While company has made a new system available, it’s difficult to know when new hardware sales will materialize

D-Wave’s release of Advantage2 sent the company’s stock soaring on Tuesday.

D-Wave Quantum Inc.’s stock climbed nearly 26% on Tuesday after the company announced the availability of its next-generation quantum computing system, Advantage2. But it remains unclear when the company will be able to book substantially larger revenue.

Quantum computers are an advancement from the classical computers that use bits of 0s and 1s. Instead, they use quantum bits, or qubits, which allow computers to process information much faster. This can help advance training in artificial intelligence and solve more complex research problems, so any development in the industry is a big deal. However, the sector is still in its early stages of development.

Tuesday’s big move in D-Wave Quantum Inc.’s stock price feels like it’s being driven more by traders rather than investors, said Benchmark analyst David Williams. He believes a gradual increase in the share price would be better for the stock because it would suggest that more long-term investors who believe in the technology were buying shares as a result of the company’s ability to meet key targets. And in turn, this would create more stability and less volatility in the stock’s price. Instead, Tuesday’s move suggests that traders are buying shares in hopes of large short-term gains or because of the fear of missing out.

Now, D-Wave’s stock is riding on good news. According to a Tuesday release from the company, its sixth-generation quantum computer, Advantage2, increases energy scale by 40% and reduces noise by 75%, which results in higher-quality outputs for solving complex calculations.

“Noise is what causes errors and so the more noise you can eliminate, the cleaner your output is, the better the performance,” said Williams.

The recent upgrade is a significant one because the company had already proven its strength in quantum technology using a smaller prototype of the Advantage2, he added.

D-Wave Chief Executive Alan Baratz referred to the company’s sixth-generation version as, “a system so powerful that it can solve hard problems outside the reach of one of the world’s largest exascale GPU-based classical supercomputers.”

Despite this big leap, the quantum industry is still in its early stages of development and at the beginning point where it could be commercially adopted. D-Wave’s fiscal first-quarter revenue came in at $15 million, up more than 500% from a year earlier, when the company had revenue of $2.5 million. However, in February, D-Wave made its first physical sale of a quantum computer to Germany-based research company Forschungszentrum Jülich. Williams estimates that the hardware sale amounted to about $15 million, with around $2 million of that deferred to future quarters. He noted that the bulk of D-Wave’s first-quarter revenue came from that sale.

This makes it tricky to project future revenue for the company because recurring revenue is currently tied to its services segment, which is based on cloud and professional support services, Williams noted. While the Benchmark analyst expects additional hardware sales in the future, the timing is hard to predict.