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Quantum computing expert IonQ (NYSE: IONQ) is going through a tricky growth spurt. First-quarter revenues rose by 77% year over year, but the company is burning lots of cash. Meanwhile, investors have turned away from the previously red-hot quantum computing industry, making stock sales a less effective tool for raising more cash.

So IonQ's business is picking up speed, but the stock price is down 61% from last fall's 52-week highs. That's a mixed message, but what does it mean? Is IonQ a great tech stock to buy today, or a falling knife to avoid at all costs?

Let's figure it out.

Image source: Getty Images.

IonQ's high-stakes gamble: a quantum leap of faith?

As a leader in the emerging field of quantum computing, IonQ is a company of stark contrasts. For example:

• Revenues are rising fast, but still very small (just $25.3 million over the last four quarters).
• The backlog of unfilled order bookings should add up to roughly $85 million in fiscal year 2024, but the first quarter only added $300,000 to that forward-looking metric.
• Quantum computing holds a metric ton of long-term promise, as its next-level calculations should run circles around digital computers in many different fields. But that revolution is many years away. The story so far involves expensive systems generating very simple, noisy, and error-prone results. Quantum computing is more of an experiment than a commercial product at this point, and IonQ's chief focus lies in finding commercial use cases for simpler systems.

Balancing revenue growth and cash burn

Developing advanced technology systems from scratch is not a cheap business. IonQ collected $7.6 million of top-line revenues in the first quarter of 2024, but reported a net loss of $39.6 million and $24.9 million in negative free cash flows.

The company keeps the lights on by selling assets from a portfolio of short-term investments, but that cash-equivalent hoard won't last forever. At the end of March, IonQ had $434.4 million of cash and investments on hand. That's down from $525.5 million a year ago and $586.4 million in March 2022. The asset sales are accelerating over time.

Sure, IonQ can run the business this way for several years before running out of money. But it's a risky strategy, and investors are betting on management finding strong commercial use cases for some relatively immature system generations. Otherwise, the company would need to raise cash by other means in the next five years.

Stock sales could do the job, at the cost of diluting existing shareholder positions. Loans and debt notes might work, but banks would set painfully high interest rates for a company with years of cash losses and uncertain future prospects. The only workable way ahead is to deliver on that commercialization idea.

IonQ's uncertain path to profits

I'm not saying that IonQ is a lost cause. The short-term investment pile gives the company a fighting chance to come out on top, and most of its quantum computing rivals can't compete with this company's system-building progress. And if you want to invest in IonQ for the long term, you raise the potential payoff and lower the investment risk by starting your position at a low price point.

That being said, IonQ remains a speculative idea. I'm quite content with watching IonQ from the sidelines at this point, letting tech giants such as IBM (NYSE: IBM) and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) represent the quantum computing industry until further notice.

All in all, IonQ may become a strong performer in the long run, but the path ahead isn't very clear. Be careful with this risky investment, and make sure you're all right with the risks before putting your money to work with IonQ stock.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Anders Bylund has positions in Alphabet and International Business Machines. The Motley Fool has positions in and recommends Alphabet. The Motley Fool recommends International Business Machines. 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.