compared with 569 million as of march 31 2026 and 589.8 million as of december 31 2025. we continue to operate with no debt and given our current operating profile we believe our capital position provides sufficient runway to execute against our technology and system deployment milestones including continued progress on scale fidelity system integration and our planned investment in the United Kingdom. Capital expenditures in the quarter were primarily driven by investments in Fab 1 and additional dilution refrigeration capacity to support higher cuba count systems. As we noted previously, we expect 2026 CapEx to be elevated relative to prior years, largely due to investments in dilution refrigeration and fab equipment. our approach to capital deployment remains disciplined and consistent with what we have discussed on prior calls the majority of our spending is directed toward core r&d activities that directly advance our technology platform including our chiplet-based architecture control systems and cloud integration we are not managing the business around short-term revenue optimization We are managing it around credible long-term progress toward quantum advantage and commercially relevant systems. Should we move from the current LOI to definitive agreements with the Department of Commerce, we would expect the CHIPS Act's funding to be deployed in a way that is tightly aligned with this philosophy. That means focusing the capital on specific technical programs that address scaling bottlenecks and packaging and enhancements while being mindful of potential dilution associated with any equity issuance. To close, our financial strategy is unchanged from what we outlined last quarter. We are focused on maintaining flexibility, funding innovation responsibly, and aligning capital deployment with the long-term value creation of our technology roadmap, including the chips act funding quarterly results will continue to reflect the early stage nature of the quantum computing market and the timing of large system contracts what but we believe our balance sheet and capital discipline position us to execute with patience and control with that i will turn it back to sue boat for closing remarks before we open the call for questions thank you jeff we are encouraged by the progress we are making on our technology roadmap, the strengthening engagement we are seeing from customers across cloud and on-premises

channels, and the strategic support we are beginning to see from governments such as the United States and the United Kingdom. We remain focused on delivering against the milestones we have laid out, including fidelity improvements on CFS-1108Q, higher qubit systems, and disciplined execution of our capital plan. On behalf of the entire Regatee team, thank you for your continued interest and support. Operator, we are now ready to open the call for questions.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And our first question comes from Brian Kinslinger of Alliance Global Partners. Your line is open.

Hey, guys. Thanks for taking my question. On the last conference call, you highlighted coherence time as the primary limitation on your new architecture to fidelity and that you believed you could address that challenge. Then you gave some details around that today. When is a reasonable time frame where we can expect to see that impact fidelity?

Thanks, Brian, for the call. Indeed, as we discussed in the call, coherence time is the limiting factor for two-cubit gate fidelity at this time, and that's why we are so focused on improving coherence time. Right now, it's in the 25 to 30 microseconds range. We want to obviously bump it up as much as possible, but we think a factor of two or three improvement is practical in the near term, and that's what we are working on. The kind of stuff we are working on, we disclose during the call, things like smoother interfaces at the Josephson subjunction level, or capping off the niobium bactantilum, which seems to improve the coherence time. And we have published some papers along those lines. Those are the kinds of things we are doing. We definitely expect fidelity to increase at the 108 qubit level before the end of this year, and we'll update everyone when we are ready to deploy a new system. I just want to put some of the developments in a little perspective here. Keep in mind that there are only three very capable, more than 100 qubit systems in the gate-based world in quantum computing right now. Besides, IBM at 120 qubits, VR at 108, and Google's at 105 qubit. Everyone else, even though they may be talking a lot about roadmaps and future, are well below that, and many companies are well below 50 qubits when it comes to actual systems. We get incredible feedback from end users who are using our systems every day that our system is one of the easiest to use and has consistent uptime. So we want to be careful that before we upgrade our system, if you will, with higher coherence time and higher fidelity, we have checked off all the other metrics and we don't inadvertently go backwards in the technical progress. So we are careful with how we are doing the experiments and how we will deploy it in the actual system that is deployed for the whole world. Hopefully that answers your question.

It does. If I can just ask one follow-up. A few months back, there was a change in the leadership in DARPA's QBI. Has this had any impact on Rigetti's chances of getting to stage B, and do you think this is still achievable by year end? Thanks for taking my question.

Certainly, there was a change in leadership at DARPA. Our plan stays the same. DARPA gave us a bunch of areas where they wanted to see improvements to get into phase We continue to work with them. We have periodic calls with them and meetings with them, and we will continue to demonstrate improvements in the areas that were pointed out. We still feel optimistic that we will get into DARPA phase B relatively soon. It's impossible to predict the exact timelines on all these kinds of things, but we continue to make very good progress, and we continue to believe we will get into phase B soon. Along with DARPA, there are other initiatives, as I mentioned in my call. There is a UK Governments Procure Initiative, which is kind of like the DARPA QBI initiative and some other initiatives across the world. So we are engaged in multiple initiatives like that, so it's not just DARPA alone. And as you saw, the Department of Commerce in the U.S. created a separate initiative focused on accelerating roadmaps, and we are definitely part of that. So DARPA is and will continue to be an important player in the quantum computing ecosystem, but it's not the only one. There are multiple areas that we are participating in right now.

Great. Thanks, Jibar.

Thank you, Brandon.

Thank you. And our next question comes from Chris Sankar of TD Cowan. Your line is open.

Hi, thanks for taking my question. Just the first question on the current path that will be in Tremont. with current tooling and your, what's the annual QPU production capacity and what kind of CAPEX requirement should we expect for that?

So Krish, right now the fab one we have in Fremont is a 150 millimeter fab. Frankly, capacity is not a concern at all. We have plenty of capacity in that fab with 150 millimeters because each quantum chip is capable of significant computation, as you're aware. So we make a number of nine qubit chips right now, and with our chiplet architecture, we are using nine qubit chiplets to get a 36 qubit system or 108 qubit system. In future, we believe we will make things like 36 qubit chiplets that will take us to 1,000 qubits and beyond, and we will continue to increase the size of the chiplets in the future. Right now, I mean, to give you a reference, the 9-cubit chiplet is roughly 6 mm by 6 mm. So as you can imagine, we can build plenty of 9-cubit chiplets in a single 150 mm wafer, and we can run number of wafers a day. So capacity is not an issue at all. The challenge, of course, is getting the capability out there, and there are some limitations with 150 millimeter equipment because and it's not an automated line and we believe there are some limitations that come with non-automated line and 150 millimeter size so we continue to look at alternative options for upgrading the fab but it's mostly for capability not for capacity that's a very helpful support another follow-up on the hpe chip so 9 qubit never a qpu system will you be providing this qpu chips only or would it be qpu plus dilution storage controls and other infrastructure and what is kind of like the timing for delivery on that so um yeah it's a good question and we are really excited to partner with hpe and principal supercomputing center it's really a great initiative to demonstrate how hybrid computing works. If you go out there right now, a lot of people talk about hybrid computing, but honestly, there are very, very few places, in fact, hardly any, where you can go and actually do demonstrate hybrid computing and how it's supposed to work. So we believe we will be one of the first ones to do that, along with HPE. Our contribution to that NSF sponsored project is a full nine qubit system. So not just the QPU, but the QPU plus dilution refrigeration plus control system and everything obviously HPE is a top player in the HPC world so HPE's contribution is HPC and then the interfaces is what we will be working on and that's really the role of Pittsburgh Supercomputing Center so it's going to be an exciting project to bring in the best of HPCs the best of quantum computing and allow access to anyone in the world so that they can easily play around with hybrid computing and see how hybrid computing works. In particular, I will bring forth that because we are using superconducting gate technology, we have a huge benefit in terms of speed. Our gate speeds are in the 50-60 nanosecond range, which are roughly 1,000 to 10,000 times faster than trapped ion or atoms or other modalities. And that really will shine and will come forward when we show the data coming out of hybrid computing, because clearly a trapped ion or an atom-based quantum computer with its very, very slow speed will have a tough time keeping up with CPU and GPU. And you can see that in some of the results being discussed when they talk about hybrid computing, whereas with superconducting computing, you will really see the benefit of speed and how speed helps in the overall uh computation and coming to the correct answer much much faster than with other modalities so we are pretty excited about this partnership opportunity and demonstrating how hybrid computing will work particularly with superconducting maybe just just to follow up on that with jeff sorry last question um timing of delivery and how to think about rev rec for this yeah so we believe the delivery will be sometime in 2027 We don't know the exact quarter yet. The program just got kicked off recently. As we find out, we will be transparent about the timelines. But at this point, it definitely will be a 2027 delivery. We'll let you know once we know exactly when it will happen.

Thanks a lot, Sabur. I appreciate it.

Thank you, Krish.

Thank you. And our next question comes from Troy Jensen of Cantor Fitzgerald. Your line is open.

Hey, gentlemen. Congrats on the continued progress here. Maybe a quick question, start with Sabood here. Just any thoughts on the executive order and has there been any change in kind of government activity post, you know, signing of that order? You know, I'm wondering if it's mainly, you know, security more or just system level, but just love to get your thoughts on if anything's changed since then.

Sure. Thanks, Troy. So, indeed, with the executive order passed by the president, there has been increased emphasis on quantum computing. A number of initiatives have started because of those executive orders. I would say they are still generally in the early stages, but you are already seeing some of them. The Department of Commerce initiative using the CHIPS Act certainly is one of those. We definitely expect more funding coming into the overall quantum computing ecosystem from the U.S. government because of those executive orders. There are various bills that are being debated as we speak, whether it's the NQID authorization bill that funds the Department of Energy Labs or the NDAA, which funds the Department of Law, and there are many line items included in that for quantum computing. So overall, I will say definitely the executive orders highlighted the importance of quantum computing for national security and strategic reasons.

It is definitely helping free up funding in quantum computing you are already seeing that a little bit in with the department of commerce but definitely expect more of those kinds of things from both from department of energy as well as uh department of law all right makes sense um and then uh just another one for you maybe um you know congrats on the hp announcement i think that's huge obviously you're close to them and quanta i guess i would assume there's tons of good data center partnerships that you guys could have um is hp as much on the networking side or that on the server side, but just any more kind of details on that would be wonderful.

Certainly we are excited to partner with HPE. They are, as I mentioned, the top player in the world of HPCs. The partnership will certainly evolve as we get into demonstration and what else can we do. It's not an exclusive partnership. We are certainly going to be talking to other HPC players and certainly HPE will be talking with other modalities and other quantum computing companies too. I think the exciting part for both of us is truly bring a state-of-the-art HPC with a state-of-the-art quantum computer and see how exactly we do the trifurcation of data. If you will, CPUs do sequential, GPUs do parallel, and quantum does simultaneous computing, and superconducting speeds are commensurate with CPU and GPU, and that's really where it will help to truly show the benefit of quantum computing. So certainly a lot of applications we will be able to take on with that kind of a setup and show really how quantum computing helps reduce the overall time to results or the accuracy of results or even some applications that are nearly impossible to solve with the current HPC setup. So certainly we are looking forward to putting the system together between now and 2027 and making it available to general public at that time. But we'll continue to talk to HPE and other HPC players on how to leverage quantum computing in different workflow applications.

Awesome. Thanks, guys. I keep up the good work.

Thank you.

Thank you. And our next question comes from John McPeak of Rosenblatt Securities. Your line is open.

Great. Can you hear me, guys?

Yes, we can, John.

Excellent. Sabote and Jeff, congrats on the execution here. Steady progress. Actually, I have a couple for Jeff. You talked about CapEx. I got that. That was one of my questions. But deferred revenues ticked up more than in any quarter I've seen in the history. And you actually had your largest billings quarter, if you just look at the change in deferreds and revenues. Could you talk a little bit about what that's about, if anything?

Sure. That mainly relates to CDAP. With that order, there were some prepayments and so forth that added to deferred revenue. So that was the main driver there.

Okay, that makes sense. And then one for Sabode. I've heard compliments about your QPUs from some optical interconnect companies. I'm curious if you've had any discussions with respect to, with your open architecture, potentially at least doing some exploratory work on optical interconnect of your Novera QPUs.

Thanks, John, for telling us that you hear good things about us from optical interconnect companies. Indeed, we are very proud of the fact that our QPUs are some of the best QPUs, if not the best QPUs out there. And we consistently hear that from end users who use our QPUs. They keep telling us that they are extremely reliable, consistent, very easy to use. So it's not a surprise, but it's always good to hear from third parties. We talked to multiple optical players, the publicly disclosed partnerships. Among the publicly disclosed partnerships, we have mentioned QFOX, where we are working with them on transduction. That's basically converting microwave signals to optical signals and vice versa. The reason that area is important is because right now, our 9-qubit or even our 108-qubit system does not use any optical signaling. We are basically relying on coax signaling. And that will continue for a while. We plan to use flex cable technology to get to 1,000 qubits, but beyond 1,000, certainly when we start talking 10,000 and 100,000 qubits, we cannot rely on flex cables and certainly not coax cables. And that's really where optical signaling comes in. And so the early research work is what we are doing right now with companies like QFox, understanding how to convert microwave signal to optical and reverse that without losing fidelity or any other issues. It all shows promising results right now, but I would caution it's still early research. Before all of that can be converted into roadmap and definitive timelines, we still have some work to do. But it's encouraging to see that optical signal is going to work out, and that allows us to get to the tens of thousands and hundreds of thousands of qubits.

Thank you. And our next question comes from Quinn Bolton of Needham & Company. Your line is open.

Hey, this is Shadi Mawalian for Quinn. Thanks for taking our questions. Now that you have your 108 qubit system up and running in the cloud, can you just talk about what you guys are seeing in regard to user engagement, and then I can follow up?

Thanks for that question. As I mentioned in my comments earlier, we are getting excellent feedback from end users who are using our 180 qubit system. We are consistently hearing it's one of the best systems out there. And again, to remind everyone, there's only three more than 100 qubit systems out there in the world. IBM at 120 qubit, we at 108, and Google at 105. Everyone else is well below that, and most of the players that talk are well below 50 qubits. So really, we are in the second place right now as far as quantum computing capability is concerned. We get excellent feedback, customers who have used it, and thousands of customers are using it through AWS and Azure as well as other cloud platforms. And we consistently hear our system is one of the easiest to use. It's always up and running. The results are consistent, reliable. So we are really happy to hear that kind of feedback. Most of the work that they are still doing is very much research kind of work. We acknowledge openly that we are not quite close to quantum advantage. We need to get to, as we have mentioned in the past, closer to 1,000 physical qubits, closer to 99.9% two-qubit gate fidelity, along with some error mitigation or correction, before we can start talking tactical workload applications and demonstrating value with that. So we fully understand that we are building systems right now for research applications. That's exactly what we see customers are doing. They're trying to understand how to design algorithms, how to fundamentally look at quantum computing, how it fits in their ecosystem. But overall, I would say we are very pleased with the feedback we are getting from end users who have been using our 108 qubit system for a while now.

Got it, that's great to hear. And then on the $100 million LOI, it sounds like this will likely be a milestone or technical base.

So can you just talk about what Rigetti would need to prove to unlock all of the funding? yeah a good question we are um still the agreement is not definitive yet so we are still discussing with commerce department on what exactly um is expected when to get the hundred million dollars broad based we know the areas we are working on we are working on things like cryogenics we are thinking working on things like miniaturization of electronics in the readout chain those kinds of things so we know at a high level uh and basically it's accelerating our road map what the overall goal of this $100 million is to accelerate our roadmap, and that's exactly what we are working on. We are defining exactly what our roadmap is and which milestones can be accelerated. So, it's still a work in progress. Hopefully, it becomes a definitive agreement soon, and then we can disclose in more detail what and when we plan to do.

Thank you. And our next question comes from Tyler Anderson of Craig Hollum. Your line is open.

Hi, gentlemen. Thank you for taking my questions. This is Tyler Anderson on for Richard Shannon. So just to start for a very quick question, for the HPE and PSE deployment, is this still fridge and control unit yours, or is this going to be a third party?

It's ours, Tyler. Basically, it's a full system that we build. We obviously are outsourcing parts of the system. So we are buying dilution refrigerators from vendors. We are obviously, we are partnered with Quanta for control system and so on. So we will use third party components, but the overall system is designed and built by Okay.

That's very interesting with the Quanta. And then getting into what's getting your coherence time up or what you are doing to So the Neobium caps you had previously done before, and I'm just wondering, was integrating all of these technologies required to get you to the Fidelities that you were aiming for originally? Or is this something that you've kind of held in your back pocket and you've been deploying these benefits as you need them to increase the coherence time? and then I have a quick follow-up.

Yeah, as you can imagine, Tyler, when you're doing advanced R&D on these kinds of complicated systems, you never hold anything in your back pocket. You pretty much do the best you can and try to put it together and see how the systems are working. We have been working with Fermilab on the capping of niobium specifically with tantalum and those results show very good promise. There are various reasons why we have not quite deployed it in the system that that is available for everyone today um we definitely plan to include that but as i mentioned earlier we have to be careful we don't just throw everything and then turn it on and deploy it right away right now the system is working very very well right now and so before we upgrade the system that is on the cloud right now we want to test it exhaustively make sure everything is good we have not sacrificed something inadvertently in the process. So that's the kind of testing we are doing. We are just being deliberate with every testing so we don't change something and inadvertently find out that we have deteriorated something else in the process. Hope that answers your question.

That does, and that totally makes sense, doing things one at a time and seeing what the impact is. And with that, you know, if we implement all of these things, we start to see a really good impact to the coherence time. You know, these adiabatic gates seem to be doing you pretty well with the fidelity increases with the 36-cubic QPU. Is this something that could potentially accelerate the roadmap if everything else goes well plus adiabatic gates?

Yeah, certainly adiabatic gates, and we published a white paper on it last year. We definitely see a lot of promise with that. That definitely is a technology we plan to deploy. We are using a version of that right now in our 108-kibit system, but not the full thing that we disclosed in our white paper. There are, again, reasons for doing that. Definitely work is going on in that area, and we definitely plan to include adiabatic CZ gauge as part of our roadmap for future systems.

Thank you for the time. I appreciate it.

Thank you, Tyler.

Thank you. And our next question comes from Gary Mobley of Stonex Group. Your line is open.

Hi, gentlemen. Thanks for taking my question. I know in the past you've done some work for the UK's NQCC, and I believe that was at one point a substantial portion of your revenue. What's the prospect for renewal of the funding for that work and potentially some sort of re-engagement there looking forward.

Well, thanks for that question, Gary. That's a really good segue into the UK's overall deployment of quantum ecosystem. If you notice, the UK government has announced a multi-year initiative that they call Procure. It's kind of like DARPA QBI, but a little different in the way the UK government is defining the milestones. The end goal is roughly similar. Both of these DARPA QBI as well as the UK Procure are targeting fault-tolerant quantum computing system in roughly six to seven years. But the path to get there is a little different for the two programs. But both have merits about why they are doing what they are doing. We are definitely involved with the UK government in those kinds of discussions. We are continuing. Our system is at NQCC right now. Again, it's a 36-qubit system over there right now. one of the best systems that they have ever seen so we get very good input from them again about how easy our system is to use consistent the results are and how reliable it is so they like working with our system we are definitely working with them on the procure initiative hopefully we will be able to announce things as the uk government announces their decisions but definitely our plan is to be in the uk ecosystem and continue to be investing in the uk thank you for that color when you examine your pipeline of potential deals how does it compare

today versus a year ago or any other recent point in time and where does that money trail lead back to and what i mean by that is it is it disproportionately skewed to um you know commercial experimentation government-backed funding university research grant funding or pqc Well, we definitely see a lot more interest today in quantum computing than a year ago or certainly two years ago.

And the interest is coming from all the different areas. Certainly governments are getting a lot more interested as you can see from the US government side. Things like the commerce initiative and continued discussion on the NQI or NDAA, the recent NSF award we got with HPE to do the hybrid computing. So you are already seeing the U.S. government being a lot more active today than what it was a year or two years ago in quantum computing. I just mentioned the U.K. government and the big initiative they have with Procure. You saw from an announcement what's happening in the country of India and their government and how they are going about it. But you see across Europe and many other countries in Asia, Just about every major economy has a quantum mission or something like a quantum mission. Many governments have freed up funding, and certainly they want to be part of at least a leader or de-leader in the quantum ecosystem. So a lot of activities happening at the government level, and certainly that leads to universities. A lot of advanced universities are getting more and more active in quantum computing. I mean, the historical places like Yale University or MIT, for instance, of the world were already there, but now you see broader swath of universities getting involved. I mean, you saw us announcing with Montana State University and University of Saskatchewan and those kinds of places, and you'll see more and more universities in this. What is exciting is actually the commercial companies getting more and more interested in quantum computing right now. If you notice, our first two nine qubit systems that we delivered this year were both to commercial organizations. Now, they're not buying quantum computers on premised for their data centers to do any practical workloads. They fully understand these are research systems. But there's enough interest in understanding the basics of quantum computing that we are seeing increased commercial traction now in addition to the government and university area. and that's where you're seeing sales growth coming for our sales first half of sales growth is primarily driven by commercial organizations buying on-premise quantum computing systems so we definitely see that increasing that wasn't there at all a year or certainly two years ago so that's an exciting development to watch but overall we see huge interest in quantum computing across the entire spectrum government universities and commercial the commercial one is a new one pretty exciting to see. Thank you. Thank you, Gary.

Thank you. And as a reminder, if you do have a question, please press star one one. One moment for our next question. And our next question comes from Neha Chokshi of Northland Capital Markets. Your line is open.

Yes. Hi. Thank you. It looks like the 36-cubit median cubic gate fidelity did improve from 99.5% in the first quarter and 99.6% in the second quarter. I may have missed this, but could you just say what was the driver of that improvement?

Yeah, I mean, we do, thanks for the question, Nehal. We continue to work on fidelity just about every day, as you can imagine. there are multiple things we have done in the background to improve 9 qubit and 36 qubit along with the 108 qubit fidelity. A lot of it goes into the, in the broad sense, we do change the design of the qubit, we change fab processes along with it, and sometimes even the materials that are used in the fab, like the tantalum discussion we had earlier. most of that improvement at the 9 qubit level we are at 99.8% 2 qubit grid fidelity and at 36 qubit we have improved it to 99.6% median 2 qubit grid fidelity most of that improvement came from design optimization, it's how we how the lines are designed and the coupling of the lines with the qubit, that's where we are seeing some of the improvements right now. Certainly we are incorporating those learnings and we'll continue to do more work to get all that learning incorporated into the 108 qubit systems and in future larger systems. Yeah, so to be clear, the improvements that were implemented to drive that improvement in the 36 qubit system has not been applied to the 108 qubit system yet, or it's in flight at this point in time to see if that those changes also result in an improvement on our eight qubit system in general you're right i mean we we are as i mentioned earlier being deliberate that we don't turn too many norms at the same time and inadvertently hurt the performance right now there are many users who are using our 108 qubit system every day obviously we don't want to tinker around while they're using the system and cause some inadvertent problems. So we are working on other 108 qubit systems independent of the one that is deployed in the cloud, and that's where we are beginning to incorporate the learnings from 9 qubit and 36 qubit systems.

Thank you.

Thank you, Neha.

Thank you. I show no further questions at this time. I'd like to turn it back to Sabo Galkarni for closing remarks.

Thank you, operator. In closing, we are encouraged by our progress in the second quarter and remain focused on executing against our strategic priorities as we advance Rigetti's position in the quantum computing ecosystem. In the coming months, we will be out meeting with investors at a number of conferences and related events, and we hope to see you there. Thank you for your continued interest in Rigetti.

This concludes today's conference call. Thank you for participating, and you may now disconnect.