Shares of quantum computing firm D-Wave Quantum Inc. (QBTS.US) surged more than 11% on Monday. This followed Mizuho Securities raising its price target on the stock and reiterating its optimistic long-term view after the company's inaugural analyst day event.

Mizuho analyst Vijay Rakesh increased the price target for D-Wave from $29 to $35, while maintaining an "Outperform" rating. Rakesh noted that D-Wave not only continues to lead in the field of annealing quantum computing but also presented a clear technical roadmap toward fault-tolerant gate-based quantum computing. This has significantly bolstered market confidence in the company's long-term growth prospects.

Analyst Day Highlights Key Positive Signals

Rakesh's report highlighted four major takeaways from the analyst day. First, the company updated its development roadmap for gate-based quantum computing. According to the latest plan, D-Wave aims to achieve 10 logical qubits by 2030, with the potential to scale to 100 logical qubits by 2032. In the quantum computing field, logical qubits are considered a key metric for measuring the practical commercialization capability of quantum computers. Achieving more logical qubits means the system can handle more complex and commercially valuable computational tasks.

Second, the company outlined a dual-platform strategy encompassing both annealing quantum computing and superconducting quantum computing. D-Wave anticipates the total addressable market (TAM) could reach between $450 billion and $850 billion by 2040, with gate-based quantum computing potentially covering about 75% of future demand. Analysts suggest this indicates D-Wave's ambition not only to solidify its leading position in optimization computing but also to enter the broader general-purpose quantum computing market.

Third, the company reported progress in quantum error correction technology. According to management, its technical approach can control the quantum error correction cycle to within 5 cycles while offering better scalability compared to other mainstream solutions. Quantum error correction is regarded as one of the core technical challenges in the commercialization of quantum computing, making this progress a point of significant market interest.

Fourth, the company disclosed long-term profitability targets for the first time. D-Wave expects the long-term gross margin for its Quantum Computing as a Service (QCaaS) business to reach 65% to 75%. Concurrently, its professional services business gross margin is anticipated to be 40% to 50%, while the gross margin for quantum computing system sales could reach 75% to 90%.

Overall Profitability Expected to Improve

Rakesh pointed out that as D-Wave gradually increases its quantum computing system sales in the future, the company's overall profitability is expected to improve further. Currently, the company's overall gross margin is approximately 71%. Rakesh stated, "As the proportion of system sales increases, we believe there is significant room for margin improvement in the future." He also noted that research and development expenditure will likely remain the largest operating expense item in the coming years. According to the company's plan, D-Wave will continue advancing its superconducting quantum computing roadmap, striving to achieve the goal of 10 logical qubits by 2030. Analysts believe R&D investment during this phase will lay the groundwork for subsequent commercialization.

Cloud-Based Quantum Computing Business Growth Potential Noted

Mizuho also specifically mentioned the growth prospects for D-Wave's Quantum Computing as a Service (QCaaS) business. Currently, D-Wave has four quantum computing systems deployed and operating in the cloud. Management projects that each system could contribute approximately $25 million to $30 million in annual revenue in the future. As enterprise demand for quantum computing increases, this business is expected to become a significant growth engine for the company. Currently, a growing number of enterprises are renting quantum computing power directly through cloud platforms, avoiding the need to purchase expensive hardware. The market generally views this model as having parallels with the development path of the cloud computing industry.

Accelerated Expansion into Gate-Based Quantum Computing Post-QCI Acquisition

Beyond its traditional areas of strength, D-Wave has recently accelerated its expansion into the gate-based quantum computing business. Mizuho noted that through the acquisition of assets from QCI (Quantum Computing Inc.) and the advancement of Dual-Rail Qubit technology, the company is accelerating its entry into the broader quantum computing market. Rakesh commented, "D-Wave remains the leader in optimization-based quantum computing tasks, while its gate-based quantum computing business is also progressing rapidly. With the QCI acquisition and the development of dual-rail qubit technology, the company has further solidified its position as the world's only dual-platform quantum computing company."

Wall Street Continues to Bet on Long-Term Commercialization of Quantum Computing

In recent years, with the rapid development of the artificial intelligence industry, quantum computing has once again become a focus of capital markets. The market widely believes that quantum computing has the potential to play a significant role in areas such as drug discovery, materials science, financial optimization, logistics scheduling, and AI training in the future. Although the industry is still some distance from large-scale commercialization, an increasing number of institutions are beginning to view companies with clear technical roadmaps and business models as potential long-term beneficiaries. For D-Wave, its dual-platform strategy encompassing both annealing and gate-based quantum computing is becoming a key reason for Wall Street's positive outlook on the company. Mizuho believes that as the quantum computing market matures and the company's technical roadmap is realized, D-Wave is well-positioned to maintain its industry leadership and share in the rapid growth of the quantum computing industry in the coming years.