Key Points
Quantum computing is attracting investor interest, resulting in a number of companies in the sector going public this year.
One recent IPO is that of Xanadu Quantum Technologies, which uses light particles, called photons, in its quantum machines.
Companies using other quantum computing techniques are looking to photonic technology because of its advantages.
- 10 stocks we like better than Xanadu Quantum Technologies ›
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.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
This company is Xanadu Quantum Technologies (NASDAQ: XNDU). 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.
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.
Should you buy stock in Xanadu Quantum Technologies right now?
Before you buy stock in Xanadu Quantum Technologies, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Xanadu Quantum Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $463,900!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,294,401!*
Now, it’s worth noting Stock Advisor’s total average return is 978% — a market-crushing outperformance compared to 211% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
*Stock Advisor returns as of May 31, 2026.
Robert Izquierdo has positions in IonQ. The Motley Fool has positions in and recommends IonQ. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
