Rigetti Computing Faces Mounting Challenges on Dual Fronts

Rigetti US76655K1034

Rigetti Computing finds itself navigating a critical juncture, contending with significant setbacks in both a key government program and its product roadmap. Today, CEO Subodh Kulkarni is scheduled to address investors at the Needham Growth Conference, outlining the company's strategy to advance despite these obstacles.

The operational pressures coincide with a financially strained position. For the quarter ending September 30, 2025, Rigetti reported figures that highlight its capital-intensive growth phase:

• A GAAP net loss of $201 million
• An operating loss of $20.5 million
• Quarterly revenue of just $1.9 million

With revenue streams still minimal and losses substantial, each technical delay or missed opportunity amplifies the execution risk for the future.

Exclusion from DARPA Program a Strategic Blow

A major concern emerged on January 12th with confirmation that Rigetti failed to progress to the next stage of a significant DARPA initiative. The company was among 15 participants in Phase 1 but was not selected among the 11 firms advancing to Phase 2.

Access to such defense-sector programs is widely viewed as a crucial gateway, offering both technological validation and a path to future contracts. This development raises investor apprehension that competitors, including IonQ and D-Wave, may gain a strategic advantage while Rigetti remains on the sidelines.

Flagship Quantum Processor Delayed

Compounding the DARPA setback, management must now address a technical hurdle. The general availability of its new 108‑Qubit Cepheus‑1‑108Q system has been pushed back to the end of the first quarter of 2026.

Officially, the delay is attributed to engineering goals. The company aims to boost the system's 2‑Qubit Gate Fidelity—essentially the reliability of specific computational operations—from the current 99% to 99.5%. This performance currently lags behind Rigetti's own smaller-scale systems, which achieve 99.7% fidelity on 9‑qubit and 99.6% on 36‑qubit processors.

This postponement signals that scaling quantum technology to higher qubit counts is proving more complex than initially anticipated. For Rigetti, whose growth narrative is tightly linked to the performance and commercialization of such systems, the delay is particularly sensitive.

Market Context and Technical Performance

Rigetti's shares have historically been volatile. Although the stock has recovered approximately 13% from its annual low, it remains nearly 47% below its 52‑week high. Yesterday's closing price of $25.53 sits about 13% above its 50‑day moving average, suggesting a degree of short-term stabilization.

The broader quantum computing sector exhibits pronounced "winner-take-all" dynamics. While Rigetti, alongside giants like IBM and Google, relies on superconducting qubits, it also faces intense competition from specialized startups. Market observers, including The Motley Fool in a January 12th analysis, frequently cite the company's high execution risks and fierce competitive pressure.

Some sector-wide factors may offer slight support. A Morningstar outlook from January 12th suggested U.S. small-cap stocks are broadly undervalued by about 15%, which could provide some valuation cushion despite Rigetti's growing company-specific challenges.

The Path Forward and Key Dates

All eyes are now on CEO Kulkarni's presentation at the January 13th Needham Growth Conference. He must articulate a clear plan for achieving product readiness despite the DARPA exclusion and detail how the Cepheus‑1‑108Q timeline will be recovered. The central technical milestone remains hitting the 99.5% fidelity target by the end of March 2026.

Investors are marking March 5, 2026, on their calendars. On that date, Rigetti will release its next quarterly earnings, which are expected to begin reflecting the financial impact of the processor delay. This report will provide a crucial data point for assessing whether the company can convert its current headwinds into tangible, sustained progress.