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

Key Points

• Q3 revenue was $1.3 million, up from $1 million a year earlier but down from $1.5 million in Q2. Xanadu reported a $32.2 million net loss and a $26.3 million adjusted EBITDA loss as research and development spending increased.
• Xanadu is prioritizing its fault-tolerant quantum-computing roadmap, targeting up to 200 logical qubits in 2029 and 500 in 2030. Management identified reducing optical loss as a key engineering challenge and cited progress in several components.
• The company ended the quarter with $286.5 million in cash and signed an agreement for about CAD 140 million in Canadian federal funding, paid over time as qualifying research investments are made. Commercial software revenue is beginning to grow, but management said it is not expected to materially drive near-term operations.

Xanadu Quantum Technologies Limited Class B Subordinate Voting Shares NASDAQ: XNDU reported third-quarter revenue of $1.3 million and a net loss of $32.2 million as the quantum computing company increased research spending and advanced its hardware roadmap.

On the Nov. 11 earnings call, founder and CEO Christian Weedbrook said Xanadu remains focused on building a fault-tolerant quantum computer rather than pursuing near-term revenue at the expense of that goal. The company is targeting a commercially viable system in 2029 or 2030, though management said its projections are subject to risks and uncertainties.

Hardware roadmap and optical loss

Weedbrook reiterated targets of up to 200 logical qubits in 2029, up to 500 in 2030 and at least 1,000 in 2031 and beyond. The company is targeting error rates as low as 10^-8 in 2029 and 10^-16 the following year.

Reducing optical loss remains Xanadu’s most important engineering challenge, Weedbrook said. He clarified that the company’s previously published loss roadmap marks the beginning of each year, meaning Xanadu expects to reach a loss level 10.2 times the fault-tolerance requirement by the beginning of 2027, rather than the end. The underlying plot and qubit targets have not changed.

Xanadu plans to report its aggregate loss metric annually because improvements do not necessarily occur in a straight line or show measurable progress every quarter. Weedbrook said the company would look to provide an update in the first quarter.

The CEO highlighted an optical switch with loss of 7 millidecibels, down from roughly 20 millidecibels reported last year. He said Xanadu believes it is the lowest reported loss for an electro-optic switch of its class. The company also reported a twofold reduction in loss for its on-chip homodyne detector over the past year and a more than threefold reduction for its fiber delay line since the start of 2026.

Xanadu’s multi-year partnership with GlobalFoundries is intended to scale production of silicon nitride chips and single-photon detectors on a 300-millimeter manufacturing line in Malta, New York. Weedbrook said collaborations with ASML and Bluefors will respectively address waveguide loss and more compact detector cooling.

The company expects to begin using its new 158,000-square-foot Inception research and manufacturing facility in Toronto early next year. Chief Operating Officer Rafal Janik said the facility will increase packaging, testing and measurement capacity and support the integration of different materials into single packages.

Software and commercialization

Janik said Xanadu began generating revenue from commercial software offerings during the quarter, with a small but growing base of enterprise customers. RBC and Booz Allen are using its software for workforce training, while semiconductor materials company JSR signed a statement of work for a feasibility study involving simulation and resource estimation.

Xanadu also launched Backline with AMD. The open platform is designed to connect classical computing hardware with quantum systems for processing, decoding and control. Janik said Xanadu demonstrated end-to-end processing round trips of less than three microseconds using commercially available AMD hardware.

Weedbrook said the company is open to monetizing software or licensing hardware intellectual property developed for its quantum computer, provided those opportunities do not distract from the main roadmap. Janik said Xanadu is exploring potential applications of its photonic intellectual property in areas including data communications and telecommunications, but did not provide a market-size estimate for its optical switch.

Spending and funding

Third-quarter revenue rose from $1 million a year earlier but fell from $1.5 million in the second quarter. Chief Financial Officer Michael Trzupek said revenue will fluctuate with the timing of contract work and partnership-related activity and is not expected to be a material driver of operations in the near term.

Research and development expense rose to approximately $25.6 million, up $5.9 million from the second quarter, primarily because of wafer spending, foundry-related process development and higher compensation costs. General and administrative expense fell to approximately $9.2 million from $11.1 million.

The net loss narrowed from $42.1 million in the second quarter, when results included losses associated with earn-out share liabilities and derivative instruments. It widened from $20.3 million a year earlier. Adjusted EBITDA loss increased to $26.3 million from $21.3 million in the second quarter and $15.4 million a year earlier.

Xanadu ended the quarter with $286.5 million in cash, down $26.3 million from the prior quarter. It did not draw on its synthetic at-the-market facility during the period; approximately $232.8 million remained available. Trzupek said the company evaluates market conditions and valuation when considering financing.

The company also signed an agreement for approximately CAD 140 million in Canadian federal funding, expected over time as qualifying research investments are made. It received provisional approval for up to $10 million in additional DARPA project funding. Trzupek said costs and capital expenditures are expected to rise in the fourth quarter, but declined to provide an operating-expense forecast.

About Xanadu Quantum Technologies Limited Class B Subordinate Voting Shares (NASDAQ:XNDU)

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.

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