications. As quantum computing advances towards commercial utility, we believe this established developer ecosystem will be a significant competitive advantage. As Christian mentioned, this quarter we launched Backline in collaboration with AMD. This extends our software infrastructure for fault-tolerant quantum computing. Backline is an open platform solution that integrates classical CPUs, GPUs, and FPGAs with quantum hardware to support real-time processing, decoding, and control required for fault-tolerant quantum computing. Quantum error correction is one of the fundamental challenges in scaling quantum computers. It requires processing large volumes of measurement data, identifying errors, and providing corrective feedback at extremely low latency.

[Rafal Janik, COO at Xanadu Quantum Technologies]

With Backline, we demonstrated end-to-end processing round trips of under 3 μs using commercially available AMD hardware. This demonstrates the ability to perform real-time error correction using standard classical computing infrastructure without the dependence on proprietary hardware. Backline is designed to be extensible across different quantum computing architectures, creating opportunities beyond our own hardware platform. Since launch, we have seen significant interest from national laboratories, classical computing manufacturers, and other quantum computing companies. We believe Backline positions Xanadu at an important intersection of quantum and classical computing and creates opportunities for broader industry adoption of our software. Beyond our open source ecosystem, we are beginning to commercialize the software capabilities and build direct relationships with enterprise customers. Many of these capabilities originated from tools developed for our own research and hardware programs.

[Rafal Janik, COO at Xanadu Quantum Technologies]

With one of the industry's largest software and algorithms teams, we have built significant expertise spanning photonics, quantum computing, algorithms, and high-performance computing. This quarter marked an important milestone as we began generating revenue from our commercial software offerings with a small but growing base of enterprise customers. We are seeing early demand across several areas. First, enterprise training and workforce development. Organizations increasingly recognize the need to build internal quantum expertise rather than rely entirely on a limited pool of specialized talent. RBC, Canada's largest bank, has selected Xanadu to deliver hands-on quantum computing training for its team. Booz Allen is similarly training an initial group of its engineers using our software platform. Together with our workforce development activities at Lockheed Martin, these engagements demonstrate that major enterprises are beginning to invest in building quantum capabilities using PennyLane as the foundation. Second, quantum application development and hardware readiness.

[Rafal Janik, COO at Xanadu Quantum Technologies]

We are helping enterprises understand where fault-tolerant quantum computing could deliver commercial value and how specific applications would perform on our future photonic architecture. Through our simulation and resource estimation capabilities, our customers evaluate quantum algorithms, estimate hardware requirements and execution times, and assess potential performance relative to classical computing approaches. This quarter, JSR, a leading semiconductor materials company, signed a statement of work for the feasibility study of these capabilities. These engagements are particularly valuable because they help customers establish a business case for quantum computing while giving us insight into the applications and performance requirements that will matter most as our hardware scales. Third, we continue to expand our commercial software portfolio by bringing capabilities developed internally, including AI-assisted research tools and high-performance simulations to a broader set of customers. Some of these products are already in pilot and early commercial deployment. Our approach is disciplined.

[Rafal Janik, COO at Xanadu Quantum Technologies]

We bring products to market early, use customer feedback to validate demand, and focus investment on capabilities that demonstrate meaningful commercial potential. Alongside these products, we continue to see strong interest from enterprises seeking to identify and develop commercially viable applications for quantum computing. One such example is our strategic partnership with Mitsubishi Chemical. Supported by the Canadian and Japanese national innovation programs, our collaboration demonstrates the potential for quantum algorithms to accurately model light-sensitive materials using extreme ultraviolet, EUV lithography, an important process in advanced semiconductor manufacturing. We are now advancing that work towards a software pipeline that is ready for fault-tolerant quantum computing to support the development of next-generation semiconductor materials. Stepping back, our software business is progressing along three complementary paths. We are expanding one of the industry's leading open-source quantum developer ecosystems.

[Rafal Janik, COO at Xanadu Quantum Technologies]

We are developing critical software infrastructure for fault-tolerant quantum computing, including Backline, and we are establishing commercial relationships with enterprises that are beginning to invest in quantum capabilities and applications. Software revenue remains at an early stage, but our progress this quarter demonstrates the growing commercial potential of our capabilities. Our objective is not to simply build software products for today's market. It is to establish the ecosystem, technology, and customer relationships that position Xanadu for long-term growth as quantum computing becomes commercially viable. With that, I will hand it over to Michael.

[Michael Trzupek, CFO at Xanadu Quantum Technologies]

Thanks, Rafal. I will cover our operating results, our balance sheet, and the funding that supports our roadmap. All figures I cite are in US dollars. Revenue was $1.3 million in the quarter compared to $1.5 million in Q2 2026 and $1 million in the prior year quarter. Our revenue will fluctuate from quarter-to-quarter based upon the timing of work performed on our various contracts and partnership-related revenue. As Christian mentioned, revenue is not expected to be a material driver of our operating activities in the near term. Our focus remains on executing against our hardware roadmap. R&D expense was approximately $25.6 million, an increase of $5.9 million from Q2.

[Michael Trzupek, CFO at Xanadu Quantum Technologies]

This increase was primarily driven by strategic investments in our wafer spend to support upcoming tape-outs, process development activities tied to our new foundry collaborations with GlobalFoundries, and to expand our engineering talent, which also contributed to higher compensation-related costs. As we said last quarter, we continue to expect R&D spend to increase over time as we add engineering talent and increase chip development, packaging, and improve all of our subsystems toward fault tolerance. G&A expense was approximately $9.2 million compared to $11.1 million in Q2. The sequential decrease in G&A expenses was primarily driven by lower professional fees incurred during the quarter, mostly related to transaction and regulatory fees. The quarter included approximately $1.1 million in non-recurring costs compared to $2.3 million in Q2. Net loss was $32.2 million compared to $42.1 million in Q2 and $20.3 million in Q3 2025.

[Michael Trzupek, CFO at Xanadu Quantum Technologies]

The lower net loss compared to Q2 primarily reflects the absence of the $10.6 million fair value loss on earn-out share liabilities and the $1.9 million loss on derivative instruments related to our synthetic ATM, both recorded in Q2. The earn-out was settled in Q2. Adjusted EBITDA loss was $26.3 million compared to $21.3 million in Q2 and $15.4 million in Q3 2025. The increase compared to Q2 was driven mainly by higher R&D spending to scale chip fabrication, including wafer consumption and headcount, offset by lower G&A. Capital expenditures, which we define as the purchase of PP&E, were approximately $8.4 million compared to $6.1 million in Q2, primarily reflecting investment in specialized equipment to test, refine, and scale our chip development and packaging capabilities, in addition to significant investments refining the subsystems that will enable our fault-tolerant quantum computer.

[Michael Trzupek, CFO at Xanadu Quantum Technologies]

We also began incurring initial costs related to the development of our new Inception facility. We ended the quarter with 361 employees, up from 306 at the end of Q2 and 277 at the end of Q1. We ended the quarter with $286.5 million in cash, down $26.3 million from Q2. We did not draw on our synthetic ATM facility in the quarter. We raised $67.2 million in Q2, leaving approximately $232.8 million available for use today. We also strengthened our funding position with non-dilutive capital. We signed a definitive agreement with the Government of Canada for approximately CAD 140 million of federal funding, which funds Inception, as Christian described. These funds are expected to be received over time as qualifying R&D investments are made rather than upfront as cash.

[Michael Trzupek, CFO at Xanadu Quantum Technologies]

We announced provisional approval for up to $10 million of additional project funding under DARPA's QBI. This is a one-year contract extension that builds on our Stage B work, and we expect to allocate the majority of the funding to accelerate critical components of our R&D roadmap. Looking ahead, we expect costs and capital expenditures to grow in Q4, driven by additional spend with GlobalFoundries, continued hiring, and equipment purchases. We expect continued headcount growth across hardware, software, and G&A. With that, I'm pleased to turn it back to Christian.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

Great. Thank you, Michael. During the quarter, we made meaningful progress.

[Brett Harriss, VP of Investor Relations at Xanadu Quantum Technologies]

I think, operator, we'll turn the call over for Q&A now. I'm sorry, go ahead. Operator?

[Operator]

As a reminder, if you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. You are limited to only two questions. We'll take a brief moment to compile the Q&A roster. Your first question comes from the line of Kingsley Crane from Canaccord Genuity. Your line is live.

[Kingsley Crane, Analyst at Canaccord Genuity]

Hi. Thanks for taking the question. I want to ask on what you're doing in AI data centers. With HyperLight, you mentioned that the ultra-low loss switching platform could provide some power efficiency advantages in an AI data center. We've also seen another quantum photonics provider kind of pursue maybe a similar approach. We'd just love to hear more on that and just like what the near-term opportunity could be, just any like relationships with customers you have. Thanks.

[Rafal Janik, COO at Xanadu Quantum Technologies]

Yeah, absolutely. This is something that's not just limited to this specific piece of IP around the thin-film lithium niobate switch, but I want to say broadly, one of the unique opportunities that Xanadu has is that we're sitting on a large amount of photonic IP developed over the last 10 years that has direct applicability in datacom, telecom on the classical side, and then also on the quantum side in quantum communications and sensing. We are definitely exploring each and every one of these opportunities as they come up, both for existing partner companies, and then potential other customers as well. But it's a fine balance making sure that we do not distract from the overall technical roadmap. You know, for us, ultimately, we want to build that utility-scale quantum computer that can drive the huge amount of value and societal change.

[Rafal Janik, COO at Xanadu Quantum Technologies]

If the opportunity arises that one of these devices would be commercially viable without the distraction from our goal, we would definitely pursue it.

[Kingsley Crane, Analyst at Canaccord Genuity]

Okay, helpful. Thank you. With the GlobalFoundries partnership, I believe you had mentioned that you had adopted nanowire single-photon detectors, and I believe that the GKP result in Nature had used transition edge sensors. Is that a change? Is that an evolution? Are those mutually exclusive? Or just would love to hear more about the evolution of the platform. Thanks.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

Yeah, thanks. That's a really good pickup. Overall, both of these devices, whether you use TESs or whether you use SNSPDs, their role is as a PNR, photon number resolving detector. That's what we actually need for our computer. We were using TESs, and then we wanted to upgrade them. Basically, think of it as a next-generation advancement, and we're now using SNSPDs. The reason why we did that is really a great upgrade to our previous blueprint. Basically, now it allows you to have far less, faster computer. That's the important thing. SNSPDs are orders of magnitude faster than TESs, but that fastness also allows you to reduce the footprint of the quantum computer as well. Yeah, good pickup. That's exactly what we're doing.

[Brett Harriss, VP of Investor Relations at Xanadu Quantum Technologies]

Thank you, Operator. Next question.

[Operator]

Your next question comes from the line of John McPeake from Rosenblatt Securities. Your line is live.

[John McPeake, Analyst at Rosenblatt Securities]

Thank you, guys. Congrats on another quarter behind you, Christian and team. Two questions. First one on the switch that you are working on with HyperLight. How does that, I am not an optical datacom telecom expert. How does that compare to what is in the market? You mentioned seven millidBs. How much better is that than commercially available products? I just have a follow-up.

[Rafal Janik, COO at Xanadu Quantum Technologies]

Yeah, it is actually better in two different areas. One of them is definitely on the loss. This is quite a bit lower loss. Usually, the amount of loss that typical optical circuit switches are able to tolerate is quite a bit higher than that. What it means that you are able to have then is a much larger number of channels going into a switch. For us, this is important because of the way that we select the qubits that we want to within our quantum computer. We want to be able to, of course, keep as much of that light, but we still need a certain number of channels going in and be able to select from them.

[Rafal Janik, COO at Xanadu Quantum Technologies]

The classical datacom guys can handle a lot more loss, but of course, they want to move away from just 16 or 128 channels to as many channels as possible to drive their workloads. The other part that might have been missed is that it is not only that it is a lot lower loss, it is also much faster. If you look at competing technologies like MEMS, liquid crystal switches, or even some of the integrated silicon photonic switches that might have been recently announced, they are operating on reconfiguration times of milliseconds. Our switches operate at times of microseconds or lower. This is something that is incredibly important for our quantum computer, where we are operating at megahertz to hundreds of megahertz. We need to be able to reconfigure rapidly to select the correct qubits. Of course, this is a big impact on classical workloads as well.

[John McPeake, Analyst at Rosenblatt Securities]

What do you think the market opportunity is for this device?

[Rafal Janik, COO at Xanadu Quantum Technologies]

I mean, within computing, it is definitely quite large. In quantum computing, this is a critical component for our device. I personally would not want to comment on the market size of optical switching overall, but of course, it is something that the team is keeping a close eye on to understand if, again, there is an opportunity for us to commercialize various different products based on this technology.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

We do know it is increasing rapidly.

[Operator]

Your next question comes from the line.

[John McPeake, Analyst at Rosenblatt Securities]

Thank you.

[Operator]

Your next question comes from the line of Nehal Chokshi from Northland Capital Markets. Your line is live.

[Nehal Chokshi, Analyst at Northland Capital Markets]

Thank you. Hey, that was a really nice press release yesterday with HyperLight. You guys talked about it a lot already. The context that I am looking for, though, is being able to frame up the impact to the roadmap. If you could define how many optical switches are present in Xanadu's quantum computer, that would be really helpful in framing up the impact of this pretty strong technical release that you guys did yesterday.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

Yeah. We don't give that specific number out publicly. I can say that the broader picture is that we have a lot of them, and as you know, there's approximately 17 key optical elements where loss propagates through, and we need to reduce the loss overall. As mentioned in our talk, we'll be giving updates yearly. I can say big achievements like this that drives down the loss into something we believe is a world first helps us achieve and stay on our roadmap. That's kind of how we'd like to comment on that question.

[Nehal Chokshi, Analyst at Northland Capital Markets]

Okay, understood. Then the non-GAAP OpEx run rate for the September quarter, it was actually substantially below what we thought you would ramp to. It does sound like you are going to continue to ramp. I would just like to get a sense as far as, what's the OpEx run rate you expect to be at once you get to the R&D scale that you are planning for?

[Michael Trzupek, CFO at Xanadu Quantum Technologies]

Yeah. Thanks, Nehal. Good question. We continue to not provide forward-looking guidance. I will just reiterate what I said during my opening comments, which we expect it to grow during Q4, and you will see those results next quarter.

[Operator]

Your next question comes from the line of Paul Treiber from RBC Capital Markets. Your line is live.

[Paul Treiber, Analyst at RBC Capital Markets]

Oh, thanks very much, and good afternoon. Just wanted to switch gears onto the software side. I was just hoping to get your thoughts on the competitive implications of Intel acquiring Classiq. Related to that, how do you see the various segments of the quantum software stack evolving over time? Meaning, do you see greater or lesser value at certain areas of the stack versus other areas?

[Rafal Janik, COO at Xanadu Quantum Technologies]

Yeah. It's a fantastic question, and I'm going to say the Classiq acquisition is a great proof point of what we've been saying all along, which is that the software portion does represent a very large part of the problem. We're very happy to have a leading platform, again, with over 30% of all quantum developers developing on top of it in PennyLane. There is three different distinct portions of that stack. The first one is that user space, the one where the developers actually work the software development kit for quantum applications. This is what we refer to as PennyLane. Within that, there's a whole host of tooling that allows you to develop algorithms faster and test them more rapidly and with greater accuracy. We've been developing this now for over eight years, and then really do have that leadership position.

[Rafal Janik, COO at Xanadu Quantum Technologies]

One that's equally important to that is the middleware. Often we refer to it as compilation. If you're following our stack, this is the project called Catalyst. We do, again, capture it under the broad term or brand of PennyLane. This is a really exciting area of research right now in that we're finding order of magnitude improvements in terms of the efficiency that you get, both in runtime and in the scale that you need of a quantum computer, by being able to optimize the compilation from what a developer writes to what actually fundamentally runs on the hardware. The last part is really the part that we've entered to most recently with Backline, which is the fundamental infrastructure that glues together all the subsystems needed to actually drive a quantum computer. A quantum computer is not just a QPU on its own.

[Rafal Janik, COO at Xanadu Quantum Technologies]

It's a collection of classical and quantum compute resources working in concert. They require various latencies going down to ultra-low latency to support quantum error correction. Realistically, we've now built out the most performant platform to support that with Backline. Backline is critical for us building our quantum computer. Of course, as quantum computers become more and more available, we will see more and more of that value push into the software layer. We're very happy to, again, have that leading framework to be able to broadly capture it across the entire ecosystem.

[Paul Treiber, Analyst at RBC Capital Markets]

Okay, thanks. Thanks for that. Secondly, just in terms of financing and the environment, you didn't issue any shares under the ATM this quarter. How should we think about near-term funding requirements just in light of that?

[Michael Trzupek, CFO at Xanadu Quantum Technologies]

As we've said on previous calls, we always are looking at the market conditions and the valuation, and we evaluate it almost on a day-by-day basis.

[Operator]

Your next question comes from the line of Todd Coupland from CIBC. Your line is live.

[Todd Coupland, Analyst at CIBC]

Great. Good evening, everyone. I wanted to step back from all the revenue crumbs that you put out during this discussion, whether it's optical switches or software monetization, but then you sort of pull it back saying you don't want it to be a distraction. What should our takeaway be? Should that there's probably some revenue coming in from these areas before commercial quantum computer 29, 30? Is it just to highlight the significant IP in the company? I'm trying to process what you're trying to say when you put this IP out there, then you say, we're not going to be too distracted by it. Just give us a little more context on that.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

Yeah, I would say it is still consistent in the sense that the things that we are developing, we do patent. We do want to make sure we own that. We continue to develop PennyLane. Those two things are really good examples where regardless of whether we monetize them, we will still be doing them, and they are very key for our ultimate vision of a large-scale quantum computer, what we are calling a quantum data center. The opportunities may or may not come up when it comes to things like monetizing PennyLane. We have mentioned in the past that we are definitely open to that. Our first seven or eight years was really all about building the ecosystem around PennyLane, having really low barriers or no barriers for people to adopt PennyLane, and we have been very successful with that.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

Now that we have built the ecosystem, it is an option for us to think about how to monetize it, and it is something we will think about. The same with the licensing and the IP of any of our hardware. Our secret sauce and why we have been so successful is really the extreme loss reduction side of things, as we mentioned with some of our optical components this earnings call. Any of those, if we think about possibilities of productizing them, knowing that we need to do that anyways in terms of the low loss, or if someone comes to us and likes our optical loss and how low it is, we are open to those discussions.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

What we are not in favor of, maybe another way to answer your question, Todd, is we are not in favor of going into quantum security, quantum sensing, quantum internet, or things of that nature. We think they are great fields, but I think people sometimes may overestimate how hard it is just to focus on one thing and build something humanity has never built before from a technology point of view, which is a large-scale quantum computer. We have our hands full with that, and I think that if a company like Xanadu is successful in that will be the biggest market share and the biggest market TAM overall.

[Todd Coupland, Analyst at CIBC]

Great. Then on the technical updates, you had some last quarter, you had some material ones recently with optical loss. Just give us an idea, what is the impact to DARPA Stage C and a sense on a timing decision relative to Xanadu? Thanks a lot.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

Yeah, sure. DARPA obviously likes to hear about these results and knows about them. They understand also loss is the biggest challenge. I would say that's one part of DARPA. DARPA has other criteria that a company like Xanadu and anyone else needs to meet as well. As they've publicly stated, they want to keep an eye on the technology and how it's progressing. We're progressing very well. We're very close contact with them. I believe the year of the program is around November, December, but it could always be a little sooner, as we saw four companies go into the next stage, or it could be later as well. A lot of that is built on timing, it's built on DARPA's availability. We still have things that we need to report to DARPA.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

No new update from that, but we'll definitely keep you posted if we hear anything.

[Operator]

Your next question comes from the line of Desmond Webster. Desmond, your line is live.

[Desmond Webster, Analyst]

Hi, good evening, everyone. Thank you for taking my question. Your algo team just figured out how to dramatically reduce the Toffoli count for QROM, which is awesome. I'm curious, has something your algo team discovered ever made your hardware engineers go back and change what they were building? What's the best example of that happening at Xanadu?

[Rafal Janik, COO at Xanadu Quantum Technologies]

Yeah, it's a fantastic question. First of all, that QROM, there's been multiple discoveries along the path. One of them was definitely developer. The other one that I really want to highlight is that it was driven through an agentic AI discovery. We were able to do something in two weeks that would have classically taken us more than six months, manual labor-wise, to do. That QROM advancement was really a great proof point of how much this entire field is accelerating and how the tooling we've been building internally has been able to push that forward. To your other part of the question of what is maybe the co-design between our hardware architecture and our algorithm development, it is a very synergistic process.

[Rafal Janik, COO at Xanadu Quantum Technologies]

One thing that might not be apparent from the outside is that in addition to all the fantastic IP we've built out on algos and hardware, one of the real strengths of this company is the digital twin that we've been able to build of our system. When algorithms is now developing a new approach, they are able to propagate that down to understand how that will impact not just the underlying architecture and the resources required to run that algo, but also the error-correcting algorithm that will be implemented. Similarly, as our error correction experts come up with new approaches and new logical architectures, we are able to very quickly and clearly propagate that into resource estimates of our top algorithms.

[Rafal Janik, COO at Xanadu Quantum Technologies]

I'm going to say it's a very synergistic activity between those groups, and we're continuously advancing the tooling to tie that closer and closer together to be able to more quickly iterate on that loop.

[Desmond Webster, Analyst]

Excellent. Great. Thank you everyone.

[Operator]

Your final question comes from the line of Ella Tulchinsky from Morgan Stanley. Your line is live.

[Ella Tulchinsky, Analyst at Morgan Stanley]

Great. Thank you. You mentioned packaging turnaround fell significantly. I was wondering, as Inception comes online next year, what part of the process do you expect to speed up the most, and what does it mean for how fast you can move on loss?

[Rafal Janik, COO at Xanadu Quantum Technologies]

Packaging will continue to accelerate, but maybe more exciting than just the turnaround time is actually the volume that we will be able to do. In order to hit our next technical milestones that were addressed in our analyst day presentation, the volumes will have to increase, and the facility we have here at our existing headquarters is just going to be insufficient to be able to do that. The other part where we are definitely increasing capacity by a huge amount is on test and measure. The volume of chips that we are getting through every quarter now is ever-increasing. We are sitting on tens of terabytes of data of designed, simulated, manufactured, and tested chips. This all is able to feed back into our agentic design and expert design systems to generate the next iteration of manufacturing runs.

[Rafal Janik, COO at Xanadu Quantum Technologies]

All this is predicated on having that test and measure capacity. Finally, the third major aspect of that Inception facility is a newer push, which is into heterogeneous integration. This is really a capacity that does not exist at this level in quality anywhere in the world that is accessible to us. This is the ability to take silicon nitride, thin-film lithium niobate, and our III-V semiconductor-based photodiodes and actually integrate them into a single package that will be necessary for building out both our QPU and the switches required for a quantum computer.

[Ella Tulchinsky, Analyst at Morgan Stanley]

Great. Thank you.

[Operator]

That concludes our question and answer session. I will now turn it back over to Dr. Christian Weedbrook for a closing remark.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

Great. Thank you for that. Thank you for everyone for your attention today. We really appreciate it. Just a quick summary of today. During the quarter, we made meaningful progress across our business. On the technology front, we set what we believe is a world record for photon loss in an optical switch, advancing ultimately our loss roadmap. We also established important hardware partnerships with GlobalFoundries, ASML, and Bluefors to support our manufacturing ambitions. On the software side, we launched Backline with AMD and hosted a record-setting QHack developer conference. We continue to deepen our relationships with industrial and institutional partners, including Mitsubishi Chemical, RBC, Booz Allen, and Lockheed Martin, demonstrating the growing range of real-world applications for our technology. Finally, we strengthened our financial resources with additional support from the Government of Canada and DARPA, providing further support for execution against our roadmap. Thank you again.

[Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies]

I appreciate it.

[Operator]

That concludes today's meeting. You may now disconnect.

Participants

Analysts

• Brett Harriss, VP of Investor Relations at Xanadu Quantum Technologies
• Christian Weedbrook, Founder and CEO at Xanadu Quantum Technologies
• Rafal Janik, COO at Xanadu Quantum Technologies
• Michael Trzupek, CFO at Xanadu Quantum Technologies
• Kingsley Crane, Analyst at Canaccord Genuity
• John McPeake, Analyst at Rosenblatt Securities
• Nehal Chokshi, Analyst at Northland Capital Markets
• Paul Treiber, Analyst at RBC Capital Markets
• Todd Coupland, Analyst at CIBC
• Desmond Webster, Analyst
• Ella Tulchinsky, Analyst at Morgan Stanley