Quantum computing was a hot sector in 2025, and investor interest was rekindled after the U.S. Department of Commerce awarded funds to a number of businesses in the industry this May.
Several quantum computing companies have capitalized on investor enthusiasm to go public this year. One of these may be a great under-the-radar quantum business to invest in because of its photon-based architecture.
This company is Xanadu Quantum Technologies (XNDU 6.64%). A deeper dive into the business can shed light on whether it’s a stock worth buying.
Image source: Getty Images.
Xanadu’s technological advantages
Toronto-based Xanadu’s initial public offering (IPO) took place on March 27, and according to the company, it is the first pure-play photonic quantum computing business to go public. Its use of photons differentiates it from its competitors.
Photons are light particles. They possess properties that make them attractive for use in quantum devices. They are already employed in fiber-optic cables and can transmit quantum data over long distances. This makes them ideal for networking quantum computers, a critical capability for artificial intelligence (AI) since networked machines unlock greater computational power.
In addition, they are inherently secure, as every photon has a random quantum state, making them perfectly suited for quantum cryptography. Photons are so useful in quantum computers that competitors using other methods are incorporating photonics technology. For instance, rival IonQ, which adopted ions for its machines, added photonics to enable quantum computer networking.
Xanadu Quantum Technologies
Today’s Change
(-6.64%) $-1.15
Current Price
$16.17
Key Data Points
Market Cap
$4.8B
Day’s Range
$16.12 – $17.60
52wk Range
$6.97 – $42.44
Volume
3.7M
Avg Vol
6.1M
The state of Xanadu’s business
Xanadu’s initial earnings report since going public revealed first-quarter 2026 revenue of $2.8 million, quadruple the $699,000 collected in 2025. This suggests the company is gaining customer traction for its technology.
However, its rising revenue was offset by growing costs. It suffered a Q1 operating loss of $23.3 million, up from a loss of $12.8 million in the previous year. The substantial increase in expenses against scant sales would be a recipe for business collapse if not for its IPO, which helped Xanadu amass a cash hoard of $272.5 million by the end of Q1.
The company also arranged a synthetic at-the-market equity facility with hedge fund Yorkville Advisors. This grants Yorkville the opportunity to buy up to $300 million Class B shares over three years. Combined with its Q1 cash stockpile, this should sustain Xanadu’s operations for a time while it ramps up sales.
Weighing an investment in Xanadu stock
While financials are important, at this point, the key consideration in evaluating an investment in Xanadu is its technology. Despite years of research and development, the quantum computing sector is still in its infancy. Many approaches to quantum computers have sprung up, and at this early stage, any of them could be the one most widely adopted, or several could co-exist, as each technology offers different strengths and weaknesses.
Xanadu’s photonic quantum devices have begun to carve out a niche for themselves, as evidenced by the company’s rapid Q1 revenue ascent. The question is whether it can sustain sales growth to the point where it can offset costs. Getting to this stage could take years. So any investment in the company right now is a risk.
Moreover, investor interest in quantum computing has inflated Xanadu’s share price valuation, as illustrated by its forward price-to-sales ratio. This metric measures how much investors are willing to pay for every dollar of projected revenue over the next 12 months.
XNDU PS Ratio (Forward) data by YCharts.
The chart shows that Xanadu’s forward sales multiple is over 600, indicating its stock is expensive, though the multiple is down from more than 1,000 earlier this year. Although the company’s stock valuation is elevated, its share price could rise if it continues to show rapid revenue expansion.
That said, with only one quarter as a public company, Xanadu lacks a track record to indicate whether Q1’s results were a one-off or a signal of more sales growth ahead. The prudent approach is to observe how the business performs over the next few quarters before deciding to invest.
