IonQ, Inc. Q1 FY2026 Earnings Call

Welcome to the IonQ First Quarter 2026 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Hanley Donofrio, Director of Investor Relations. Please go ahead.

Good afternoon, everyone, and welcome to IonQ's First Quarter 2026 Earnings Call. My name is Hanley Donofrio, and I am the Investor Relations Director here at IonQ. I'm pleased to be joined on today's call by Niccolo de Masi, IonQ's Chairman and Chief Executive Officer; and Inder Singh, IonQ's Chief Operating Officer and Chief Financial Officer. By now, everyone should have access to the company's first quarter 2026 earnings release issued this afternoon, which is available on the SEC's website and on the Investor Relations section of our website at investors.ionq.com. Please note that on today's call, management will refer to non-GAAP financial measures. While the company believes these non-GAAP financial measures provide useful information to investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. You are directed to our earnings release for a reconciliation of adjusted EBITDA and adjusted EPS for the closest comparable GAAP measures. During the call, we will discuss our business outlook and make forward-looking statements, including those regarding our guidance for 2026. These comments are based on our predictions and expectations as of today and are not guarantees of future performance. Actual events or results could differ materially due to a number of risks and uncertainties. Therefore, you should not put undue reliance on those statements. We refer you to our recent SEC filings, including our annual report on Form 10-K for the year ended December 31, 2025, for a more detailed discussion of those risks and uncertainties. We undertake no obligation to revise any statements to reflect changes that occur after this call, except as required by law. Now I will turn it over to Niccolo de Masi, Chairman and CEO of IonQ.

Thank you all for joining us today. 2026 is off to a strong start at IonQ, and our results this quarter serve as a powerful validation of what we built throughout our transformational 2025. Financially, we have delivered the biggest quarter in IonQ history thus far, and our fourth consecutive quarter of record-breaking results. $64.7 million of GAAP revenue in the first quarter of 2026 is more than 8x what we delivered in the same period last year. Our strong momentum is a testament to the demand for our industry-leading quantum computers as well as the commercial impact of our entire quantum platform. As I outlined on our fourth quarter call in February, a key objective for 2026 is to drive superior financial performance by leveraging our scale and quantum product families, combined with increasing geographic breadth and depth. We are executing well and have today raised our full year revenue expectations to $270 million at the high end. Our results were underpinned by accelerating global quantum computing system sales, increasing high-margin cloud utilization and deepening application layer partnerships with our enterprise customers. I am tremendously excited about IonQ's ecosystem progress, which was on full display at the New York Stock Exchange when we rang the bell with over 50 customers to celebrate World Quantum Day. IonQ is defining the quantum technology market and establishing the leading hardware and software quantum industrial ecosystem. Our organic performance is a direct reflection of this leadership as we architect and deliver the quantum platform for the next century of computation. We continue to widen our lead across commercial and technical frontiers. Our parallel gate architecture with electronic qubit control will allow us to solve problems at a scale and cost that we believe will be unmatchable. On April 14, we rolled out clear third-party validated benchmarks, showcasing the incredible time-to-solution and cost-to-solution advantages that our quantum computers already possess. These metrics represent the speed and economics with which our systems deliver accurate solutions to the world's hardest problems. As you can see on Slide 6 of our investor presentation, we presently enjoy up to 10,000x faster time to solution on key quantum algorithms, including 1,000x faster for the Quantum Fourier transform. The Quantum Fourier transform, in fact, enables many critical use cases, such as cryptography, molecular drug discovery, advanced material synthesis and unlocking fusion energy, making this timely solution valuable today and into the future. It is not a coincidence that several of the key utility-scale applications, described by DARPA's quantum benchmarking initiative, could take advantage of quantum Fourier transforms under the hood. IonQ's time-to-solution advantage with the Quantum Fourier transform and other benchmark algorithms today underscores our fidelity and connectivity advantages that we expect to endure throughout the coming decades. I am proud to report that we have presold our first chip-based 256-qubit system in the first quarter. We are moving with conviction to demonstrate this technology by year-end with customer systems expected to begin commissioning by the end of the second quarter of 2027. While much of the industry remains in the scientific research phase, IonQ has been able to focus on delivering production-ready systems that are shaping the quantum market globally. We remain the first and only quantum company in history to have demonstrated the critical technology components at the performance levels required for full fault-tolerance. The next critical frontier in our industry is the efficient use of quantum error correction to convert high-quality physical qubits into even higher-quality logical qubits, unlocking new frontiers of scale and impact. This is the bridge to utility-scale, fault-tolerant quantum computing. And it should be no surprise that IonQ is leading here as well. Just last month, we published our complete architectural blueprint for our flexible modular framework that describes how our technology scales through to 2030 objectives of a fully fault-tolerant system with millions of physical qubits and logical error rates as low as 1 in 1 trillion. Our walking cat paper described IonQ's end-to-end architecture for full fault-tolerant quantum computing, spanning compiler design and error correction to hardware, control systems and ion movement. This historic paper outlines in manufacturable detail how we will move from today's IonQ commercial systems to deploying and commissioning IonQ's utility-scale quantum computers to customers. The level of detail and completeness in our blueprint is a global first and a historic milestone for the quantum industry as a whole. Along with the academic community, there has been strong and broad recognition that this is the industry's first clear detailed manufacturable path to scaled fault-tolerance systems. For those able to follow along in our investor presentation, please see Page 7 for details. IonQ's specificity sets a new standard and distinguishes IonQ with its tangibility, resting on capabilities our hardware has already demonstrated including 99.99% 2-qubit fidelity and reliable ion transport. This historic work demonstrates precisely why IonQ is on track to be the first to unlock fully fault-tolerant quantum computers as we published clearly in June 2025. Our level of transparency is only possible through our 30 years of innovation. Only IonQ has the operational maturity and engineering predictability of generations of deployed systems as we now accelerate into a new phase of manufacturing and scale. Moving on now to SkyWater and our merchant supplier activities. As most listeners know, in January of 2026, we announced our intent to acquire SkyWater in order to accelerate the U.S. quantum industry and deepen our commitment as a merchant supplier. We expect the transaction to close in the second or third quarter of 2026, subject to customary regulatory approvals. Over the past quarter, our commercial collaboration with SkyWater has already yielded multiple test iterations for our 256-qubit chip. As we shared in February, we hit the ground running with multiple initial tapeouts. Today, I am pleased to report that we have already received some of the first ion trap samples back from SkyWater and have demonstrated on the sample chips the critical performance we need for the complete 256-qubit chips. To design, fabricate and test these chips with SkyWater within a single quarter has been a delight. Our commercial partnership with SkyWater is a demonstration of the kind of acceleration we hope our investment will bring for all customers of our quantum merchant supply function. And we expect these benefits to grow even further once the combination is complete. We already act as a merchant supplier with our industry-leading atomic clocks, sensors and networking products being sold to other quantum companies. When the SkyWater transaction closes, IonQ will be the largest quantum merchant supplier in the world, with Thomas Sonder continuing to lead SkyWater. We view this transaction as not only accelerating IonQ's commercialization of fault-tolerant quantum computers, but also using our balance sheet to secure the scalability of the entire U.S. and allied quantum market. As it is a frequent question from our community, I will now walk through our application and quantum algorithm momentum in a bit more granularity than in prior quarterly calls. This work can be seen in our investor presentation on Page 8. Applications and quantum algorithms are another cornerstone competitive advantage for IonQ. We know that for customers, value is measured not just on a machine's architecture, but by how that architecture ultimately delivers customer value and results. We are confident IonQ already delivers a potent combination of orders-of-magnitude faster time-to-solution, the most accessible cost solution, reliability and quality that customers cannot find anywhere else. We have more than doubled our quantum algorithm and applications team size in the past few quarters in response to strong demand. We continue to grow internationally, adding both application engineers and field engineers to support customer appetite for implementing IonQ's quantum solutions in their organizations. We are deliberately focused on early advantage verticals: pharmaceuticals, financial services, energy and logistics. Real-world examples from just the past few quarters include the following partnerships. In the financial sector, we ran the world's first large-scale portfolio optimization quantum algorithm using real S&P 500 data. This showcased, along with Cambridge Quantum, our systematic improvement in portfolio quality and execution time in a production environment. Our trapped-ion hardware has a long-term structural advantage for dense portfolio optimization such as these because of its all-to-all connectivity and industry-leading single-qubit and 2-qubit gate fidelities. With Synopsys, we demonstrated accelerated computer-aided engineering workloads through quantum-enhanced graph partitioning. We achieved double-digit percentage advantage in end-to-end time for large-scale structural models such as the Rolls-Royce jet engine and automotive models as well. Crucially, this demonstration was integrated into their existing cloud workflow with zero new infrastructure required. IonRide is using IonQ to optimize shipment allocations and fleet orchestration for electric and autonomous freight, delivering measurable gains in real-world logistics efficiency. We have already demonstrated real-world commercial validation using anonymized logistics data and historical cancellation logs. By achieving an increase in shipments delivered, this work will underpin very significant revenue gains for our partner at fleet scale. With Quantum Basel, we are advancing hybrid quantum-classical techniques to optimize large language models and reduce energy consumption. Our results show that IonQ quantum computer energy consumption scales approximately linearly with qubit numbers for shallow circuits. By comparison, classical simulation exhibits exponential scaling. We are on track to demonstrate significant energy savings with improved inference performance as we scale these capabilities. These four production-oriented applications are just some of the examples our customers are deploying to actively drive business advantage and growth. We are proud to announce in parallel that our work to positively and powerfully impact humanity itself has this quarter seen a step change. We are now working with participants from the Wellcome Leap initiative out of the U.K., which is a program designed to accelerate human health, to apply our quantum optimization to improve cancer research. Our work introduces new computational approaches for reconstructing difficult regions of DNA that are often missed or misread by existing methods. This could become a useful foundation for future studies of genetic changes that matter in human disease, including cancer. Last quarter, we also announced a commercial partnership with CCRM, which is one of the world's leading accelerators for advanced therapies. We are very excited about the work we are doing with them, which includes cell and gene therapies for cancer and immune system rebuilding. This work is truly world-changing, offering a powerful new future for human health. We have also begun work on combining our quantum optimization technology with computational methods for gene therapies. That includes optimization of mRNA sequences that get delivered into cells. Long term, we anticipate personalized medicine acceleration. For those following along in our investor presentation, this can be seen on Page 8. Let us now turn to the rest of our unique and expanding quantum platform. Building on the momentum of our recent deployments of quantum communication networks in Switzerland, Romania and Slovakia, IonQ has now successfully deployed Poland's first national quantum communications network. This is one of the largest terrestrial quantum key distribution networks in Europe, and it cements our position as the partner of choice for sovereign quantum security. We are similarly expanding our quantum platform leadership domestically by announcing a new statewide quantum networking initiative in the great state of Florida and the first commercial sale of a quantum memory node into the Mid-Atlantic regional Quantum Internet hosted at the University of Maryland. These partnerships underscore that IonQ is proudly playing a central role in the development of our secure national quantum infrastructure. On the technical front, we continue to innovate and lead the market as the only public company with a scaled quantum networking division. Last year, in partnership with the Air Force Research Lab, we achieved the first qubit-to-telecom frequency conversion in a field-deployable system, enabling real-world quantum networks on existing telecom infrastructure. Last month, on World Quantum Day, we announced that in conjunction with AFRL, we connected qubits from two separate systems. This is the first demonstration of connected commercial quantum computers, demonstrating the operationalization opportunity of quantum interconnects and paving the way for distributed quantum computing that will underpin the future of secure global communications. Our contract with DARPA's HARC program is another testament to our leadership in quantum memory, modular quantum computing and scalable networking architectures using quantum interconnects. IonQ is playing a critical role in enabling a new class of networked quantum computers that can combine multiple qubit types into an interconnected high-performance architecture. To our knowledge, we are the only industry player to win a hardware award as part of HARC. This contract is another powerful example of how IonQ is already serving as the leading merchant supplier to the entire quantum industry with key IP, including the world's most accurate commercial clocks that matter to any modality's long-term scaling and manufacturability. Turning now to Slide 9 in the investor presentation. Momentum remains strong at IonQ Federal. We continue to advance through DARPA's quantum benchmarking initiatives and are building out our capabilities to support next-generation GPS, alternative PNT and other mission-critical initiatives for our nation. We were awarded a $39 million contract to advance next-generation space communications on the Space Development Agency's halo program. This paves the way for mission-ready quantum space systems for national security. Just this week, we expanded our space mission and sensing capabilities with a new product launch delivering persistent change monitoring intelligence from space. We were also awarded a spot on the Missile Defense Agency's SHIELD contract, which is focused on the rapid delivery of innovative capabilities to the warfighter with increased speed and agility. Our technology platform represents a dual-use advantage for our nation and its allies underpinning both economic growth and national security. We are proud to be the partner of choice for U.S. and allied governments in this geopolitical quantum space race. In order to do this work with U.S. government agencies, high technology readiness levels are an imperative. Our quantum sensors and clocks have reached TRLs for deployment on land, sea, air and space. At this very moment, we have quantum sensors currently deployed on a Navy ship and in space on the X-37B spaceplane. Our quantum security products similarly have already reached deployment-ready TRLs across critical infrastructure, telecommunications and national networks. Providing mature deployable quantum security solutions today is vital to ensuring continuity for communications as quantum computers become ubiquitous. Before I close, I would like to touch on Q-Day and talk through Page 10 in our quarterly investor deck. Lately, Q-Day, the threshold where quantum systems render current RSA encryption obsolete, has dominated industry conversation. We have been transparent in our assessment of Q-Day's timeline since publishing our technology roadmap in June 2025. Based on our public roadmap, we expect to achieve the logical qubit count required to challenge RSA-2048 encryption in the 2028 to 2029 window. China's stated goal is 2029 in their government quantum efforts. It's worth noting that our peers have now recognized this accelerated timeline with Google very recently bringing forward its expectation for Q-Day from the mid-2030s to 2029. As we continue to accelerate the timeline toward Q-Day, we view it as a strategic responsibility to also provide the solution. We are not just identifying the future risk; we are delivering mature field-deployable hardware and software cybersecurity solutions that allow global governments and enterprises to both enhance cybersecurity today and ensure our nation's protection in the age of quantum ubiquity. IonQ is uniquely positioned to deliver post-quantum security solutions precisely because we're the ones defining the offensive frontier. Our deep understanding of how advanced quantum systems challenge RSA and ECC encryption allows us to build superior defenses. This creates a powerful strategic flywheel: our hardware leadership informs our security and innovation, and our security expertise de-risks the quantum transition for our customers. As I said in our full year call in February, 2025 was a strategic and financial inflection point for IonQ. Today, I am confident that 2026 is in turn the year we move from platform building blocks to platform execution at scale. We will continue to deliver superior financial performance, unlock exponential value through applications and system-level breakthroughs and operate with both discipline and speed. IonQ's mission is to pioneer and globally commercialize the world's quantum solutions, positively impacting every aspect of applied science while ensuring U.S. and ally leadership in this generational and geopolitically vital technology race. I want to thank my colleagues for their extraordinary efforts and the broader quantum industry for their partnership. With our strong capitalization, unmatched talent density and clear roadmap, IonQ is one platform, one team primed and poised to win. I'm now delighted to hand the call over to Inder Singh, our COO and CFO.

Thank you, Niccolo. We are very proud to report our strongest quarter in the company's history, delivering $64.7 million in GAAP revenue, which is 755% year-on-year growth. This is now our third straight quarter of record-setting revenue growth. These results exceeded our revenue guidance by over 30% and our own expectations. Importantly, our results are underpinned by strong organic growth, which we expect will continue through the remainder of the year. In fact, as we indicated last quarter, we are expecting organic revenue growth to be 100% for the full year, even exceeding the 80% that we reported for 2025. I'll now cover our financials in more detail, which you can also see in our investor presentation on Pages 12 through 18. Consistent with the additional color we started to provide you last quarter regarding the different areas of our revenue and the composition of our revenue, I'm going to touch on four key aspects: one is commercial; two will be geography; three we're introducing a metric around multiproduct sales; and of course, I'll again talk about remaining performance obligation, also known as RPOs. Number one, let me address our commercial revenue. I'm pleased to report that approximately 60% of our revenue came from commercial customers this quarter, similar to what we reported for all of full year 2025. This demonstrates that we are firmly entering the commercialization of our quantum technologies. Commercial revenues consist of quantum platform contracts with non-U.S. government customers. We are happy to see this metric remain high as our revenues grow. We are happy that our commercial sales have now become a major part of the business and, importantly, a takeaway for us is that our quantum solutions have moved well away from the lab and squarely into real-world applications and deployment, as Niccolo described. Number two, our global revenue mix. I'm also pleased to report that we are seeing demand for our products come from around the world and from more countries than ever before. In Q1, approximately 35% of our revenue came from international markets. We've now sold solutions in over 30 countries compared to a year ago when we had customers in just a few. As I said last quarter, we're working on pursuit and capture in a very methodical way, and it is now starting to pay off as we begin to see revenues come from many more parts of the world. Number three, we are providing you with an additional metric, a new view into our revenues, which you can look at and I would best describe as multiproduct sales. Multiproduct sales means what percent of our revenue came from customers who have now bought more than one product from us, for example, computing, networking, sensing, security, et cetera. I'm pleased to report that in Q1, over one-third of our revenue came from multiproduct sales. The reason this is important is consistent with the strategy that Niccolo laid out last year: we have become the go-to place for all things quantum. Under the leadership of Scott Mallard, who heads global sales for us, we have created a methodical approach to our go-to-market strategy. This includes cross-selling across our business, very disciplined pipeline development and conversion, our land-and-expand strategy and, yes, an amazing group of sales leaders that we are deploying around the world. While we may or may not always share all metrics every single quarter, we want to provide you color that will help you look at our business. You should know that we are investing in growing our revenues across our entire suite of products. It was Niccolo's vision a year ago to develop this quantum platform company, and we are seeing that play through our financials now. This multiproduct metric represents how that platform strategy has turned into financial outcomes. Number four, let me spend a moment on our remaining performance obligations or RPOs, which is a widely accepted measure that companies use to gauge their visibility over several quarters. As of March 31, 2026, our reported remaining performance obligations stood at $470 million compared to approximately $72 million a year ago. That represents a growth of 554% year-over-year. From our lens, RPOs help us get context around the continuing growth of our company as well as provide visibility potentially beyond the next few quarters. As all of you know, RPOs turn into revenue as performance obligations are met and RPOs get replenished with TCV from new sales. In Q1, to give you some context, for every $1 of revenue we recognized, we added roughly $2.5 in RPOs. And again, some use this as a proxy for backlog. To summarize my revenue comments, this first quarter of 2026 was another record-setting quarter with a revenue profile of 60% commercial, 35% international, 35% multiproduct and RPOs grew 554% year-on-year. And yes, we expect 100% year-on-year organic growth. Let me turn to our investments and profitability metrics now. First, let me talk to you about R&D. As of last quarter, our biggest investment area continues to be R&D and GAAP R&D in Q1 grew 215% year-on-year to $125.7 million. For some context, last year, our R&D exceeded the entire reported R&D in the quantum industry. Our strategy is to accelerate our innovation, deliver the most powerful quantum computing solutions to the market, connect all things quantum and secure our customers in a post-quantum world, as Niccolo described. As a prime example of our innovation leadership and the compute power we intend to deliver and are delivering, today we're deploying our fifth-generation compute system called Tempo. We are now well on our way to the 256-qubit sixth-generation system, and we are starting to turn our focus also on the seventh-generation 10,000 qubit solution. We will maintain this relentless focus on innovation and our financial firepower allows us to do so. Turning now to adjusted EBITDA. We recorded a loss of $96.8 million for the first quarter. In this quarter, adjusted EBITDA included approximately $12 million of expenses related to our commercial agreement with SkyWater for the fabrication of our industry-leading ion trap. This commercial agreement remains in place until the approval and close of SkyWater. Excluding the SkyWater commercial agreement expense of $12 million, adjusted EBITDA would have been negative $85 million. Turning now to net income. In Q1, we reported a positive $805.4 million in GAAP net income, which was mainly due to an approximately $1.1 billion mark-to-market warrant valuation. As in prior quarters, let me remind you again that this warrant mark-to-market is a noncash item and depends on the stock price at any given time. Therefore this net income, including the volatility, does not represent the operating performance of our business. Let me now turn to our financial position as a company. Cash, cash equivalents and investments as of March 31, 2026 were $3.1 billion. This provides us with the visibility and financial firepower to accelerate our R&D roadmap, invest in new product development, scale our go-to-market engine and also to acquire critical capabilities. In addition to supporting our investment capabilities, our financial firepower provides comfort to our customers that we will be there for them, not just today, but in the coming years. This helps us create stickier relationships with top-tier customers who want to align with our multiyear roadmap. With my COO hat on, let me highlight a few areas we are driving towards excellence in our execution. As Niccolo shared last quarter, that is one of our prime objectives for 2026. Last quarter, I noted that near-term demand for some of our products in compute was outpacing our ability to perhaps meet that demand. And so this quarter, I'm happy to report we've addressed that and already strategically accelerated our ability to address the demand by growing our deployment teams, forward deployed engineers, manufacturing capacity and field operations. For one small example, we have more than doubled our manufacturing over the Tempo to meet the demand that we are seeing. Looking into the future for our 256-qubit system, last quarter I shared that we had completed tapeouts A, B and C and have started working on tapeout D. This quarter, I'm pleased to update you that tapeout D has been completed. The designs have been handed over to the foundry and their chips are now progressing well through the fabrication process. As part of this process, we received the first fully fabricated ion trap prototypes. I'm happy to share that they're already beyond the critical quality metrics needed for 256-qubit devices. Not only that, but also these metrics are approaching what we will eventually need for our 10,000 qubit device and beyond. This is an important milestone; it means we're proving out the path for the 256-qubit chips that are in fab at this time as well as the generations beyond. Building on our progress at the chip level, I'm pleased to share that we are also now wrapping the first engineering prototype for the full 256-qubit computer. This means that we're now moving from component-level testing to system-level testing. These are very important strides towards delivering the full 256-qubit system to the market in the future. And we're not stopping there. As I mentioned, our team is already starting stride towards our seventh generation 10,000 qubit chips. The key to scaling into our 10K high qubit-count system is the integration of active CMOS design where SkyWater really helps. By moving control functions directly onto the silicon with CMOS, we are taking advantage of the scaling techniques of the existing global semiconductor industry. In a nutshell, we're executing on our strategy. Let me now turn to financial guidance. As you have heard today, we have built a strong foundation for what we expect will be another historic year for IonQ in 2026. With that in mind, we are pleased to raise our revenue guidance for the full year 2026 to be between $260 million and $270 million. For context, even the lower end of that guidance doubles the company's year-over-year revenues. For the second quarter, we are projecting revenues of between $65 million and $68 million. We are also reaffirming our projections for full year 2026 adjusted EBITDA to be in the range of negative $310 million to negative $330 million. We look forward to the remainder of 2026 with confidence and believe that IonQ is well positioned with the talent density, the processes, the technology and the innovation investment to remain the trailblazing quantum leader that we're establishing and have established already. With that, operator, please open the call for Q&A.

Our first question comes from John McPeake of Rosenblatt Securities.

Thanks, nice work. I believe you now have three customers for the 256: Cambridge, Quantum Basel mentioned on the last call, and Horizon Quantum. Could you discuss the likely delivery schedule and how we should expect revenue from these customers to come in? I have a quick follow-up after that.

Yes. Thanks, John. Thank you for the comments as well. Look, we are laser-focused on our fifth-generation machine because customers are laser-focused on it. The demand that we're seeing is actually for many more customers than I can share today. You mentioned a few important ones, but as I look at the demand for our fifth-generation machine, customers will often also want to look at our next generations. That remains very, very strong. So we will continue to announce new wins. I mean, the first quarter is obviously just the beginning. As I look through the rest of the year, the demand is strong. The need for us to have the manufacturing and deployment capabilities was necessary, as I mentioned last quarter. And we've made those investments by bringing on board and deploying, frankly, folks that will be building these. You'll see many more announcements coming in the future. I mentioned Scott and team are busy responding to some of the demand signals that we're seeing for Tempo. And importantly, early demand signals also for our 256. Remember, when customers buy something as unique as a computing platform they're buying the platform, meaning a multiyear view, not having to shift direction 12 months from now. So we're ensuring that we are in the right places with the right customers who not only have the desire and interest in our solutions, yes, but also the long-term conviction to remain with us over multiple years. Quantum Basel is an excellent example of that. And there are many more we'll be announcing. Our focus is to make sure that in 2026 we deliver on the guidance we've provided you and hopefully see Tempo be a big driver of that as well as the rest of our platform. But also 256 is just around the corner, looking into 2027 and beyond. So hope both of that addresses your question?

It does. I just have a quick follow-up. The roadmap has 1e-12 logical, very respectable 10^-7 2-qubit gate error rate. Will that be calibratable? In other words, could you have more logicals with slightly higher error rates? Is that in the cards because that's a very low error rate, but it's lower logical as a result.

Yes. So I said in my script that we're expecting 10^-12 error rates as our architecture matures. And so you're going to see even lower error rates in the coming generations of systems. The other thing that we are making progress on is reducing the ratio still further between the physical and logical qubit ratio. So I think there's probably some modest upside in the public roadmap that we published last June in terms of physical-to-logical qubit counts accelerating a bit further, at least on the logical front. But as we've said consistently for the last two, if not five, years, frankly, the advantage of our architecture is we have the highest fidelity qubits naturally. And that makes everything easier, right? It makes the ratio of physical-to-logical lower as it starts out lower even before we start trying to optimize it. And it means error rates are lower. And you can see, particularly the advantages in having lower error rates on things like Page 6 in the investor deck, where we're talking about time-to-solution and the high-fidelity 2-qubit parallel gate architecture we've developed. Time-to-solution is obviously a product of how many times you have to take what's called a shot in a certain algorithm and of course, how accurate the shots are. Our shots are all very accurate, so we don't have to take very many of them, and that's an advantage that we expect is going to endure throughout our entire architecture. And we're already obviously demonstrating this in grand style now. And obviously, with the walking cat architecture now all publicly available, you can see how we're going to hold that all the way through 2030.

Our next question comes from Craig Ellis of B. Riley Securities.

Congratulations on the momentum to start with, guys. I wanted to go back to the point that you made, Niccolo, on the April 14 photonic interconnect announcement. And it's great to see something that I think some people are calling an Ethernet moment. But the question is, as you look at what that means and how customers are engaging, what are the revenue implications of that either later this year or out on the roadmap as we look at that advancement in technology?

Well, we're not going to give you a precise guidance on the revenue impact in our quarters. But I will say that the beauty of our lead in quantum networking and photonic interconnects is threefold. One, we think we can push our systems a long way vis-à-vis getting millions of physical qubits on a single chip. At some point though, we may want even bigger systems. And so data center opportunities arise at some point in our architecture, whether it's two million per chip or it's four million per chip or even ten million per chip. At some point, we may want 100 million qubits. I'm very bullish on humanity's ability to take advantage of more compute power, and particularly more quantum computing power. And I think at some point in the future generations of quantum computers themselves will help us figure out how to optimize and take advantage of even bigger quantum computers. The second thing is it builds us an expanded merchant supplier capability. I talked in my prepared remarks about the fact that our quantum memory solutions and IP actually will allow multiple modalities to potentially connect together in a pretty seamless fashion and work together. And I think that's exciting vis-à-vis, again, where the world will be in the coming years and decades. Then thirdly, we've talked a couple of times about the fact that we have multiple customers in the networked quantum computer category. Air Force Research Lab is obviously the first of those, and that continues to be a large contract that we prove out every quarter and every year. My colleague Inder mentioned a few other customers, both last quarter and this quarter taking networked quantum computers. So in summary, there's really three great lever points for us, and we continue to invest and of course, protect our quantum networking and photonic interconnects because it's something that we've been working on, including from our founder Chris Monroe early on. Chris Monroe continues to work on that. So we're very excited that our lead there we believe to be as prodigious as the computing one. The world is going to need protected communications between quantum computers. This is precisely why we expanded the vision of the company 15 to 18 months ago from computing into networking.

Yes. And I'll just add, I agree with everything Niccolo just said. So in Q1, we saw growth in every product line year-on-year. And if you look at our guidance for the year without commenting on individual quarters, just look at the math: the company is doubling. Organic will be doubling. Therefore, the rest of the company's product lines also have a doubling effect on the company in total to get to the guidance that we've provided you. The interconnects, the ability to network our computers together, the ability to deliver hybrid compute — those are the things that we are uniquely positioned to do. We can connect an ion trap type of quantum machine with someone else's. We are, in that way, being very agnostic. We want the whole industry to grow. We want to become the networking and the compute leader in many ways in terms of our own innovation, and we want the rest of the industry to succeed as well because that's how you make a successful, durable industry. We have moved ourselves out of the lab into the commercial market. We want everyone else to do that as well, and that's how we grow. We are happy to see the results that we're delivering. We keep investing and Niccolo is constantly getting calls in for additional investment ideas. So I think there are ideas always that are in front of us. We are very happy with the portfolio we have. It was put together about a year ago by Niccolo's strategy: become the first quantum platform company, and establish a critical mass that allows the industry to scale, innovate and grow. So strong first quarter across every product line, a strong year. I think you can sort of do the math around the growth of the other products that are not discontinued.

That's really helpful, guys. And Inder, I'll ask a follow-up question that relates to the COO hat you also were wearing and it's directed at how go-to-market changes as you bring Scott Mallard in from Dell. You talked about wanting to be a service provider and span a range of solutions. You would seem to have just an ideal background for that. But how does go-to-market change as we think of the next few years in the company pursuing the roadmap that you laid out at Analyst Day?

Becoming a successful technology company is a team sport. You have to have the legal professionals to do the commercial negotiations. You're seeing leaders being deployed around the world, working in partnership with Scott and my teams in the finance area, helping Scott succeed. Scott himself is developing a methodical pursuit and capture process. These are not things companies do until they have critical mass. We think we're there. So that's where we're now investing: not just R&D, but go-to-market. Some of the leaders that have joined the company would amaze you in terms of their knowledge of the market and the mindset of the customer. There's not a vertical that I think quantum will not touch eventually; it will touch everything. Some will be early adopters, some will lag. Areas like financial services, which need protection now due to Q-Day, life sciences companies that need faster innovation because they're competitive and trying to solve some of the most intractable problems that humanity faces, and others. So we're happy to be the one that actually brings all that together, whether it's connecting our machine to someone else's or ours with interconnects. I'm happy to see the flywheel effect starting to take over. Happy to follow up with you offline as well.

Our next question comes from Troy Jensen of Cantor Fitzgerald.

Congrats on the results and all the technical milestones. Maybe to start here with Niccolo: I agree 100% around the cusp of all your quantum advantage, really helping to solve some commercial applications that we haven't done previously. But I was just curious, how do you think about pricing the value that you guys are creating? Because if you are enabling new drug discovery and new material science, there are huge market opportunities. So can you just talk about how you kind of price and think through the value you're delivering here?

So look, we obviously are innovating business models at the same time as we are building the quantum ecosystem. Inder has eloquently talked in the last few quarters about the platform strategy translating into real momentum. And so obviously, we are pricing things differently when there's a networked quantum computer and we're providing more value there than obviously just a single system that's not networked. There's going to be a fair amount of price exploration, frankly, on a global basis as our quantum platform continues to mature. What I am excited about this quarter, in particular this year, is that the market continues to come towards us. Inder mentioned the fact that at times, there is greater short-term demand than ability to supply it. So we're very focused on improving manufacturing capacity at IonQ across the entire platform. We are working on both individual customer sales that can at times be multiproduct, but we're also working on some very large initiatives at the national scale. And I think it's safe to say that there is a fair amount of bespoke consultative selling that's going on. If you think about the breadth and depth of our product families as well as the geographies that we now have traction in. Because of our cost advantages and because of the fact that we have always tried to forward-invest in manufacturing capacities, we believe we have the greatest power per unit dollar that's on offer in the marketplace. That's, of course, our goal. I have talked in prior quarters about the fact that we do three things at IonQ across the company: we meet and beat expectations, we continually refine our internal operating system, and we meet and beat financial expectations. So as we see how market demand evolves, we will get more efficient about what we're bundling and how we're configuring and delivering that. But right now, we're very much at the start of that S-curve, if you will. And I think there's orders of magnitude of growth to be had here and orders of magnitude of maturation to be had in our sales ops, manufacturing and deployment organization. We're proud of the fact that we believe we lead the industry right now in maturity, but we recognize that as revenue continues to grow, this organization will have to keep getting standardized and keep growing up. So we'll keep you posted as we standardize, but we're not quite at the point whereby we're listing rack prices on our website.

I think less about pricing; to me, it's more about meeting the customer where they are. So a customer can choose to buy a system, they can choose to access it via the cloud, they can choose to ask us to provide them an edge device that connects them to something. So we meet them where they are. It's less about competing on price. It's more about ensuring that we give them what they want and, frankly, can afford. Cloud access is obviously cheaper than buying a computer device. So not everyone will buy a computer. Not everyone will be happy with just cloud access.

Easy follow-up for you, Inder: did you report a number of 10% customers in size at all?

We did not in this quarter, Troy.

Our next question comes from Quinn Bolton of Needham.

This is Shadi Mitwalli for Quinn. Congrats on the progress. As IonQ transforms into a quantum platform company, can you just talk about some of the solutions you've been bundling for customers, and then has the bundling been more IonQ-driven or customer-driven?

Great question. The customer journey in quantum is not very dissimilar to the customer journey in traditional networking and compute. Sometimes customers start in one area and expand into another or vice versa. We have clear examples where a customer started by buying a network from us and then later asked us to add a computer and then maybe add security. On the other hand, somebody may start with the compute device sitting next to a GPU cluster or an AI factory and what they want is to have hybrid workloads. The types of large-scale matrix computations required for LLMs run on GPUs, but where you need simultaneous analysis of all possible outcomes in a fraction of the time, quantum can help. So we're seeing both. Over time, you'll see the industry evolving into something that resembles networking, and we want to be in every part of that. One important part to consider is there's a Q-Day coming up, and whether it happens rapidly or more slowly, there's a protection angle that has to be pursued. We're finding some customers say, 'protect me first, lock down my crown jewels, help me understand how I can protect what I value most and then go from there.' So all those conversations are happening. They're starting from different places and may end in different places. That multiproduct metric that we introduced this quarter is around how many customers or what percentage of our revenue is now employing more than one product. I think that's the network effect.

Our next question comes from Richard Shannon of Craig-Hallum.

This is Tyler on for Richard Shannon. I just wanted to first understand: when does the architecture that you had recently published intersect into your roadmap? Like, what size QPU would that architecture be implemented?

You're talking about the walking cat architecture for full fault-tolerance? We're going from 256 to 10,000 qubits out to 1 million. This full fault-tolerant architecture kicks in every generation, but obviously, 10,000 qubits is when you start to see all of the full benefits of the fault-tolerant architecture. So next year and beyond.

And then basically use that as a jumping-off point to go from 10,000 to 20,000 to 200,000 and then to millions. That leverages a semiconductor ecosystem that is well tested and developed and we can take advantage of.

So we're working on like three generations of systems at the same time. We're trying to continue to accelerate here every quarter. If we can find ways to go faster, we will.

And then could you level-set on how many satellites you have up in space right now? And if you could, what you think you would have exiting the year and whether or not you have a quantum memory in a satellite. And I presume that would be connecting Florida and Maryland, but any information on that would be helpful.

Some aspects of our business are highly classified. We have a constellation of satellites is what I can say. We look at the ability to connect things on the ground from ground-to-space, space-to-space and space-to-ground, and even under the water. So we want to make sure that we can meet the customers' needs and not everyone needs everything. We're very uniquely positioned with the most accurate atomic clocks and the most accurate sensing. And yes, we have satellites, too. So I look at it as that platform story: not everybody needs everything. But some of the things that we invest in are ground-based and some are not.

All I'd add is that we're focused on next-generation PNT, positioning, navigation and time. This is obviously dual-use. It's important for our Department of Defense customers and it's also important for things like the future of autonomous driving and more precision and robustness in GPS. We're a very unique company in the sense that we have a leadership position in QKD, optical interconnection space, quantum sensing in space and atomic clocks. So there's a good amount of both U.S. and allied enthusiasm for different configurations. We'll update the market as we can and as we make progress.

Our next question comes from Antoine Legault of Wedbush Securities.

Congratulations on the results as well. With regards to the timeline compression for Q-Day: Inder, you mentioned it briefly, but are you seeing a shortening of the sales cycles within enterprise customers? Or put differently, is there more impetus for enterprises to migrate to post-quantum cryptography standards? And has that driven any acceleration in revenue growth recently?

I can't comment on individual industrial customers. We are seeing customers wake up to the fact, not just because we're saying it, but because others like Google are saying it, that things are about to change in a very radical way in a very short timeline. If you look at our roadmap, our roadmap probably gets us there before many other companies. So the need for creating solutions that solve chemistry problems or encryption is real. We also have to ensure that we are ready to secure our customers. We're starting to see conversations around security more now than a year ago. I'm not going to tell you that everyone is thinking they need to do something tomorrow, but people are realizing it's not 20 years away. That's the difference. The national conversation is that when you have compute power that creates enormous amounts of capability, you also need solutions that help guard you today so you can deploy compute solutions and secure what matters to you. We're very unique in that mission.

And just a quick follow-up: on the recent Florida announcement, can you give us a sense of the scope of that engagement, what it means for the company? More broadly, do you see that as a replicable model in other states or jurisdictions?

It's a phased contract and it will connect a limited geography to start with, but there's ambitions from Florida's Secretary of Commerce to expand that to be a statewide initiative. Universities are leaning in in Florida; the state is leaning in. They recognize that as Q-Day comes earlier, the need to secure critical infrastructure for the state continues to climb. It's now inside the planning horizon for both enterprise and government partners when we're talking about something that is two to three years away, not a decade away. So it has been a nice piece of momentum. Landing and expanding like this is part of that precise strategy. We'll be growing in sophistication and we will be the leading player in security for the quantum era.

Our next question comes from Nehal Koski of Northland Capital Markets.

The $12 million impact from SkyWater, is that 100% realized in COGS? Would that have been 100% realized in COGS?

The expenses I talked about are more R&D, tooling and things like that.

Okay. So then can you talk to the driver of gross margin being down about 600 basis points quarter-on-quarter?

This is a nascent industry. Scale will build over time. We are very focused on gross margin, obviously. We start with a huge advantage. Niccolo mentioned this earlier: we have a bill of material that is a fraction of the cost of any other modality. So you start with that and then you add capabilities on top of it. The better way to think about a business like this, or frankly any other high-tech business on the cutting edge, whether it's AI or other, is EBITDA, and that's why we guide EBITDA because R&D is a big component as much as you're focused on COGS. R&D is an important ingredient in our recipe right now to maintain and accelerate our roadmap. As our revenues are doubling this year, we have the ability to then drive cost and margin improvements across goods sold. At the moment, it's a mix of things and depends on what you sell more of in any given quarter. So I would not over-index on gross margin; I'd urge you to think more about EBITDA margin.

Okay. Great. Two more questions, please. Niccolo, the walking cat architecture: can you discuss what you see as the advantages relative to some other qubit architectures, specifically superconducting architectures?

The main advantage is ours is shovel-ready and we're ready to go. We have gotten there first as we have with other areas. It is all-to-all communication, it is parallel gate execution, and we're going to have a lot more physical qubits, which means more logical qubits given our error correction ratio is very low on a single chip. So we'll be able to tackle problems in the fault-tolerant era that other architectures may not be able to because they won't have enough logical qubits. One hundred logical qubits will not do what 1,000 or 10,000 logical qubits can do on a single chip where they can communicate quickly and seamlessly to each other. The parallel gate aspect is quite unique. If you go through our bill of materials, which we announced last September at Analyst Day, our bill of materials in 2025 was under $30 million for the system — that's truly astonishing. It's manufacturable, has modest energy consumption, and because of the way the architecture is built, it's robust. We don't have a bunch of dilution refrigerator requirements that drive energy cost and BOM up. What we have is something that can fit near the front line, in a normal data center or office. And because we also control a lot of the IP for networking and memory, we have extensibility to full data center offerings already being worked on. Hybrid workflows and hybrid data centers are coming. IonQ, because we're networking-forward, has thought about how that component will fit into our architecture as we roll it out. You see customers beginning to work on that, including AFRL and others, and that's going to accelerate.

One thing that jumps out is the scalability and the relatively low physical-to-logical qubit ratios. Was that contemplated in the long-term roadmap you laid out a year ago where, for example, when you're talking about 200,000 physical qubits, you're at 8,000 logical qubits, implying roughly a 25:1 ratio? Was that already contemplated that you'd be moving forward with a walking cat architecture to enable relatively low physical-to-logical ratios?

Yes, for sure. We've been very clear on this. Because we have the highest fidelity and we've proven ion transport and high fidelities, we've been working with architecture for a long time. It's a multiyear effort. When we publish things in our roadmap, we have a very high 'say-do' ratio. We do what we say we're going to do both technically and financially, and these are goals our team prides themselves on delivering. We're proud to be first yet again. We continue to march up this curve right on schedule.

Okay. Great. And real quickly, do you have the average duration on the RPO?

You can imagine that it's multiyear. In our filings, we'll break out what percent of that will turn into revenue in this year and then the rest turns into future years. What I like about it is we're talking years, not just one quarter of visibility. That allows us to focus on long-term R&D investments for the next five years. The modalities that have lots of errors talk about error correction; modalities that have very few errors do not. The founders of this company decades ago focused on modalities with highest coherence and best fidelity, which are three of the four ingredients you must have. The fourth is speed, and we are trying to build the fastest, most powerful computing devices on the market. We're not just a maker of machines anymore; we are a maker of end-to-end solutions. That's why we look at the company as one P&L and focus on long-term outcomes.

Our next question comes from Peter Pang of JPMorgan.

Just on the near-term question, you guys gave an updated annual revenue guidance. Based on your second quarter guidance, it would imply a pretty flattish revenue through the remainder of the year. I know you guys talked about expanding capacity to accelerate the demand. To what extent are you still constrained as we look out into the back half of the year here?

We're exercising prudence. It's a nascent industry. When we guided for Q1 last quarter, we guided for a number you saw and we beat that by $15 million. We aim to be responsible stewards of investment, capital and what we say to investors with the hope that we can at least meet or exceed expectations. The total cost of ownership differentiation that we provide is not widely discussed yet. The fact that we can deliver 10,000 machines and then 20,000 and beyond as modular upgrades creates very sticky relationships with customers. Stay with us on the journey. The last several years suggest we can meet or even beat what we say.

Great. And then on the 10,000 qubit chip, can you update us on the timeline? Is that calendar '27 or calendar '28?

We are focused this year on Tempo. 2026: Tempo; 2027: in-market 256; and the year after that, 10K. Because we have an integrated team under unified leadership, we may be able to do things more efficiently and perhaps faster. We'll invest in continuing to move our roadmap left where possible. When we acquired Oxford Ionics previously, we moved our roadmap left, and with the proposed SkyWater acquisition, subject to approvals, we may be able to move it further. So that's the cadence: Tempo this year, 256 in 2027, 10K in the subsequent year, and we will continue to push if we can.

We're working on three generations in parallel. We've already had success on the 256 tape-outs with SkyWater this quarter and expect continued progress. The walking cat architecture is modular, parallel gate based, uses proven manufacturing techniques and is built for scalability. We're confident in our ability to scale from 10K to 100K to 1 million over time.

Our next question comes from Vijay Rakesh of Mizuho.

Great to see solid guidance. Two quick questions: one on the short term and one on the longer term. On the short term, as you look at that mix of hardware and platform services, should that mix be about the same going forward? Or do you expect one to accelerate?

It depends on where the customer begins their journey with us. The rule is to meet the customer where they are: sometimes they start with compute, sometimes with networking or security, and then they expand. Rather than worrying about which product grows faster, we look at the whole company as one P&L and try to drive outcomes. The multiproduct sales we just reported show customers starting with one product and adding more. I hope that number will continue to grow over time. Our focus is on one P&L, one R&D capability across the company and teams focused on driving innovation.

Got it. And then on your 2027 plan of getting to 10,000 physical and 800 logical, how is that looking?

Early indicators are positive. We have made progress on the tape-outs and system-level testing for the 256. When you get comfort with that generation, you can turn your focus to the next. There's always a learning curve and each generation helps the next. We're making steady progress.

We're building on decades of work. The components of our architecture have been demonstrated and validated. We believe we're on schedule and will continue to accelerate where we can. We remain focused on delivering results and executing on the roadmap.

This concludes the question-and-answer session. I would like to turn the conference back over to Niccolo de Masi for any closing remarks.

Thank you, operator. As I shared in our annual letter to shareholders last week, my personal journey with IonQ dates back to reading our founders' seminal paper on the world's first phonon logic gate as an undergraduate physics student in the 1990s. That moment was a shot heard around the world for anyone passionate about quantum mechanics and it cemented my commitment to this company's mission. Today, one year into my role as Chairman and CEO, IonQ has evolved from a quantum computing pioneer into the world's preeminent full-stack quantum platform and U.S. merchant supplier. We're the only company delivering integrated solutions across quantum computing, networking, sensing and security in all major allied geographies and in all domains from submarines to satellites for the warfighter. We believe passionately in the importance of our merchant supply mission for the U.S. and allied quantum industry. We are investing and building a foundation to support the acceleration and commercialization of the entire quantum ecosystem as we have already done with our atomic clocks, sensors and quantum networks. Our North Star is the pioneer of quantum solutions and quantum applications that create durable value across global industries, and we are poised to transform sectors spanning pharma, finance, energy, defense, materials, logistics, GPS, cybersecurity and far beyond. Our revenue momentum underscores how we are already positively impacting our global customers in these domains. We have 1,500 world-class professionals, comprised of over 300 PhDs and the deepest IP portfolio in the industry with over $3 billion of cash on the balance sheet. We are now moving from quantum platform building blocks to quantum platform execution at scale. IonQ is one platform, one team, primed and poised to win. I want to thank our shareholders for their continued trust and our colleagues for their extraordinary efforts. Thank you again for joining our call. We look forward to 2026 with confidence.

Thank you. This call has now concluded. Thank you for attending today's presentation. You may now disconnect.