Thursday was a rough day to own stock in quantum computing stock IonQ (NYSE: IONQ | IONQ Price Prediction). Shares of the company, which bills itself as “a leader in the quantum computing and networking industries,” and which boasts two different types of quantum computer offering “36 algorithmic qubits” closed the day down more than 16% after beating analyst revenue forecasts but missing badly on earnings.
But now that the bad news is out, and IonQ stock has become 10% cheaper, might it be time to… buy IonQ stock?
IonQ in Q4
Let’s start with the bad news. IonQ performed much worse than analysts had hoped it would in Q4 2024.
Although the company grew its revenue 92% year over year, this was actually a slight slowdown from the 95% rate of revenue growth posted earlier in the year. Meanwhile, IonQ’s losses grew even faster than its sales. Whereas net losses for Q4 2023 were only $41.9 million, IonQ lost $202 million in Q4 2024, a five-fold increase year over year.
Losses for all of 2024 topped $331.6 million, “only” a 110% increase, so relatively better news, but still pretty bad.
Despite the bad news, IonQ executive chair Peter Chapman insisted that 2024 was actually “IonQ’s best year yet in 2024, exceeding the high ends of both our bookings and revenue guidance ranges and making truly significant technical strides (towards a) quantum networking industry (worth) $10-15 billion per year within the next decade.”
Good news amidst bad
Relative to the $43 million in business that IonQ did in all of 2024, that leaves a lot of room for the company to keep growing as the quantum computing industry develops. The big question for investors, though is: If IonQ is losing so much money, and if its losses are in fact growing, rather than shrinking, as its sales ramp up, will this stock even survive to benefit from quantum computing once the industry matures?
There’s good news on that score.
Digging into the details of IonQ’s big Q4 loss, it turns out that not all the news is bad. Against sales growth of 92%, IonQ’s:
- Cost of revenue increased only 60%.
- Research and development costs grew 27%.
- And marketing costs grew 27% as well.
Really, the only recurring expense that grew faster than sales was general and administrative spending, and that only grew 94%, so not much faster than sales growth. And overall operating costs were up only 47% year over year, growing significantly slower than sales. The primary reason IonQ’s losses were so much bigger than anticipated, it turns out, is that the company recorded a large one-time $128.5 million loss in the “fair value of warrant liabilities,” an accounting charge that doesn’t really tell you anything worrying about the state of the business.
And all of this implies that over time, and assuming these trends hold true, sales growth should pile up new revenue faster than operating costs siphon it away, moving IonQ closer and closer to profitability.
What this means for investors
How long will it take for IonQ to reach profitability, and can investors afford to wait that long (and will the rewards be rich enough to justify the wait)? That’s all hard to say. Surveying analysts who follow the stock, though, the future looks pretty bright.
After nearly doubling sales in 2024, Wall Street anticipates further growth in the 100%-ish range in each of 2025, 2026, and 2027, with sales growth only starting to slow down in 2028 and 2029 (to 56% and 50% growth, respectively). Street analysts have the company pegged for $750 million in revenue in 2029, and believe that will be enough for IonQ to start reporting both pro forma earnings and positive free cash flow in 2029. Actual GAAP profits will take a bit longer, arriving in perhaps 2031.
Long story short, if you can afford to wait another five years, a bet on IonQ stock may eventually pay off.
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