Xanadu stock slumps 10% on US$21-million loss in Q1 despite revenue jump

Xanadu Quantum Technologies Ltd. posted a US$20.6-million net loss for the first three months ending March 31. Photo by Xanadu Quantum Technologies Ltd.

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Toronto-based Xanadu Quantum Technologies Ltd.‘s revenue quadrupled in the first quarter compared to a year ago, but it still lost more money as it continued to spend heavily on research and development.

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The quantum computing company on Thursday posted a US$20.6-million net loss for the first three months ending March 31, or 28 cents per share, compared to $12.2 million a year ago.

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“It takes money to achieve the ultimate goal of building a large-scale quantum computer or data centre,” Xanadu founder and chief executive Christian Weedbrook said. “One of the reasons why we decided to go public is the access to additional capital.”

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Quantum computing technology is still in its early stages, and companies such as Xanadu have to figure out how to scale hardware while reducing error rates to build commercially viable machines. Xanadu is aiming to build a large-scale quantum data centre in Toronto by 2029 or 2030 and estimates the price tag will be around US$1 billion.

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Its first-quarter revenue jumped to US$2.8 million, beating analyst expectations of US$1.1 million, largely due to Xanadu’s involvement in the Quantum Benchmarking Initiative managed by the United States Defense Advanced Research Projects Agency, which aims to find a path to building a useful, fault-tolerant quantum machine by 2033.

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Three Canadian companies, including Xanadu, have advanced to the second stage of the initiative.

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Weedbrook said the company’s active partnerships will help advance its hardware milestones and contribute to revenue growth.

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For example, Xanadu in March announced a government partnership that could see Ottawa and Ontario funnel up to $390 million into the company to manufacture quantum computing hardware in Canada. It also announced a tie-up with Telus Corp. that same month to explore jointly developing quantum computing infrastructure.

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Weedbrook said the company’s joint initiative with U.S. defence contractor Lockheed Martin Corp. to advance quantum machine learning applications and theory will be a revenue driver and it now has a “strategic partnership” with chip giant Advanced Micro Devices Inc.

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“Our main priority is to build the best partnerships … rather than chasing one-off revenues,” he said.

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Shares of Xanadu, which are dual-listed on the Nasdaq and the Toronto Stock Exchange, slid nearly 10 per cent Friday morning.

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Xanadu made its public market debut in March through a merger with a special purpose acquisition company. Its stock has experienced major volatility since then, soaring 486 per cent in the first two weeks of April, but then crashing in early May.

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Weedbrook called the stock fluctuations a “wild ride,” but “characteristic of the quantum industry.”