By Bill Alpert and Mackenzie Tatananni

IonQ claims to be the biggest pure-play on quantum computing. As proof of its commercial lead on rivals D-Wave Quantum and Rigetti Computing, IonQ cites its fast-rising revenue from customers like the Defense Department.

However, most of IonQ's revenue has come from acquired businesses outside of quantum computing, or from contracts imposed on the Pentagon by budget earmarks from congressmen, says a report published Wednesday by the activist short-selling firm Wolfpack Research, which disclosed its short position in IonQ shares.

While crowing about its Pentagon projects, IonQ hasn't highlighted that the majority of them weren't funded in the last two federal budgets, Wolfpack says. Filings show that IonQ insiders sold nearly $400 million in stock in the days before the first funding shortfall became public record.

"These government contracts allowed IonQ to claim that its quantum computing was commercially viable in a way that made them stand apart from Rigetti, D-Wave and other quantum companies," said Wolfpack in its report. "These Pentagon contracts have been handouts from friendly politicians, not the result of any technological success or advantage over peers."

In midday trading Wednesday, IonQ shares were down 12% to $34.

IonQ didn't immediately respond to queries from Barron's.

Starting with technology from the University of Maryland, IonQ came public during the 2021 fever for special purpose acquisition companies, by merging into the SPAC of its current CEO Niccolo de Masi.

It has since achieved a $14 billion market capitalization and added $3.5 billion of cash to its balance sheet, including $3 billion raised last year from a hedge fund affiliate of Susquehanna International Group.

By harnessing the physics of the atomic-scale world in a new way, a quantum computing circuit can hold many values simultaneously, instead of just a 0 or 1 like today's transistor-based circuits.

That could speed up certain computations by orders of magnitude. But outside the laboratory, quantum circuits remain fragile and error-prone. Researchers remain focused on scaling up the circuits and improving fault tolerance -- that is, finding and correcting the system's errors in real time.

IonQ's approach manipulates trapped ions with magnets and lasers, which it thinks will prove easier to perfect than the superconductor technologies under development at competitors IBM, Alphabet's Google and Rigetti.

As evidence of IonQ's progress, de Masi recently showed a slide saying his company has "the largest revenue scale in the industry," with 11 times the revenue of its nearest competitors. Revenue doubled to $43 million in 2024, and IonQ came into 2025 saying it had won two big contracts from the Pentagon that brought its order backlog to $75 million.

Only $21 million under those contracts was actually obligated to IonQ, according to records in the government's Federal Procurement Data System. The rest required further funding from Congress. And when the new Republican majority in Congress passed the fiscal 2025 budget last year, the remainder went unfunded.

On Feb. 26, 2025, IonQ's founding CEO Peter Chapman resigned that post, effective immediately, saying he would continue as executive chairman and focus on "strategic customer relationships and the development of quantum AI." Succeeding him, de Masi said the company would stop reporting its backlog.

The House and Senate 2025 budget votes were March 11 and March 14, respectively. Details on the Pentagon budget weren't public record and widely visible until March 19. Between March 11 and 14, Chapman, de Masi and six other IonQ officers and directors sold stock or adopted 10b5-1 plans to sell stock that ultimately resulted in total sales of $396.6 million dollars.

By fixing the timing, price, or amount of stock sales in advance, 10b5-1 plans are designed to allay concerns about executives' inside information. Wolfpack acknowledges that it doesn't know if IonQ insiders were selling on nonpublic information about Pentagon funding. "Was there any wrongdoing? We don't know," says the report.

IonQ then began an acquisition spree, buying the satellite imaging company Capella Space and the atomic clock maker Vector Atomic. Such acquisitions enabled IonQ revenue to double in the nine months ended September 2025, to $68 million, while more-than doubling IonQ's negative free cash flow to $215 million.

Wolfpack asserts that those acquired businesses aren't clearly related to quantum computing, and seem to have been purchased for their government contracts and revenue.

In January of this year, IonQ announced it would pay $1.8 billion in cash and stock for the chip maker SkyWater Technology. SkyWater brings almost $600 million a year in non-quantum revenue and some nascent projects in quantum computing chips. It makes a slim profit.

After the deal, IonQ told Barron's that its acquisitions are part of a comprehensive strategy that has allowed it "to quickly move into quantum tech spaces adjacent to our original quantum computing roots."

One acquisition clearly related to quantum computing was a $1.6 billion deal for Oxford Ionics in June 2025. The motive for that deal, asserts Wolfpack, was a quantum computing competition started by the Defense Advanced Research Projects Agency, or Darpa. The competition seeks quantum computer projects that might "reach industrial utility within the next 10 years."

Both IonQ and Oxford Ionics entered the competition, but Darpa procurement records found by Wolfpack suggest that only Oxford got funded by Darpa last summer to advance to the second round. Thanks to the acquisition, however, DARPA's list of second round winners included IonQ.

"[W]hen IonQ loses, they just buy their competitor with shareholder money and say they won," writes Wolfpack.

Delving into government records, Wolfpack says it learned that the major part of IonQ's government orders weren't the result of the Pentagon choosing IonQ technology, but from congressmen adding the projects to the Defense budget through a practice known as "earmarks."

The April 2025 sale of an IonQ system to a Chattanooga, Tenn., municipal power company, says Wolfpack, was funded two-thirds by IonQ itself, and one-third by the federal earmarks of a Tennessee congressman.

Earmarks can get Pentagon contracts going, but that doesn't mean Congress will fund them. As noted, most of IonQ's contracts weren't funded in the 2025 fiscal year budget. Wolfpack says that IonQ's biggest Pentagon contract remain unfunded in the continuing resolution for fiscal 2026 that is now struggling through the House of Representatives.

The Wolfpack report isn't the first time that IonQ has attracted activist shortsellers. In 2022, Scorpion Capital released a 183-page critique, and in March of last year, Kerrisdale Capital Management wrote that IonQ delivered "limited, error-prone systems." When asked to respond to Kerrisdale's claims, de Masi said that short reports came out "every few years," and were "baseless."

"We haven't even bothered trying to defend ourselves because they're all wrong," he told Barron's at the time.

Write to Bill Alpert at william.alpert@barrons.com and Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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February 04, 2026 14:00 ET (19:00 GMT)

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