Rigetti (RGTI) Q3 2025: $5.7M Novera Orders Signal On-Prem Quantum Traction Despite Margin Compression
Rigetti’s third quarter illuminated a transition period: while legacy government revenue paused, new commercial and academic demand for on-premises quantum systems advanced, and the company doubled down on its chiplet roadmap to 1,000+ qubits by 2027. Gross margin volatility and the absence from DARPA’s next phase highlight execution risks, but a $600M cash position and multi-year contracts provide strategic runway as quantum hardware moves toward practical hybrid applications. Investors should watch for revenue inflection as system deliveries and ecosystem partnerships mature into 2026.
Summary
- Commercial System Orders Expand: $5.7M in Novera system sales to enterprise and academic customers mark a shift toward on-premises quantum adoption.
- Roadmap Commitment Intensifies: Leadership reaffirmed milestones to 1,000+ qubits and higher fidelity, anchoring Rigetti’s position in the quantum hardware race.
- Margin and Funding Volatility Persist: Near-term revenue and margin pressure offset by robust cash reserves and new contract visibility.
Performance Analysis
Rigetti’s Q3 2025 results reflect both the volatility of early-stage quantum markets and the company’s pivot from government-led to broader ecosystem demand. Revenue declined year-over-year due to the expiration of the U.S. National Quantum Initiative (NQI), with management emphasizing that future sales will depend on both NQI reauthorization and new commercial contracts. The gross margin compressed sharply to 21 percent from 51 percent a year ago, primarily because recent contracts—especially those with the UK’s National Quantum Computing Center—carry a lower margin profile, and contract mix remains lumpy. Operating expenses increased, driven by R&D investments and higher stock-based compensation, leading to a widened operating loss.
On the positive side, Rigetti secured $5.7 million in purchase orders for two nine-qubit Novera systems—one to an Asian tech manufacturer and another to a California AI startup—both upgradable for future revenue opportunities. A $5.8 million, three-year contract with the Air Force Research Laboratory (AFRL) will be recognized ratably and underpins future revenue. The company ended the quarter with a substantial $600 million cash balance after warrant exercises, providing ample liquidity for continued R&D and potential capex or M&A. The near-term revenue outlook remains tied to delivery milestones and the ramp-up of these new contracts.
- Revenue Timing Linked to System Shipments: Novera system sales will be recognized upon shipment, with deliveries scheduled for the first half of 2026.
- Gross Margin Variability: Strategic contracts to advance R&D can dilute margins, but management expects improvement as product mix shifts toward higher-value system sales.
- Cash Runway Secured: A $600 million cash position, with no debt, supports roadmap execution and optionality for inorganic growth.
Rigetti’s financial profile remains high-risk/high-reward, with near-term losses offset by a cash buffer and a maturing sales pipeline targeting both government and commercial quantum computing buyers.
Executive Commentary
"On the technology front, we remain on track to deliver our 100-plus-qubit chiplet-based quantum system with an anticipated 99.5% median two-qubit gate fidelity by the end of 2025."
Dr. Subodh Kulkarni, Chief Executive Officer
"Gross margins in the third quarter of 2025 came in at 21 percent compared to 51 percent in the third quarter of 2024. The lower gross margins on a year-over-year basis was due to the composition of our revenue and variability in the pricing in terms of our contracts."
Jeff Bertelsen, Chief Financial Officer
Strategic Positioning
1. Chiplet-Based Roadmap to Scale
Rigetti’s core technology strategy leverages chiplet-based architectures—modular quantum processor units that can be tiled to scale qubit counts. The company plans to deploy a 150+ qubit system (nine-qubit chiplets) by late 2026 and a 1,000+ qubit system (36-qubit chiplets) by 2027, each with incremental improvements in two-qubit gate fidelity. This approach aims to solve quantum scaling challenges without requiring monolithic chip breakthroughs, positioning Rigetti as a leader in practical quantum hardware scalability.
2. Ecosystem and Hybrid Compute Integration
Rigetti is deepening partnerships across the quantum ecosystem, including collaborations with QFox (quantum networking), Montana State University (academic R&D), and India’s CDAC (hybrid quantum systems). The company’s support for NVIDIA’s NVQ-Link—a platform for integrating quantum processors with AI supercomputers—signals a strategic bet on hybrid quantum-classical workflows as the path to quantum advantage. These partnerships expand Rigetti’s market reach beyond government to enterprise and academia.
3. Commercialization and Upgradable Systems
The $5.7 million Novera system orders reflect growing commercial and academic interest in on-premises quantum computing. These systems are designed to be upgradable, creating future revenue streams as customers ramp from nine to 36 or more qubits. This modularity lowers adoption friction and aligns with the needs of early-stage quantum users building internal expertise or benchmarking their own technologies.
4. Capital Allocation and Optionality
With $600 million in cash and no debt, Rigetti has flexibility to invest in R&D, expand its chip fabrication capabilities, or pursue strategic M&A. Management indicated that current technology needs are met internally but remains open to inorganic options if they accelerate the roadmap. Discussions about next-generation fabs (potentially hundreds of millions in capex) are underway, with timing contingent on national initiatives and industry foundry developments.
5. Government and Regulatory Dependencies
Rigetti’s revenue remains partly dependent on government funding cycles, as seen with the NQI reauthorization. While recent funding was reinstated at $625 million over five years, future growth will rely on a mix of government, commercial, and academic contracts. The company’s engagement with DARPA continues, though it was not selected for Phase B of the Quantum Benchmarking Initiative. Constructive feedback from DARPA will drive increased focus on error correction and long-range coupling—critical for future milestones.
Key Considerations
This quarter marks an inflection point, as Rigetti transitions from primarily government-funded R&D to a more diversified customer base and prepares for commercial system scaling. Strategic initiatives and technology milestones will dictate the pace of revenue growth and margin recovery.
Key Considerations:
- System Delivery Execution: Timely shipment and installation of Novera systems are critical for revenue recognition and customer validation in 2026.
- Margin Rebound Potential: As the mix shifts toward higher-value system sales and away from low-margin R&D contracts, gross margin could recover, but remains sensitive to contract composition.
- Quantum Roadmap Credibility: Achieving 99.7 percent fidelity at 150+ qubits and scaling to 1,000+ qubits are pivotal for establishing quantum advantage and commercial viability.
- Hybrid Compute Adoption: Integration with AI and HPC ecosystems via NVQ-Link may expand addressable markets, but real-world hybrid use cases are still emerging.
- Capex and Foundry Decisions: Future investments in chip fabrication will impact capital intensity and technology independence, with timing linked to industry and government initiatives.
Risks
Rigetti faces execution risk on both technology and commercialization fronts. Delays in system delivery, failure to achieve roadmap milestones, or further margin compression could erode investor confidence. Dependence on government funding cycles and the uncertain pace of quantum ecosystem adoption add volatility. The absence from DARPA’s next phase highlights competitive pressures, while large future capex needs could dilute returns if not carefully managed.
Forward Outlook
For Q4 2025, Rigetti expects:
- Revenue benefit from initial recognition of AFRL contract and continued progress on Novera system orders.
- Gross margin variability tied to contract mix and system delivery timing.
For full-year 2026, management did not provide formal guidance but emphasized:
- System deliveries in the first half of 2026 will drive revenue inflection.
- Continued focus on achieving 150+ qubits at 99.7 percent fidelity by year-end.
Management highlighted several factors that may influence results:
- Renewal of U.S. National Quantum Initiative and international government contracts.
- Potential for additional commercial and academic system sales as the ecosystem matures.
Takeaways
Rigetti’s Q3 2025 shows a company at a strategic crossroads, balancing near-term financial volatility with long-term quantum hardware ambitions and ecosystem integration.
- System Orders Validate Commercial Traction: The shift from government R&D to enterprise and academic system sales is underway, but scaling and delivery execution will determine future revenue growth.
- Roadmap and Technology Execution Remain Central: Delivering on chiplet-based scaling and fidelity targets is essential for Rigetti to maintain relevance as quantum computing moves toward practical applications.
- Investors Should Monitor Margin Recovery and Capex Decisions: Gross margin improvement and prudent capital allocation will be key as the company navigates the transition from prototype to scalable product business.
Conclusion
Rigetti’s third quarter underscores the challenges and opportunities of commercializing quantum hardware. New system orders and ecosystem partnerships provide early validation, but execution on the chiplet roadmap, system delivery, and margin stabilization will be critical for translating technology leadership into sustainable financial performance.
Industry Read-Through
Rigetti’s results highlight the quantum industry’s transition from government-driven R&D to broader commercial and academic adoption. The shift toward on-premises, upgradable quantum systems signals that enterprises and universities are ready to invest in hands-on quantum hardware, not just cloud access. Partnerships with AI ecosystem leaders like NVIDIA point to a future where quantum processors become part of hybrid compute stacks, accelerating the convergence of quantum and classical HPC. Margin volatility and capex discussions also foreshadow the capital intensity and competitive risks facing all quantum hardware vendors as the race to practical quantum advantage intensifies. Investors in the quantum sector should track system delivery milestones, government funding cycles, and the pace of hybrid adoption as leading indicators for the industry’s next phase.