Rigetti's revenue growth is a significant concern. The company's TTM revenue of $10.8 million indicates a struggle to scale, and Q1 2025 revenue declined by 52% year-over-year. The CEO's acknowledgment that meaningful commercial sales are still three to five years away underscores the current reliance on R&D and government contracts, which are inherently lumpy and unpredictable. This inconsistent revenue stream makes it difficult to justify the company's valuation.

While Rigetti has secured important government-funded projects and is making strides in developing innovative approaches to scaling qubit count systems, the company's growth perspective is tempered by the long timeline to commercialization. The CEO's view that quantum advantage is still four to five years away suggests that near-term growth will be primarily driven by R&D and government contracts, which are one-off and lumpy in nature. This makes it difficult to assess the company's long-term growth potential.

Despite the recent completion of a $350 million equity offering, Rigetti's stock performance has been volatile. While the company's shares rose 6.5% on positive industry comments from Nvidia's CEO, the overall trend has been downward, with shares plunging 10% after Q1 results. The stock's exit from the Russell Microcap Index further underscores the challenges it faces in maintaining investor confidence.

Rigetti faces several significant risks, including its ongoing reliance on government contracts and R&D milestones, the pressure on gross margins due to cost-sharing models in certain government contracts, and the timing risk associated with the passage and appropriation of the NQI Reauthorization Act. The company's increasing operating expenses, driven by salary, hiring, and stock compensation, also pose a challenge to its path to profitability.

Rigetti has demonstrated industry-leading innovation through its advancement to Stage A of DARPA's Quantum Benchmarking Initiative, its $5.48 million AFOSR Award, and its three Innovate UK Quantum Mission Pilot Awards. The company's focus on developing the Alternating-Bias Assisted Annealing (ABAA) chip fabrication technology and its publication of a joint paper in Nature Physics highlight its commitment to pushing the boundaries of quantum computing.

Rigetti faces intense competition from established players like IBM and Google, as well as emerging companies like IonQ and D-Wave. These competitors have greater resources and more diversified revenue streams, which could make it difficult for Rigetti to gain a dominant market position. The company's CEO has acknowledged that quantum computing remains in the research and development mode, and meaningful commercial sales are likely three to five years away.

Rigetti's business is sensitive to macro-economic factors, particularly government funding and R&D spending. The company's reliance on government contracts makes it vulnerable to changes in political priorities and budget allocations. A slowdown in government spending or a shift in focus away from quantum computing could negatively impact Rigetti's revenue and growth prospects.

While the quantum computing market has significant long-term potential, it remains in its early stages. The industry is characterized by high levels of hype and speculation, with many companies trading at extremely high valuations despite limited scale and traction on revenues and earnings numbers. This makes it difficult to assess the true market opportunity and the potential for Rigetti to achieve sustainable profitability.

Rigetti faces minimal geopolitical and ownership risks. The company is based in the United States and has a strong governance structure. However, its reliance on government funding could make it vulnerable to changes in political priorities and budget allocations. The company's deepening ties with Quanta Computer, a Taiwanese company, could also expose it to geopolitical risks related to US-China relations.