All right, welcome back, everybody. I'm Joe Moore, very happy to have with us today. This is actually the fifth new CEO that I've hosted at our conference. I'm cheating with two, but we'll leave it for you.
But crucially, it's the best one.
Yeah, there you go. But Niccolo de Masi, newly minted CEO of IonQ. So maybe you could just give us a little bit of a sense of your background and what led to the transition to CEO, and then we can.
Sure. Yeah, so I'm a physicist originally. I was actually one of the original sponsors of the IonQ IPO in 2020. Peter Chapman and I have been working together really closely since before IonQ was a public company. I've been following the quantum computing space for over 25 years. I've actually been following IonQ's progress in foundational research since probably the mid- to late 1990s. In fact, Chris Monroe, our founder, I would argue, kicked off the physical manifestation of Dr. Richard Feynman's work in the theoretical space in the 1970s. IonQ has been thinking about the commercialization of quantum computing a long time. Peter and I have been talking for a while on how we can work together on a more full-time basis.
And since we've expanded aggressively and successfully into quantum networking in the past six months, both organically and via a couple seminal acquisitions, the need for more bandwidth at the top of the company, so to speak, has increased. And we felt the full year result was a good time to make that evolution happen. Peter's not going anywhere. We continue to work together every day as we have in the past. And we've made all the strategic decisions together. And as a result of that, it's seamless. We're able to execute at pace. And we're very optimistic about our ability to effectively double the TAM of the company via our networking expansion and continue on with the quantum computing core without missing a beat.
Great. So I wonder, you touched on some of this, but talk about your priorities for kind of year one, where you want to take this. And I've been covering you guys for almost two years. And at that time, you talked about being a couple of years away from realizing kind of commercial results. So maybe give us some sense of that.
Yeah. So IonQ has been the commercial leader in the space, I'd say, more from the IPO because it's been a priority for us. We're a big believer that new platform transitions in the computing space tend to be won by the players that build the richest and deepest ecosystem. And so our ecosystem of customers via hardware sales, by effectively selling power by the hour and access to our machines via the cloud, has been one that's led us to have a global customer base, a lot of commercial and private companies, a lot of, of course, sovereign nations as well. That remains the top priority along with growing our quantum networking business. And the two are complementary.
In fact, not only were our customers asking us to do more in quantum networking in the last year or two, but ultimately, our fundamental photonic interconnect IP that allows us to scale our rack, stacked, and mounted quantum computing architecture allows us to have an edge and lead on that networking front, so we are organically growing networking. We're inorganically growing networking, and we're already doing useful things for our customers today and we were last year. I think it's sort of a hallmark of IonQ is that we believe we can succeed not only when we have even more logical qubits, but we're succeeding today with our Forte system that has 36 qubits, algorithmic qubits. And we were succeeding back at the IPO when we had maybe 18 logical qubits to also do useful things for customers.
We consider ourselves to be the 800-pound gorilla of the quantum computing business. We have 933 patents, 400 in networking, 500 in computing. We continue to build that momentum and that moat with every customer on every geography we're in.
Maybe you could talk a little bit about that core technology. I feel like when we think of quantum, think about low-temperature superconductors, things like that, your methodology, ion trap, is significantly different. Can you talk about what's different about it and why you think it's commercializable before those superconductors?
Yeah. I mean, look, I follow the space for a long time. There are multiple approaches to manifesting a theoretical quantum computer. I think it is pretty well agreed, and it has been for the last five-plus years, that because we can do this at room temperature, because we have high-fidelity, kind of naturally perfect qubits in the form of individual ions that we trap, obviously, with lasers, we're able to get to double-digit logical qubits faster than everybody else. And we expect we'll get to a triple-digit number of logical qubits faster than everybody else. But what we're focused on, honestly, are customer results. So there are different benchmarks. We have a lot of customers because our customers run algorithms on our machines, and they get better results with our machines than any other option they might come across.
That's not to say that in 15 years, it's possible that someone might come out of left field. But the reality is who we run into with our customers, it's a very short list. We're not competing with everyone in the private space who has raised around. We're not even competing with trillion-dollar market cap companies that have announced prototypes in the quantum space. Most of these sort of early-stage efforts from people in the quantum ecosystem, quantum hardware ecosystem, they're effectively announcing something akin to where IonQ was in 2005, 2010, 15 years ago, even before we were spun out of a lab and became a commercial company. So the technical prowess that we've exhibited the last 15 years is a mixture of having thought about it longer than other people, having been an early partner to commercial and government agencies. And it's, frankly, showcased by our customer ecosystem.
It's very difficult for most investors who are not advanced-degree physicists to read all these white papers and decide who's ahead today, let alone who's going to win in 2035 or 2040. But it's pretty easy for everyone at this conference to understand GAAP revenue and understand customer traction. And so just like I don't think you have to be a better physicist than the technical team at NVIDIA to buy NVIDIA stock or Broadcom or whatever, you shouldn't have to be an expert on quantum computing to understand what's going on at IonQ versus all our other brethren who are only doing one piece of the quantum business. We have an R&D roadmap. We have an engineering team. We're selling to manufacturing systems. We have an applications team. We're doing useful things for customers. We have a customer success team. We're effectively doing all aspects of a fully-fledged business.
Most people who are in the private space or a startup, they're just doing the R&D pipeline. They're just doing the lab work.
So I don't want to go too far down the rabbit hole because I agree with everything you just said about not trying to be a physicist and not trying to understand this at a PhD level. But there is quite a bit of debate about the proper benchmarks and kind of qubit benchmarking wars. You guys have historically talked about algorithmic qubits, which you said is more relevant. And then it sounds like from the call, you're sort of refining that a little bit. So can you just talk about the benchmarking of this stuff?
Yeah. I mean, so for those of you that are meeting with us at this conference, we'll walk you through, I think, it's slide 15 in our presentation. Come see us if you haven't seen it yet. I think kind of like benchmarks for investment banks and financial services firms, you can always find a different league table.
We're all the leaders.
Yeah. And so honestly, it's kind of like our move to GAAP revenue. It's like we can find the benchmarks, but at the end of the day, our customers need to speak for us. They do the best diligence because we're actually running things that solve useful problems they pay us for. Everyone can give away stuff. But getting paid to do things is the sign that you're actually ahead and actually tackling problems in today's era of what we would call commercial advantage. There's big debates about quantum supremacy in an era where you absolutely have no chance of doing anything near that problem set with a classical computer. But today, we're taking pieces of problems and coming up with better solutions for customers, not always faster, but better solutions for customers in a whole array of applied science.
Algorithmic qubits, I think, start to lose meaning at a certain point and a certain scale. We talked about the earnings call last week. We're going to announce our AQ 64 system. Our guidance is by the end of the year. That machine is, I think, 270 million times more powerful than the AQ 36 system that we call Forte today. After AQ 64, we're focusing on customer results. It's a mixture of tailoring the application with the machine. Yes, it will have more of what people would call a logical qubit of some kind. There's a general agreement around you probably need triple-digit numbers of qubits to do certain types of problem-solving, cracking RSA, and these sorts of things. We're demonstrating that we can do a lot of useful things with double-digit qubits.
And most importantly, I think, for everyone to understand, and I've been a fan of this since the IPO, is the fact that our machines are improving, doubling in power every time we add a logical qubit effectively. So it's not Moore's Law every 18 months or 24 months. Sometimes it's Moore's Law every month, even. And so our pricing power, if you will, with our customers, clients, and so on, is almost unprecedented. You don't want to be tendering in the aerospace for the next, whatever, stealth bomber and then find out that your competitor has a machine that's 270 million times more powerful. Same in the drug discovery world. Same in the logistics world. That is not a winning competitive advantage.
Yeah.
Kind of thing for your company when you're the CEO and you say, well, the other guys beat us because they paid for the best machine we used last year's.
Great. So maybe digging into some of the workloads and applications, Jensen made kind of offhand comments at CES that tanked your stock. And I don't think it was intended to be. But now you're going to be at the NVIDIA GTC conference later this month with a quantum day. Can you just talk about generally how you fit into an AI ecosystem and maybe give us some sense of that whole kerfuffle from Jensen's comments?
Yeah. I mean, look, we have a partnership with NVIDIA around drug discovery using CUDA. Peter Chapman, our Executive Chairman and my colleague, I think, has had a spirited debate with Jensen since the IPO, quite honestly, on and off, both privately and publicly. I think that everybody has a grain of foundation of accuracy in off-the-cuff comments. So I think our GAAP revenue is not likely to be the size of NVIDIA's next quarter, and we're not guiding towards that. At the same time, we're patently proving that it is not true that you can't do useful things with quantum today on our machines. That doesn't mean you can do useful things on everyone's machines. There are a whole host of startups that are telling venture capitalists that they're going to come out and smash NVIDIA and Broadcom any moment now, or certainly in 2035.
I don't know how many of you would invest in that. I don't find it hugely credible. People in the tech ecosystem have demonstrated for decades, but particularly the last decade, that if you get all the customers and you have all the momentum and you build the ecosystem, you tend to be the winner. Facebook bought WhatsApp and Instagram not till they were around. Look at Oracle 40 years on with that relational database, and so I think the big get bigger. We consider ourselves to be the 800-pound gorilla of the quantum computing space. We are the only quantum commercial business. And we continue to show that you can walk and chew gum. You can drive your tech roadmap. You can drive commercialization. We're well capitalized, and we're using those resources to make sure we win at both.
Because at the end of the day, everyone's got to turn into a business that's judged on the same metrics as any other business.
Great. And sticking with compute, I want to get to networking as well. But sticking with quantum compute, what other applications outside of AI are you finding commercial use cases? And where are you now with doing things that can't be classically simulated?
Yeah. So look, half of probably what we are being paid for is classified. So I'm not going to talk about any of that, but we announced the delivery of one of our systems to the Air Force Research Lab this morning. That's a $94.5 million contract that involves a couple of systems networked together. So that is both a compute and a networking partnership. We've also announced that we're doing drug discovery work with AstraZeneca. We've announced that we're doing anomaly detection and fraud detection with General Dynamics. We're doing computational engineering work with Ansys. We're doing logistics work with Airbus. All of these companies are working with us because we can help them today, but most of all, they know we can help them a lot more next year and the year after. To Jensen's point, it's not a double-digit number of years away from helping them.
It's a double-digit of weeks away in some cases for us, and it's continual improvement. I mean, our market cap is about the same as NVIDIA's 10 years ago, and I'm not saying that we're necessarily on the same improvement curve, but we may well be because, as everyone in this room has seen, the network effects very much accrue to the leader.
OK, great. And outside of compute, you've made a push into networking. You've done a number of acquisitions. Can you talk about sort of those acquisitions and kind of what your networking roadmap looks like?
Yeah. So it's a global portfolio. We are the only listed company in the U.S. that has a leadership position in networking. It's about 400 of our 900 patents. And it is a fairly broad portfolio. So we're not selling only eight-figure deals or even seven-figure deals. We're ultimately able to sell a more diversified portfolio worldwide. Between our organic networking investment, Qubitekk, and our acquisition of IDQ, we have a leadership position that is difficult for anyone to encroach upon. I think there's maybe one company in Asia that's part of a bigger conglomerate that does a fair amount of networking as well. But otherwise, it's just startups. So we're very excited about networking because it more or less doubles the TAM, if you believe McKinsey's research report of late on networking. And it's complementary for our technical roadmap and sales team. We are able to sell both.
It's actually the fundamental tenet of how we're scaling our quantum hardware is through photonic interconnects that are exactly the same kind of thing we're going to use to secure the quantum internet, so to speak, and we're finding that not only are the additional customers we brought in complementary Singtel, SK Telecom, JPMorgan, and so on that have come with the IDQ acquisition, but we're effectively demonstrating that we're moving where the market has most demand today from our customers in the quantum networking and computing space.
Is quantum networking, quantum computing on a similar timeline? Or seems like there's a general consensus that networking is commercializable earlier, but I'm not sure if that's true for you.
Yeah. I mean, we haven't broken out revenue in our guidance this year between the two halves. I will say that some of our biggest partners from the last year are combo contracts, if you will. We want to see both, like Israel, we want to see compute and networking. We think they go together. We're almost in the code-making, code-breaking, the safe cracking, safe building business here, if you will. I think for other companies besides us, they're far behind our networking business for their computing hardware commercialization. For us, they're broadly similar if I were to sort of put a finger in the air for this year and next year.
Talking about the M&A that you've done, I mean, you have certainly the most financial resources of the other sort of dedicated quantum companies. Do you see other areas where you can do acquisitions to add to the portfolio? Is that still part of the strategy?
It's part of the strategy of every public company, I think, on some level. We will always look, of course, to bolster the IP moat that we have. We'll look to accelerate our ability to bring customers what they're demanding. We have a quantum sensing piece in the IDQ acquisition. So that's an area that we can invest further in accelerating because, like networking, that's at about the same pace and position on the commercialization front. I actually think applied quantum computing, networking, and sensing is going to continue to effectively cascade out in every area of applied science. I'm heartened tremendously by the fact that at our IPO four or five years ago, very few people in this room or in the Fortune 500 C-suite knew what quantum computing really was.
And here we are, four years on. Nobody doubts that there's a quantum computing business. You can debate the size. We can debate the size by year or even by quarter. And we can debate the size of hardware versus software versus networking versus sensing.
I think the timeline is still a big debate.
It's size against timeline.
Yeah, yeah.
Size against timeline, so IBM and IonQ, the two I's, are the ones generating the revenue today. We bump into each other, I think, in customer engagements and contracts and so on. Pretty much everybody else is in the R&D business, and so let's see how that race plays out. But historically, who spends the most on R&D? It's the customers that commercialize the first because they have the money. I mean, Apple, Google, Amazon, Microsoft, NVIDIA, Broadcom, you wouldn't bet against their R&D operations. They can afford a lot there. So I think the TAM is growing as customers get acclimated by people like ourselves and the other I. We're working with customers to translate their problems into, effectively, recast them as a problem that can be run on a quantum computer, ours in our case.
We're working with their application teams and ours to make sure that we can solve that problem, give them useful results, and iterate, and I think that ecosystem will keep building and keep deepening and keep getting broader. When I met IonQ, it was a 35, 40-person business. Today, it's 500, and yes, we're resource constrained. That's a high-class problem for companies growing nicely, but I'm really excited by the fact that there is just so much more talent coming into the space now in every layer.
Great. So I wonder if we could look at some of the near-term investment opportunities within the space that you guys could be beneficiaries of, maybe starting with the Department of Energy Quantum Leadership Act, I think $2.5 billion. Can you talk about that and how it affects you guys?
Yeah. I mean, I think it's safe to say that we're in the mix on everything. It is a nonpartisan issue. That's the most important thing I'm going to say. We've been through. We're on the third administration that agrees that this is a national security priority and just a national priority in general. True for AI, true for defense, true for drug discovery, true for logistics, it's true for energy. One of the things that I think is maybe not appreciated sufficiently is the physical space and energy advantages that our quantum computing solution brings. So if you look at our AQ 36 Forte enterprise system we're selling, it's the size of two refrigerators. And it plugs into a wall socket. There is no nuclear power plant that has to be connected to it. We don't need a football field.
And see, when we were in your analyst day, you just stand next to it and we're talking, and it just looked right there. It's not.
Yeah, yes. And so will we need a bit more space as we stack more of them together? Yes, but we're also miniaturizing. And so there's a miniaturization effort. That's why you can imagine people like the Air Force care about that because they care about, can you be local on something that might be in the air someday? We think we can save approximately an order of magnitude of the energy that's being used in certain problem sets in classical analogs paradigms. And so energy will not constrain us. Space will not constrain us. We're also room temperature. There's no freezing required for IonQ. That's really remarkable if you think about it. Almost everybody else that is trying to have a quantum computing hardware solution has something that's not particularly robust about it.
Either needs a lot of space, needs to be really cold, or parts of the memory compute solution haven't been figured out, and they are requiring fundamental leaps in science. We are an engineering-centric company because the fundamental leaps have been made and our architecture is freely available. We're really connecting our multi-core systems together with our photonic interconnect. That is our quantum networking. That is how we're going to scale. And I think we're going to get there before everybody in terms of having more logical qubits. I think we'll carry our customer ecosystem with us. And I think our customers are going to like the fact that we can not only sell them networking but compute together and sensing as it fits into their roadmap and ours.
You've also had a number of business relationships with AFRL, with Air Force. Can you talk about the importance of that relationship and why it seems like they've selected you as a key partner in a lot of these applications?
Yeah. I mean, I think we've had three bites of the apple with them. We announced this morning that we just delivered the first major system of two. They want those two systems networked together. I think it's safe to say that we've had aerospace interest in IonQ right the way back to the IPO. And that room temperature, that miniaturization, that modularization are all part of those reasons. I can't tell you exactly what we're doing with them, obviously. But it's almost a nine-figure contract in total. And it's not the only thing that we're doing with branches of the military and their research labs. So there is a lot of interest, a lot of budget. People are solving for different things in different orders. We're a solution-led, customer-led business here.
But we're very proud of the fact that we are supporting our country's national security needs. And at the same time, we're finding the ability to prioritize non-defense-related partners as well.
Yeah, I guess on those lines, the state of Maryland also announced a $1 billion investment. And obviously, the partner there, can you talk about that relationship as well?
Yeah. No, we've had a great partnership with the University of Maryland and Maryland as a state. Obviously, we're headquartered in College Park. The original research was done there. I think the University of Maryland has been a leader in quantum research really through our founders' labs and the original IP that we generated and licensed from the university. They continue to want to be, if you will, the Silicon Valley of the quantum ecosystem, and we're at the forefront of that billion-dollar initiative that they are effectively getting state funding for. It'll be an increase most likely in the size of our footprint there, so it'll be more space for research, more space potentially for manufacturing, certainly more space for applications, our headquarters, and our employees.
And it will also have a continued quantum center and connectivity with the state as well as the university for every piece of the stack that we need between R&D to engineering to applications to customer success. And of course, we love the connection to the national security apparatus that comes with a state that's very much in the center of that, in the heart of that.
Great. So just one quick financial question that we've been getting. You went away from bookings as a metric. Can you talk about why bookings aren't relevant really going forward?
Sure, sure. Yeah. I mean, Peter Chapman's been raising this with our board and myself for at least a couple of years. To quote him on the earnings call last week, he said, "We're going to be doing nine figures of GAAP revenue certainly next year. This year's guidance is 75-95." He sort of keeps asking, "When are we going to take the training wheels off?" At the end of the day, AQ 64 makes sense. Beyond that, it's difficult to measure and define exactly how an AQ looks relative to other benchmarking metrics like the problem set size and fidelity. We think that it's part of becoming a real company and continue to demonstrate that we're the leader in commercialization. We're the leader in doing things for customers today. We're the leader in applying quantum.
At the end of the day, it's like the proverbial sound of the woods that no one hears. It doesn't really matter if you have the best sound of the woods no one hears. We think quantum is about being the best commercial business, being the only quantum business that actually is regulated by the SEC, Starbucks, et cetera. We put one foot in front of each other every quarter, every year. We keep doing what we say we're going to do, and I think focusing people on a metric that can be understood by everyone in the room or in the conference is important. We don't expect you to be experts on R&D decisions, engineering decisions any more than you are on other things, other businesses in the technology ecosystem.
We want to measure ourselves by customer success and customers paying us for the work we're doing because at the end of the day, they're speaking for us and they're doing that due diligence for the investing community.
OK, great. So I just have one more question, and then we'll open it up to the audience for questions. But kind of just an overarching question that I've asked you guys after every earnings call, I feel like when you talk to some of the cloud decision makers, they sort of talk about quantum as being five years away from being five years away. And I've sort of asked you about that, and you've said, "Well, that's because their technology is. Our technology is commercializable much sooner." When is the point of realization around that? Because I feel like if everybody thought that way, there would be a lot more acquisitions in the quantum space. There would be a lot more the incumbents who would be worried about your encroachment would be starting to react. We haven't really seen that yet.
So what do you think is the tipping point that maybe makes this clear to everybody that you are closer to commercialization than people think?
You know, the funny thing is I think that point has shifted simply because what were $100 billion market cap companies are now multi-trillion-dollar market cap companies. And so when you're at the I think Arm is in this room in a session or two. They were a $30 billion-$40 billion acquisition for SoftBank. Now they're maybe a $130 billion market cap business. When you're that size and that size business, you're going to look at us in a different way than you will when it's $3 trillion. And we're currently $75 million-$95 million of GAAP revenue is a rounding error. The funny thing about the commercialization comment with the cloud players is we were the only quantum computer at our IPO that operates on Google, Amazon, Microsoft's cloud, and you can access our Forte system through that.
Today, four years later, we're still the only system on that. Those companies' own R&D efforts are not on their own cloud, and no one else in our space is on all three of them. So on one hand, I'd say quantum is very much here today. On the other hand, as you can see from our GAAP revenue, like I said, I'm not pretending that I've got Jensen's GAAP revenue next quarter. So companies with trillion-dollar market caps can afford to wait until they acquire something that shows up on their P&L, I think, is a big piece of it. At the same time, obviously, we're enjoying building this ecosystem out and showing that we will continue to be the 800-pound gorilla of the quantum space. And I think that we have a path to being a disruptor as well as a successful independent business.
I think every public company can be bought and sold. That's a reality. But we're a young team. We're excited about the progress we have to date. We're excited about how far we've gotten since the IPO. And we think it's very much early in capturing all the value on the upside that we can be. And there's no reason why we're not an Arm-sized business in the public markets in the next few years. And that can happen, by the way, on the networking side alone or the computing side alone. Either one can be 10x the size of our business today, 100 times the size of our business today.
All right, very helpful. Let me see if we have questions from the audience.
Right here.
Yes. You mentioned quantum networking. So can you give us a sense of what part of the value chain you want to be positioned in quantum networking? And maybe if you can enlighten us on the end game of quantum networking? Is that some sort of Internet 2.0? And then what will be your role in the long term and what are you targeting in that space?
Yeah. So we have partnerships with three-letter agencies on the one hand who are thinking about the backbone of Internet 2.0, the quantum internet. Obviously, in a world where RSA is crackable, and that is no longer a fantasy, we're debating again the timeline on that. The basis of e-commerce, the basis of banking, the basis of battlefield communication is all something that is at the forefront of people's concerns. I mean, right now on the battlefield, you're seeing drones getting hacked and down, and people are tethering them. And so the ability to communicate safely and securely, I think, is incredibly valuable to pretty much everyone in every industry. IDQ is an interesting business. It's about 20 years old. It was a piece of SK Telecom. SK Telecom is becoming a roughly 1.5%, 2% shareholder as a result of our stock-based partnership and operating partnership with them.
And they're embedding the quantum random number generator chip that IDQ makes in the Samsung Galaxy Quantum 5 also. So if you look at IDQ's website, there's four or five families of solutions. And we're involved in actually a fairly broad range of, let's just say, quantum data transmission as well as random number generation. We'd like to play a role not only, of course, in scaling our own quantum computers faster than everybody else, but providing that backbone around networking for three-letter agencies and governments and companies that want to have their own air-gapped network and computing solution. Ultimately, we think that we're going to need a big presence and, in some cases, partnerships to expand that presence for financial infrastructure, financial banking systems, payment systems, e-commerce.
It's really hard to think about how the world is going to function if we can't rely upon the ability to transmit information securely, so we will continue investing in our networking portfolio and our networking business because it's simply not just a foundational item for national security. It's a foundational item for the economy overall.
Great. Any other questions?