Many investors are excited about the prospects of quantum computing. The technology is touted as having the potential to lead to new drug discoveries, improved artificial intelligence (AI) models, advancements in materials science, and more. And one company that has benefited immensely from the surge in quantum computing interest is D-Wave Quantum (QBTS 8.76%). Its share price is up by about 1,600% over the past three years.
But as impressive as that stock surge has been, as of the close of trading Friday, D-Wave's stock was also down by about 38% over the past three months, which might have some investors wondering whether now is a good time to buy or whether the stock has further to fall. Here's what potential investors should know.
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Why some investors are optimistic about D-Wave
Given D-Wave's huge price gains over the past few years, it's worth taking a minute to explain precisely why some investors are so excited about the stock. The biggest reason may be that quantum computing is viewed by many as holding significant promise to be a game-changing technology. For example, consulting firm McKinsey estimates its market size will reach $100 billion by 2035. And with the potential for it to improve current AI models, many investors anticipate these two trends converging into one tech megatrend in the coming years.
For D-Wave specifically, there have been catalysts propelling it. For instance, its revenue doubled in the third quarter of 2025, and the company signed several commercial and research customers. Some other quantum computing companies are struggling to increase their revenue, so it's clearly a good sign that D-Wave's top line is improving.
It also has significant cash reserves of $836 million, the highest in the company's history. Operating expenses were just over $30 million in the third quarter, so those reserves should allow it to keep the lights on and invest in new research for quite some time.
And it recently purchased a peer company, Quantum Circuits, for $550 million, in a deal that it says will accelerate its development of a commercially viable product.
Why you shouldn't buy the stock right now
Despite all of the above, there are some big red flags around D-Wave that investors shouldn't ignore. For one, while its sales increased significantly in the third quarter, they were still tiny -- just $3.7 million.
Compare that to the company's third-quarter net loss of $140 million under generally accepted accounting principles (GAAP), and it becomes clear how far D-Wave will need to go to improve its financial picture. What's more, although it has significant cash reserves, its spending is also ramping up. Operating expenses surged 40% year over year in the third quarter.
What's also concerning is that its valuation is extremely expensive. Its price-to-sales ratio (P/S) is an astronomical 280, compared to the tech sector's average P/S of less than 9. This means investors who buy today are paying a high premium for a company with minimal revenue, rising expenses, and that isn't anywhere near profitable.
Quantum computing is still a highly speculative market, and there's no guarantee that it will succeed in delivering on the hype. And if it does, it's not expected to happen soon. Some of the other players in the quantum computing space, including Alphabet, have said that "useful" quantum computers are still five to 10 years away. With the technology still in its relative infancy and with D-Wave trading at exceptionally pricey levels relative to its minuscule sales, investors should leave the stock alone for now.
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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.
This article was originally published by The Motley Fool
