D-Wave Is Rising Again Despite Dilution—What’s the Deal?

Key Points

• D-Wave Quantum completed its $400-million at-the-market offering late in June, the second of its kind so far this year.
• Despite investor concerns about dilution, D-Wave shares spike by about 19% in the last several trading days of the month.
• An influx of cash could help to strengthen D-Wave's international partnerships and technological developments while buying the company time as it continues to build toward profitability.

As quantum computing leader D-Wave Quantum Inc. NYSE: QBTS announced the completion of its $400-million at-the-market equity offering, the company's share price spiked by more than 19% in under a week.

The offering, which poses a risk of dilution for D-Wave shareholders, seems to have generated, or at least coincided with, a new rush of enthusiasm for the company and its quantum annealing technology.

So what might be underlying this recent spike, and is it likely to continue?

Dilution vs. Cash Influx

Despite the risk of dilution that comes with an at-the-market offering, the flip side to this equity issuance is a significant influx of cash that bolsters D-Wave's position. The ATM offering raised about $15.18 per share on average, bringing D-Wave's cash reserves to an estimated $815 million.

With cash holdings approaching $1 billion, D-Wave now appears to have the strongest balance sheet among its peers, that is, among smaller quantum-focused companies, not major tech firms also exploring the space.

Investors may also be heartened by the high average sale price, which came in at a premium of 149% over the average per-share price of $6.10 from the company's last ATM offering in January 2025. This would seem to suggest that investors believe D-Wave's reasonable per-share value has substantially increased in less than half a year.

Cash Can Continue to Drive Major Developments

Another reason investors may have rewarded D-Wave with a price bump upon news of the completion of the equity offering comes down to the company's recent track record of utilizing its reserves well. D-Wave's technological advances have come quickly in recent months, from the firm's apparent quantum supremacy achievement back in March to its more recent breakthrough Advantage2 processor, available via cloud as well as on-site deployment.

The firm is also using its cash to support key strategic partnerships that have the potential to expand D-Wave's business globally. Most notably, the firm's deals with South Korea's Yonsei University and Incheon City, Germany's Jülich Center, and Japanese mobile services provider Docomo may benefit from additional cash reserves.

The Greatest Advantage of All Is Time

However, the most significant benefit of an influx of billions of dollars of cash into D-Wave's balance sheet is the time it will afford the company. D-Wave continues to struggle with profitability. Its revenue has grown at a rapid pace in terms of percent increases, but remains quite small on an absolute scale—in the latest reported quarter, D-Wave noted just $15 million in quarterly revenue.

For the time being, D-Wave is relying primarily on one-off purchases of its major quantum computing products to drive revenue. While a small number of these sales is enough to continue to grow revenue from quarter to quarter, it is only an intermediary step toward more widespread adoption of D-Wave's quantum tech.

Investors optimistic about the firm's prospects in this area will likely point to a roughly 500% year-over-year increase in bookings for the fourth quarter of 2024, suggesting that continued revenue growth is likely to come down the line as enterprise and government contracts are fulfilled.

From this perspective, as long as D-Wave maintains sufficient cash to continue operations and further its technological advances, the company may be well on its way to a much more substantive revenue flow.

Caution Is Still Warranted

On the other hand, D-Wave skeptics may point to key technological developments by some of the company's competitors that suggest that its annealing technology may have more limited applications than once thought. If this is the case, D-Wave's early lead over some of its smaller rivals may evaporate once quantum technology becomes widely commercially viable.

Similarly, there remains a lack of consensus around just how long it will take for quantum computing tech to be commercially appealing at all. Some of the more pessimistic estimates suggest that this may still be many years away—if so, even firms with cash reserves as robust as D-Wave's may have a difficult path ahead to sustain themselves in the interim.

Finally, D-Wave's high price-to-sales ratio and other value metrics suggest the possibility that shares are already overvalued, a concern that dilution due to at-the-market offerings is not going to lessen.