Good day, and thank you for standing by. Welcome to the Rigetti Computing Third Quarter 2025 Financial Results Conference Call. At this time, all participants are listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I'd like to hand the conference over to your first speaker today, Dr. Sabol Khokonarani, CEO. Please go ahead.

Good morning, and thank you for participating in Rigetti's earnings conference call covering the third quarter ended September 30, 2025. Joining me today is Jeff Bertelsen, our CFO, who will review our results in some detail following my overview. Our CTO, David Rivas, is also here to participate in the Q&A session. We will be pleased to answer your questions at the conclusion of our remarks. We would like to point out that this call, Antigati's third quarter, ended September 30th, 2025, press release contains forward-looking statements regarding current expectations, objectives, and underlying assumptions regarding our outlook and future operating results. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described and are discussed in more detail in our form 10-K for the year ended December 31st, 2024, our form 10-Q for the three and nine months ended September 30th, 2025, and other documents filed by the company from time to time with the Securities and Exchange Commission. These filings identify and address important risks and uncertainties that could cause actual events and results to differ materially from those content in the forward-looking statements. We urge you to review these discussions of risk factors. During today's call, we will refer to certain non-GAAP financial measures. For details on these measures and reconciliations to comparable GAAP measures and for further information regarding the factors that may affect Rigetti's future operating deserves please refer to yesterday's earnings release on rigetti's website at investors.rigetti.com or to the 8k furnished with the sec yesterday after the close today i am pleased to report that during this past quarter we saw strong momentum with both the demand for our on-premises quantum computers and the development of collaborations to advance our own r d and the quantum ecosystem more broadly. On the technology front, we remain on track to deliver our 100-plus qubit chiplet-based quantum system with an anticipated 99.5% median two-qubit gate fidelity by the end of 2025. I'm also excited to share our 2026-2027 roadmap updates. We expect to deploy a 150 plus qubit system by or around the end of 2026 with an anticipated 99.7% median two-qubit gate fidelity. And by or around the end of 2027, we expect to deploy a thousand plus qubit system with an anticipated 99.8% median two-qubit gate fidelity. In September 2025, we announced purchase orders totaling approximately $5.7 million for two 9-qubit Novera quantum computing systems. Both systems are upgradable, allowing the customers to increase the system qubit count for more complex computations and research. One system is being purchased by an Asian technology manufacturing company. The system will serve as a test bed to develop internal quantum computing expertise. They also plan to benchmark and validate their own quantum computing technologies with the Novera system. The other system is being purchased by a California-based applied physics and artificial intelligence startup. The system will be used for quantum hardware and error correction research. Our open and modular architecture continues to allow us to integrate innovative solutions with our technology stack, including our project with QFOX and the Air Force Research Laboratory or AFRL to advance superconducting quantum computer networking. In September 2025, we announced a three-year 5.8 million contract from AFRL to advance superconducting quantum networking. Rigetti will be collaborating with QFOX on the project, a Dutch quantum technology startup developing leading frequency conversion systems for quantum applications a key challenge to networking superconducting quantum computers is the need to convert the microwave signals which are used to control superconducting qubits to optical photons that can travel along those fibers this project aims to deliver systems providing entanglement between superconducting qubits and optical photons the essential building block of quantum networking our new collaborations with the Center for Development of Advanced Computing or CDAC and Montana State University showcase the increasing maturity of the quantum computing ecosystem. MSU is the first academic institution with an on-premises Rigetti quantum computer in 9 qubit Novera QPU which will be used by researchers to advance quantum computing R&D. We intend to work with MSU on a variety of initiatives including research projects related to quantum hardware and hybrid quantum systems and co-development and testing of enabling quantum technologies and quantum system components collectively these initiatives underscore the importance of public-private partnerships in advancing next generation quantum technologies we also signed a memorandum of understanding with cdac india's premier r d organization of the ministry of electronics and information technology With this MOU, Rigetti and CDAC intend to collaborate on the design and development of hybrid quantum computing systems and related technologies and bring them to market. We are proud to be deepening our support for quantum computing capabilities in the academic and government sectors. We are equally excited to support NVIDIA NVQ-Link, NVIDIA's new open platform for AI supercomputer quantum integration. By providing low-latency and high-throughput integration between quantum hardware and AI supercomputing, NLEQ-Link is a very promising resource to accelerate hybrid computation development on the path towards quantum advantage. We remain engaged with the Defense Advanced Research Projects Agency, or DARPA, on stage A of Quantum Benchmarking initiative or qbi project on november 6th darpa announced the companies initially selected to participate in phase b of the qbi project although we were not selected at this time for phase b we received constructive feedback regarding our proposal and we will continue to work with their team we are optimistic that we will be chosen for phase b in the coming months lastly i am also pleased to share that the GATI plans to open an Italian subsidiary in the coming months. We believe that this development will allow us to accelerate our pursuit of business opportunities and talent in Italy as the region dedicates more resources and funding to bolstering its quantum initiatives. Thank you. Jeff will now make a few remarks regarding our recent financial performance.

Thanks, Subod. Revenues in the third quarter of 2025 were $1.9 million, compared to $2.4 million in the third quarter of 2024. On a year-over-year basis, our revenue for the quarter was impacted by expiration of the National Quantum Initiative and its pending reauthorization in the U.S. Congress. Renewal of the U.S. National Quantum Initiative sales to U.S. and foreign governments, and Novera, are all important to future sales. The recent sales, Sue Bode noted in his remarks, the two nine-cubit Novera system sales and the AFRL contract will benefit revenue in the fourth quarter and as we move into 2026. Growth margins in the third quarter of 2025 came in at 21%, compared to 51% in the third quarter of 2024. The lower gross margins on a year-over-year basis was due to the composition of our revenue and variability in the pricing in terms of our contracts. Our recent contracts with the UK's National Quantum Computing Center for Quantum Systems have a lower gross margin profile than most of our other contracts. On the expense side, total OPEX in the third quarter of 2025 was $21 million dollars, compared to $18.6 million in the same period of the prior year. The increase in total op-ex was due to annual salary increases, new hires, and higher stock-based compensation and consulting costs, primarily in research and development. Stock compensation expense for the third quarter of 2025 was $4.3 million, compared to $3.4 million for the third quarter of 2024. Our operating loss for the third quarter of 2025 came in at $20.5 million compared to $17.3 million in the prior year period. Our gap net loss for the third quarter of 2025 was higher than our gap net loss for the third quarter of 2024, primarily due to the non-cash change in the fair value of our derivative warrant and earn-out liabilities. We recorded a $10.7 million, or $0.03 per share, non-GAAP net loss for the third quarter of 2025, compared to a $13.4 million, or $0.07 per share, non-GAAP net loss for the third quarter of 2024. As of September 30, 2025, we had approximately $558.9 million of cash, cash equivalents, and available for sale investments and no debt. Subsequent to September 30, 2025, and through November 6, 2025, proceeds of $46.5 million were received from the exercise of slightly more than $4 million of our public warrants. As of November 6, 2025, cash, cash equivalents, and available-for-sale investments totaled approximately $600 million. Thank you. We would now be happy to answer your questions.

Thank you. At this time, we'll conduct the question and answer session. As a reminder to ask a question, you'll need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of David Williams of the Benchmark Company. Your line is now open.

Hey, good morning, gentlemen. Thanks for taking my questions. Maybe first, Bo, just kind of thinking about the DARPA Phase B, and just can you talk maybe a little bit about that? You said that you've received some nice or constructive feedback, but can you maybe talk around what is maybe holding that up and when you think we might have an answer or you might see that advancement happen?

Sure, David. So as we mentioned in the press release, DARPA did the initial selection of companies that they have got into phase B. Unfortunately we were not one of them but they gave us good constructive input on what we need to do and improve on to get into phase B. So we are working on that and it primarily goes into the area of error corrections and some areas of long-range coupling. Things that are important in the long term to get to the DARPA fault-tolerant quantum computing milestone in 2033 not as important in the short term to get to quantum advantage so a lot of our focus has been and continues to be on getting to quantum advantage in the next three to five years the thousand qubit and 99.9 percent to keep it gate fidelity gate speeds and with some error correction that was input was more on the ftqc milestone and there we need to increase effort further specifically in the area of error correction and in long-range coupling so we are incorporating that input we will continue to talk to DARPA we are still part of very much part of phase A and we'll continue to work with DARPA closely so we are optimistic we'll get into phase B soon exactly when that's hard to know but we'll continue to work on it but I mean DARPA's project as you know is a seven-year project so just because we didn't make the initial cut it's not a big deal we feel pretty good that we'll make the cut in the next few months here sounds like this is more kind of on a conceptual basis versus actual performance or what you're achieving today but but longer term conceptually that's fair to say i mean we fundamentally the data is really good and they liked it and we are very proud of the data that we have demonstrated both with our uncast system but as more important to the cps 36 qubit chiplet-based system with 99.5 percent two-qubit gate fidelity and about 60 nanosecond gate speech. That data is really impressive, and that's all positive. Where the constructive criticism came is how do we do error correction and things like long-range coupling to enable the FTQC milestone seven, eight years from now. So it's really the future work that the plan that we have needs further improvement. So it's a fair thing to say, as you correctly pointed out.

Great. Thanks so much for that. And then maybe just secondly here, I think in the past you've talked about 1,000-plus qubits and 99% fidelity and around 50 nanosecond gate speeds to achieve quantum advantage. And looking at your roadmap into 2027, you're awfully close to that, maybe just a bit short on the fidelity side. So I guess my question is, do you feel or what is your comfort level that you can get to that 99% fidelity in 2027? And then is that kind of a right way to kind of target in terms of when you think you can reach quantum advantage or do you think that pushes out a little bit further? Thank you.

That's a good question and really we are excited to disclose that the two big milestones one for 26 when we believe we will hit 99.7% fidelity at the 150 plus qubit level but more importantly the 2027 milestone when we believe we will get over 1000 qubits at 99.8% two qubit grade fidelity. You're right, I mean it's a significant jump up from where we are And frankly, the whole quantum computing industry is, including peers in superconducting quantum computing, but certainly when you look at other modalities, those numbers are impressive. It's 1,000 kubit, 99.8% at 60 nanosecond gauge speed. It gets us awfully close to quantum advantage, but not quite there. For quantum advantage, we still think we need the 99.9% two-qubit gauge fidelity, as well as some form of error correction. So between 27 and 29, which is when we still believe we will accomplish quantum advantages, getting the fidelity to that 99.9, and also error correction. Hopefully that answers your question.

Thank you so much.

Thank you, David.

Thank you. One moment for our next question. Our next question comes online with Gwen Bolton of Needham & Company. Your line is now open.

Hi, Shavodan and Jeff. I wanted to follow up on David's question just kind of around the roadmap. getting to 150 qubits next year and 1,000-plus in 2027. Sabote, can you just walk us through, is this still going to be a chiplet-based approach? Is it going to be on nine qubit tiles, or as you get to the 1,000-qubit system, do you see the number of qubits per tile increasing? And then maybe a related question, given DARPA seems to be interested in quantum error correction and long-range coupling. Can you achieve long-range coupling on the tile-based system? Can you give us your thoughts on that?

So good questions, Quinn. So 150 qubit with 99.7% 2 qubit gate fidelity, we definitely are planning on using 9 qubit chiplets. For the 1,000 qubit, our thinking right now is to go up to 36 qubit chiplets uh to get to the thousand qubit level at the 99.8 percent two qubit gate fruity by the end of 2027. that's our plan right now uh the main reason we feel confident that we will be able to get to thousand qubits at the 1998 is because of chiplets and the data we are generating with the current 36 qubit system as well as all the experiments we are doing with a 100 qubit system that we hope to launch here fairly soon. Regarding DARPA's input for error correction and long-range coupling, fundamentally we have not seen any challenges in using chiplets and long-range coupling. The challenges are pretty much the same, whether it's a single monolithic chip or chiplet-based system. Long-range coupling is a challenge for the whole industry, not just us. And as far as we have seen, chiplets don't change that challenge. It's still the physical distance between the qubit and how do you couple qubits across the width, across a certain width. It's nothing to do with chiplets per se. So we feel pretty good that we need, I mean, we obviously need to improve long-range coupling, that was part of the input, but it doesn't make it worse just because we have chiplets. Hopefully that answers your question.

That's great. And then one for Jeff, Jeff, I think you mentioned in your script the AFRL contract as well as the two nine QBIT Novera sales would start to, you know, generate revenue in the fourth quarter and into 2026. I guess maybe on the two Novera sales, I think you in the press release talked about completion or delivery of those systems in the first half of 2026. Is this sort of a revenue rec that you'd be able to rev-rec those sales upon delivery because they're systems, maybe not just QPUs? Is there a percentage completion accounting that is used for those systems? Maybe just walk us through how you rev-rec on the Novera sales, if they're systems rather than just QPUs.

Sure. On the two Novera system sales, I mean, we, you know, anticipate recognizing the revenue for those upon shipment. Right now, it looks like one of them will go in the first quarter, one in the second quarter. But, you know, upon shipment would be the manner of REVREC.

Excellent. I'll go back.

Thank you. Thank you. One moment for our next question. Our next question comes from the line of Krish Sankar of TD Cowan. Your line is now open.

Good morning. Thanks so much for taking my questions. This is Stephen calling on behalf of Krish. First question for others to go to Jeff. Regarding the two Novera system sales that you discussed, just kind of curious, just given the size of the orders, are they both complete systems that include dilution fridges and full control systems, or is one of them potentially just a QPU chip sale? And as far as the upgrade option, is that already currently baked into the price that you guys announced, or is that an additional revenue step up or adder later on further down the line?

Sure, I'll take that. So they are full systems, so they include everything from a dilution refrigerator to control systems. So they are complete systems. Regarding upgrade, when the customers upgrade them from 9 qubit to, let's say, 36 qubit or something bigger, it will be an additional revenue opportunity because we have to go and add some cables and those kinds of things inside the dimension refrigerator to account for the additional qubits. Certainly, obviously, the chip has to change too. So there will be an additional revenue that comes with upgrade from 9 qubit to a higher qubit count sometime in future.

Okay, got it. Thanks so much for that. And for my second question, I wanted to ask a little bit about the upcoming or future support for NVIDIA's NVQ-Link interface. Can you talk about some of the, I guess, software or hardware changes that you need to make to your IPTPs or control systems in order to support that? And also related, any thoughts in terms of hybrid quantum computer support? Is this really more just for the supercomputing space or do you think that MDQ-Link could also allow quantum systems to be placed alongside in the AI data centers for Gen AI type of application?

Great question, Stephen. So if you look at NVIDIA's MDQ-Link announcement, it's an open format for quantum computers to basically interface directly with AI supercomputers. So the idea is indeed to have quantum computing start being used with Gen AI and potentially for HEI-type applications. Now, from our viewpoint, this was a natural step. We have always said that we believe in hybrid systems. We have always supported hybrid system standards. And that's partly because of the strengths of superconducting quantum computing where we have speeds that are commensurate with CPU and GPU speed. So it's logical for us to try to interface with HPCs. And that's why we believe superconducting quantum computing is most amenable for hybrid computing compared to other modalities which are a thousand times lower, like trapped ion or pure atom modalities. So for us, it was a logical step when NVIDIA started discussing an open platform like NVQ Link. We obviously signed up with it. It fits in with our vision and strategy of having a quantum computer as part of a hybrid ecosystem. We certainly expect products like that to start coming into data centers once we get closer to quantum advantage although interfaces will be worked out between now and then so the timeline for having quantum computers in data centers doing practical applications doesn't change because of the NVIDIA announcement what it does change is the whole notion of how a hybrid system will work and open standards that support the hybrid systems. Hopefully that answers your questions.

Yes, thank you so much.

Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Greg Ellis of BYU Securities. Your line is now open.

Yeah, thanks for taking the question. I wanted to follow up on a couple of prior questions to start. So, Subodh, with regard to NVQ Link, NVIDIA is very, very strong in the national labs. Rigetti has a very strong position in national labs. So can you talk about what Rigetti's historic strengths with national labs mean for engaging with ecosystem partners that can help accelerate Rigetti's integration with hybrid compute and getting pulled into various workloads, including AI-related workloads with MEQ.

Sure, Keg. So you are indeed right. I mean, NBD has a very strong presence in national labs, and so do we with quantum computing. So it's logical for the interfaces to be worked out at national lab level, whether it's for me, national lab, or the Oak Ridge National Lab or other national labs. Also, the NQI initiative, although not funded at the higher level, the funding has restarted last week, as you probably saw. So it's exciting to have national labs get their funding back again to some reasonable level, and this NVQ-Link platform being launched at about the same time period. So certainly, we believe, as we have discussed in the past, that in future CPUs will continue to be used for sequential computing and GPUs will be used for parallel computing as they are being used today. And QPUs, quantum processing units, will be used for simultaneous computing. So everything we have discussed in the past, now we have a chance to start demonstrating it in real life in partnership with NVIDIA, with their NVQ-Link platform, as well as the Kudakure quantum platform. So definitely expect more work in this direction where we will be able to generate data where we take generic applications and split them into sequential, parallel, and simultaneous and show how the three respective technologies are suitable and the benefit of having the three technologies work together in a complementary way. That we believe is the best way to address future computation needs.

That's really helpful, Subo. And Jeff, I wanted to ask a follow-up clarification to you regarding the AFRL deal at $5.8 million. I think that was $3 million, or excuse me, a three-year deal, three-year deal for $5.8 million. Does that red brick fairly rateably across 12 quarters, or how do we think about red brick? And is that kicking off in the fourth quarter or early next year?

No, it will be fairly rateable over the three years, Craig.

And, you know, it actually, you know, we got a little bit of it in the third quarter, so it'll be, you know, rateable going forward. got it nice to get that going and then lastly if i could guys just any any commentary on uh potential um exploration of m a or or other um other inorganic activity with a cash balance of 600 million as something that might either accelerate or or add strength to the road map that you just announced the uh the details roadmap out through 2027 thank you so it's a good question and we

discuss um both our current cash balance and what whether what the needs are in future as well as opportunities to do any m&a to help accelerate our roadmap as you saw we have been able to accelerate our roadmap quite significantly we are talking about 99.7 percent next year with 150 qubit and more importantly more than thousand qubits and 99.8 at the in by the end of 2020 roughly. And that's really without doing everything organically on our own, which obviously we prefer. We think we have all the necessary technology components internally right now to be able to execute that roadmap. And the main reason for that is the success we are having with our chip-lit technology. We feel really good about executing that roadmap right now. If we find someone who could help us accelerate our roadmap further, we obviously we'll take a look at it. But right now, we believe we are in a leadership position, and we'll continue to execute well to get to that roadmap.

That's helpful, and congrats on the roadmap progress, Shubha. Thanks. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Brian Kingston of Alliance Global Partners. Your line is now open.

Great. Thanks so much for taking my question. A follow-up on the roadmap. I'm curious what progress you are making currently on fidelity and when you expect to achieve 99.7% medium two-qubit gate fidelity for a nine-qubit chip and when that has to happen in order to start the tiling process to get to 100 qubits by the end of 2026.

So good question here. I mean, we are making nine-qubit chiplets right now. We are tiling them to get to our milestone for this year, which is 180 qubit, more than 100 qubit at 99.5% before the end of this year. Certainly as we are doing that work, we are seeing a very good two-qubit fidelity level with the individual nine-qubit chiplets, and that gives us confidence that we should be able to get to 99.7% by the end of next year with more than 150 qubits. Regarding the 1,000 qubit, that's a little more challenging as one of the real questions had come up. We believe we are going to increase the size of the chiplet to about 36 qubits. So we have to prove that out, that at 36 qubit chiplet, we can tile multiple ones and still maintain high fidelity. That's the work we'll be doing next year in anticipation of demonstrating more than 1,000 qubits at 99.8% by the end of 2027. But we certainly, all the data we are generating right now with the nine qubit chiplet gives us high confidence that we will not only be able to execute this year's roadmap, which is more than 100 qubit at 99.5, but more importantly, end of next year's roadmap, which is more than 150 qubit at 99.7. So the chiplet data is good enough to give us high confidence with both of those milestones, and that's what we are relying on to get us 1,000 qubit at 99.8 by the end of 2027.

Thank you.

Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Richard Shannon of Greg Hahn Capital Group. Your line is not open.

Great. Thanks, Sabo and Jennifer. Let me ask a couple of questions here. Looking at your 10Q, and you have a passage in here about you may significantly increase your CapEx, including upgrading your chip FAD facility or an entirely new one here.

Maybe you can tell us a little bit about what this potential might be when you might decide this and what's the kind of scale and the best one are we talking about here so sure so right now um we have a 150 millimeter chip fab facility in fremont california and it's fairly manual in operation it's obviously doing a good job of giving us the current data and we feel very good that that fab will continue to give us good data for the next two three years and quite capable of meeting our needs for the next two to three years including the thousand qubit at 99.8% milestone that we talked about by the end of 2027. The challenge we see is getting to more than 99.9% two-qubit grid fidelity with several thousands of qubits. We believe that the current fab will have limitations, not capacity limitations, but capability limitations, primarily because your tools at 150 millimeter are not as good as they are for 200 or 300 millimeters. because the semiconductor industry has standardized around 200 or 300 millimetres. So we think we are going to need 200, 300 millimetre type tools and more automation in our line for capability, not capacity. And we think we are going to need it for beyond a three-year horizon. Now, typically it takes a couple of years to build a fab. So if you need something in three years, we there's a high chance we will have to start of thinking about real capex needed roughly a year or so from now and that's what the statement was about that anticipating that we have to invest in a new fab we will have to start thinking about capex needs roughly a year or so from now there are various alternatives being discussed by commerce and other other areas with a national lab somewhere in the U.S. is being contemplated and obviously if any of those initiatives take off we will be part of those initiatives so it will not be that riggedy has to shoulder all the burden for a full 8 inch or 12 inch fab. To answer your question I mean a quantum fab is significantly simpler than a state-of-the-art CMOS fab because our lateral dimensions are a lot more forgiving. Our challenges are vertical dimensions which come from oxidation and those kinds of things. And also we have a lot less lithographic steps compared to our CMOS fab. So the combination of forgiving lateral dimensions and significantly reduced number of lithographic steps, you are talking about hundreds of millions of dollars for a brand new quantum fab of 8 inch or 12 inch compared to as you know we are talking about 20 to 25 billion dollars for a brand new CMOS fab because of the lateral dimensions involved as well as the complexity. So a quantum fab intrinsically is a lot cheaper, if you will, compared to a brand new CMOS fab. But still, it is, we are talking sizable numbers here, hundreds of millions of dollars.

And that's what the statement in the 10Q is about, that we may start looking into that if there is no national initiative that commerce or somebody else leads that allows us to be part off does that answer your question it does about let me follow up on that topic here which is um to what degree do you would you wish to have something standalone versus shared here but also you know you know sharing ip and maybe even worrying about ip leakage here what's kind of the puts and takes in that sort of decision well the puts and takes are no different than the regular semiconductor industry.

I mean as you know the most advanced fabs right now are run by companies like TSMC which are foundry type model and there is no IP leakage. They take tremendous care. I mean Nvidia and AMD are both making their advanced chips at TSMC right now and there is no IP contamination. So foundries have mastered the art of meeting multiple customer design needs without any IP contamination and assuming a foundry model takes off and the US as a country we have a state-of-the-art fab which doesn't exist today by the way I mean so we will have one way or another there has to be a brand new fab coming along somewhere in the US for quantum technologies but assuming a faulty model is established we will be happy to take a look at it because we know it works but at the same time if it if it doesn't happen the numbers are not that daunting as I said we are talking hundreds of millions of dollars not tens of billions of dollars like in CMOS so it's conceivable that

we are known or we in partnership with some other company could do this kind of thing without going to a full all-out phone remodel okay that's helpful detail here maybe a follow-on question here for Jeff a number of questions here earlier in the in the call here about the future rev rec for both the AFRL contract as well as the system sales here. How do we think of kind of a general profile of gross margins as additional revenues or kind of general thought process here, especially since gross margins here in the third quarter are lower than what you've seen in the past? Thank you.

Sure. So, you know, gross margins were lower, as you pointed out, in the third quarter. It really is due to the variability in our contracts. And sometimes we do these contracts for strategic reasons or because they're going to advance our R&D necessarily more than the margin profile. You know, I do think with some of these other sales, particularly, you know, some of the Novera sales, you know, margins will be a bit better than certainly than what we've seen here in the third quarter and even, you know, earlier in the year to a certain extent.

Okay, great. That's all for you guys. Thanks.

Thank you. We'll move in for our next question. Our next question comes from the line of Troy Jensen of Cancer Fitzgerald. Your line is now open.

Hey, gentlemen. Congrats on all the great progress here. Maybe a couple quick questions for Sabood. Just curious on the 2027 target of 1,000 qubits. What types of applications would your system be able to run at that status?

Great question, Troy. I mean, this is where I think the exciting part comes in. I mean, the announcements we have done with NVIDIA, with NVQ-Link, and hybrid systems, I think it's all coming together in about the same time period. So imagine a world where there is a hybrid system offering between us, NVIDIA, and a few other companies where you have a thousand-qubit physical, a thousand physical qubit at 99.8% two-qubit get fidelity interfacing smoothly with the state-of-the-art CPUs and GPUs. We believe the kind of applications you'll be able to take on would be the complex ones that struggle with CPU and GPUs today. We are talking about things like drug discovery or financial forecasting or material synthesis, those kinds of applications. We don't think we will be talking about encryption or decryption still at that point with those kinds of metrics. But certainly, areas where you have thousands of variables that are interacting simultaneously that current CPU and GPU architectures struggle to keep up with, those applications will start coming our way. So, as I mentioned, a lot of forecasting type applications, whether it's financial forecasting or drug discovery type stuff or weather forecasting kind of stuff, are the ones that I anticipate will start using quantum computing in a hybrid setup in a couple year time period.

Perfect. All right. And then just a question. I'm just curious here. The customers that are buying these nine qubit systems, why would they not buy the 36 qubit system now?

A good question. We asked the question to them too. And they are buying physical on-premise quantum computers right now because they want to fundamentally understand how quantum computers work because they are doing some research on some aspect of quantum computing themselves. but they need to understand how fundamentally the hardware works, what kind of pulses do we send, how do we tune, recalibrate and detune and all those kinds of things. So a 9 qubit is a good starting point for those kinds of things to understand how a quantum computer works. But as we discussed, they clearly are interested in upgrading it at the right time. Once they are confident they understand how 9 qubits work, I'm pretty sure they will want to upgrade it to tens of qubits, whether it's 20-odd qubits or 30-odd qubits, we'll see what their interest level is. But they will certainly be interested in upgrading, and that's why the systems are designed so that they are upgradable. There will be an additional revenue recognition at that point because we have to change the chip, we have to change the wiring, and a few other things. But fundamentally, the systems are designed so they can handle up to 50 or so qubits.

Okay, makes sense. Keep up the good work, General.

Thank you, Troy.

Thank you. one moment for our next question. Our next question comes from the line of David Williams of the Benchmark Company. Your line is now open.

Hey, thanks for letting me ask the follow-up here. Just wanted to ask Subodh, if you kind of think about your foundry, as you spoke about earlier, is there a possibility that you could transfer your technology today to an outside fab that's slightly more advanced, that you could get better fidelity? And just kind of thinking about the thousand qubits, is there a potential to maybe get to that 99.9% alternatively using another FAB source?

Good question, David, and we are talking to existing foundries that are doing some quantum computing-related work for some of our peer companies. So we are exploring those options, and certainly if it gives us a bumper-win performance, we would love to have it. As of today, we haven't found anyone who's quite that capable of running the types of materials and processes that we run for superconducting gate-based quantum computing. We know in the other forms, like superconducting annealing and some other modalities, like photonics, there are some foundry companies that are doing some work for some of our peer companies. And we are talking to them to see if we can use that model. But as of right now, all the leaders in superconducting gate camp, including us and other companies like IBM and Google, as far as I know, none of us are using a foundry model at this time. But we will continue to explore those options. If an existing foundry meets our requirements, we would love to have it, obviously. It changes a lot of capex if that is the case. But as of today, we are not confident that existing foundries can meet our requirements.

And then maybe just one last one here on Craig's question about M&A earlier. Do you think you have the right kind of path forward on the control side? And you kind of talked about needing to transition to a flexible cabling platform. is that an area that you could potentially be looked to outside sources for acquiring, or do you think you have that under control today and have the path forward there?

Well, I mean, on the control system itself, as you know, we are partnered with Quanta Computer, who's a leader in CPU, GPU servers, so we feel very good about our strategic partnership with Quanta Computer for the control system itself. Regarding the cables that go inside the dilution refrigerator, you're right, we need to move to flex cables in the next two to three years. We have good technology ourselves along with some subcontractors that we use right now. We have a lot of IP in that area as well. So we feel generally good about our path forward. But if, again, as I mentioned, if we find someone who can help us accelerate our roadmap, we will absolutely be willing to take a look at that kind of a company.

Thank you. One moment for our next question. Our next question comes from the line of Gwen Bolian of Needham & Company. Your line is now open.

Thanks for taking my follow-up. Somebody mentioned the Energy Department announcing, I think it was $625 million to invest in the National Quantum Research Center. I was just wondering, you know, how does that affect the business? And do you have any updates, what you're hearing in Washington on just the reauthorization of the NQI Act?

So yeah, so NQI ran out of the original act was signed in 2018, I believe. It ran out of money somewhere towards the end of 2023. NQI reauthorization was supposed to be signed at that time. Obviously, it hasn't happened yet. A lot of discussions have happened. Multiple versions of the bills have gone between the House and Senate with numbers as high as $2.5 billion dollars over five years that was practically four to five times higher than the original NQI which was $625 million over five years. Now the latest one that got passed last week is a re-instating the original amount so at least we are up from virtually nothing to back to $625 million over five years so $125 million per year which is better than nothing but nowhere close to the 2.5 billion dollars that are being discussed now this is just a first step is what we understand there's still discussions going on and we definitely expect a much better funding situation for doe in the next few months but exactly when that will happen given the current government situation and the time it takes for bills to get signed and appropriated we can't we can't tell you what exactly the date will be or what amount will be. But definitely a much bigger amount is being discussed for DOE in the upcoming months here. But at least it's good to get it back to the original amount, which was $625 million over five years.

Excellent. Okay, thank you. Thank you. One moment for our next question. Our next question comes from the line of Tyler Anderson of Greg Holland Capital Group. Your line is now open.

Hi, Sabo. This is Tyler Anderson on for Richard Shannon. So I have a housekeeping and a technical question. For Q4, what do you guys expect the share count to be? I noticed there was a few warrants that were exercised subsequent to the end of the quarter.

Sure, Tyler. So I would say, you know, and it's going to depend on how many warrants get exercised, of course, between, you know, November 6th and the end of December. You know, as of November 6th, we had 330 million shares outstanding, so, you know, I would probably plan on, you know, maybe 335 or something like that. Again, it could flux a little bit depending on how many warrants get exercised.

Okay, great. Thank you. And then, so these tools that you expect to purchase for new foundries, are you waiting for new tooling to be developed or the tools that you expect to purchase, are those upgradable once you have those and new capabilities become released? And how does that, if they are and you do plan on upgrading them, how does that change the pace of your roadmap in terms of qubit density and fidelity? day?

So the roadmap is, right now the roadmap that we have disclosed for 26 and 27, just to be clear, we are still counting on our Fremont fab to be able to give us those chips. So we are not assuming that we need a new fab or even a new foundry somewhere to help us execute that roadmap. So the 26, 27 milestones we feel are pretty good with the existing fab. As discussed earlier, we are looking at options including existing foundries that are out there and if an existing foundry model works that obviously is the easiest one to execute assuming it doesn't then we are looking at investing in a fab on our own or to some kind of initiative that the US government initiates and we are open to options there are some clearly a new fab will be that an 18 or 12 inch so it's very unlikely that any of our existing tools, except for wet baths and stuff like that, which are relatively small in the big scheme of things, can be repurposed. Most of the tools will have to be new at the 8 inch or 12 inch level. So it will be a substantial new capex. But we are talking about, again, compared to CMOS, many small numbers, hundreds of millions of dollars. And that's assuming that the existing foundry model doesn't work or we have to take the entire burden ourselves. Hopefully you'll find easier, cheaper alternatives here. Hopefully that answers your question.

Partially. So with the tools that you purchase, would those potentially be upgradable for just quantum add-ons that tooling companies are thinking about?

Yeah, they should be. I mean, fundamentally they are very similar kind of tools, so they should be upgradable in the future. And is there any capability that you would look for in a foundry? if you were to purchase one I mean right right now as you know in the super conducting gate camp we use what is called as Josephson junctions and then we create gates between the qubits so materials themselves are superconducting materials like aluminum and aluminum those kinds of materials are which are not normally available in the CMOS world the processes there are some unique processes that we do to enable our superconducting gate chips again so slightly different materials and slightly different processes that's what we need some foundries that are doing like superconducting annealing type approaches they have some of the tools that we need but not all of them so we that those are the options we are looking at right now to see whether we can use some of those models after our Fremont FAB before we have to commit to a brand new FAB ourselves.

Awesome. Thank you, and congrats on the roadmap.

Thank you, Tyler.

Thank you. I'm showing no further questions at this time. I'll now turn it back to Dr. Sobolka Konari for closer remarks.

Thank you for your interest and questions. We look forward to updating you after the end of next quarter. Thanks again.

Thank you for your participation in today's conference this concludes the program you may now disconnect