20-F: Arqit Quantum Reports Reduced Losses, Boosted Cash in 2025

Arqit Quantum Inc. reported a significant reduction in operating and net losses for the fiscal year ended September 30, 2025, alongside increased revenue and a stronger cash position, driven by strategic capital raises and commercialization efforts.

Summary

• Arqit Quantum Inc. reported an operating loss of $38.539 million for the fiscal year ended September 30, 2025, a 43% reduction from $68.0 million in 2024.
• Net loss for the financial year attributable to equity holders decreased by 38% to $35.343 million in 2025, compared to $56.818 million in 2024.
• Revenue increased by 81% to $0.530 million in 2025 from $0.293 million in 2024, driven by the commencement of revenue recognition on operational contracts.
• Cash and cash equivalents significantly increased to $36.978 million as of September 30, 2025, up from $18.705 million in 2024.
• The company raised approximately $37.180 million through its At-the-Market (ATM) Program in 2025 and $10.000 million from warrant exercises.
• An exceptional item of $6.000 million was provisioned for a legal settlement related to a putative class action lawsuit.
• The satellite division, previously classified as held for sale, was fully impaired in 2024, and its operations were discontinued, contributing a profit of $0.087 million from discontinued operations in 2025, compared to a loss of $30.604 million in 2024.
• Administrative expenses increased by 37% to $34.697 million in 2025, primarily due to a reduction in foreign exchange gain and higher share-based compensation.
• The company acquired Ampliphae's product portfolio IP and innovations team in May 2025, specializing in encryption risk advisory and AI analytics.
• Arqit joined Vodafone's Tomorrow Street Scaleup X program in August 2025 and was selected as a member of the Oracle Defense Ecosystem in June 2025.
• The company won the Endpoint Security Solution Award at the Computing (UK) Security Excellence Awards in May 2025.
• A 1-for-25 reverse share split was effected on September 25, 2024, consolidating ordinary and preference shares.

Sentiment

Score: 6

Explanation: The company shows improved financial performance with reduced losses and increased revenue, alongside successful capital raises and strategic partnerships. However, it remains unprofitable, administrative expenses increased, and there's an ongoing legal settlement, indicating continued operational challenges and reliance on external funding.

Positives

• Operating loss significantly reduced by 43% to $38.539 million in 2025 from $68.0 million in 2024.
• Net loss for the financial year decreased by 38% to $35.343 million in 2025 from $56.818 million in 2024.
• Revenue increased by 81% to $0.530 million in 2025, indicating growing commercialization of products.
• Cash and cash equivalents increased to $36.978 million in 2025, providing stronger liquidity.
• Successful capital raises through ATM Program ($37.180 million) and warrant exercises ($10.000 million) in 2025.
• Discontinued operations (satellite division) showed a profit of $0.087 million in 2025, a significant improvement from a $30.604 million loss in 2024.
• Acquisition of Ampliphae's product portfolio and innovations team enhances encryption risk advisory and AI analytics capabilities.
• Strategic collaborations with Vodafone's Tomorrow Street Scaleup X program and Oracle Defense Ecosystem expand market reach and validation.
• Awarded the Endpoint Security Solution Award at the Computing (UK) Security Excellence Awards in May 2025, recognizing product strength.
• Recognition of a $2.186 million income tax credit from the Research and Development Expenditure Credit (RDEC) program in 2025.

Negatives

• Continued to incur significant operating and net losses, indicating the company is still in early commercialization stages and not yet profitable.
• Administrative expenses increased by 37% to $34.697 million in 2025, partly due to higher share-based compensation.
• A $6.000 million provision for a legal settlement related to a class action lawsuit was recognized as an exceptional item.
• The company's limited operating history and evolving market make it difficult to predict future revenues and budget expenses accurately.
• Reliance on channel partnerships for distribution means revenue growth pace and scale are uncertain.
• The market adoption of the company's product is not fully proven and may develop slower than expected.
• The company will require additional capital to fund operations, with no assurance of future funding availability on acceptable terms.

Risks

• The company is an early-stage company with a history of losses and relies on a significant increase in sales and marketing to become profitable.
• Limited operating history makes it difficult to evaluate business and future prospects, increasing investment risk.
• Market adoption of products is not fully proven, evolving, and may develop slower or differently than expected.
• Dependence on maintaining and increasing channel partnerships and developing annual recurring revenues through them.
• Requirement for additional capital to fund operations; inability to obtain such capital would hinder business development and product commercialization.
• Complexity of products could lead to unforeseen delays or expenses from undetected defects, errors, or reliability issues, damaging reputation and exposing to claims.
• Inability to adequately protect or enforce intellectual property rights or prevent unauthorized copying/reverse engineering, leading to costly efforts.
• Third-party claims of intellectual property infringement could result in costly litigation or expensive licenses.
• Use of third-party open-source software components could restrict product sales or expose the company to risks if licenses are not complied with.
• Intellectual property applications, including patents, may not be approved or granted, or may take longer than expected.
• Reliance on unpatented proprietary technology, trade secrets, designs, and know-how, which may be difficult to protect.
• Markets characterized by rapid technological change, where competing product innovations could adversely affect market adoption.
• Business depends substantially on executive officers and highly skilled personnel; failure to attract and retain them could disrupt operations.
• Failure to comply with governmental trade controls (export/import laws, sanctions) could lead to liability, loss of contracting privileges, or reputational harm.
• Failures to comply with privacy, data protection, and information security requirements may adversely impact business.
• Fluctuations in currency exchange rates may adversely affect business and results of operations.
• Business Combination Warrants are accounted for as liabilities, and changes in their fair value could materially affect financial results.
• Interruption or failure of information technology and communications systems could impact product/service provision.
• Breaches of third-party systems, customer environments, or internal systems could harm public perception, lead to business loss, and incur liabilities.
• Failure of network and products to interoperate with customer internal networks or third-party products could reduce competitiveness.
• Difficulty enforcing judgments against the company or its directors/officers in U.S. courts due to Cayman Islands incorporation.
• Sales of substantial numbers of ordinary shares by existing shareholders and warrant exercises may adversely affect market price.
• Significant ownership concentration by two shareholders (49.9%) could conflict with other shareholder interests.
• Price volatility of ordinary shares due to various market and industry factors.
• Risk of involuntary delisting from Nasdaq if continued listing requirements are not met.
• Potential classification as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, leading to adverse consequences for U.S. investors.
• Management team has limited experience managing a U.S. public company, leading to increased costs and regulatory oversight.
• Failure to maintain an effective system of disclosure controls and internal control over financial reporting could impair ability to produce timely and accurate financial statements.
• As a foreign private issuer, the company is exempt from certain U.S. securities laws, limiting information available to shareholders.
• Loss of foreign private issuer status in the future could result in significant additional cost and expense.
• Increased costs and obligations as a public company, especially after ceasing to be an emerging growth company.
• Uncertainty if reduced disclosure requirements for emerging growth companies will make ordinary shares less attractive to investors.

Future Outlook

The company anticipates significant market opportunities in cyber encryption due to the expected transformation in the industry over the next decade, driven by the vulnerability of public key infrastructure to quantum computer attacks. New growth opportunities are expected in government, defense, telecom, and confidential computing markets. The global enterprise key-management/discovery market is projected to reach nearly US $7.74 billion by 2033, and the global confidential-computing market is forecasted to extend to about US $153.84 billion by 2030. The company expects increased engagement from these markets to result in more tests, demonstration activity, and ultimately more revenue licenses. Greater integration with existing channel partners and adding new ones, including announced multiple lines of activity with Intel, are critical for driving additional revenue opportunities in fiscal year 2026.

Management Comments

• "Arqit is a leading provider of encryption analytics and encryption software, enabling organizations to protect data and communications against both today's cyber threats and tomorrow's risks posed by quantum computers."
• "Arqit is unique in that it has developed what it believes is the only symmetric key agreement encryption solution that is software based, globally scalable, able to secure any number of end points and that is provably quantum-safe."
• "Arqit believes that its intellectual property is foundational in the area of encryption technology and intends to enforce the intellectual property portfolio that Arqit has built."
• "Arqit believes that it is well positioned to take advantage of this market opportunity [for more secure encryption products]."
• "Arqit believes that it has the opportunity to establish high margin unit economics when operating at scale as its software, fulfilled from the cloud, automatically creates keys in infinite volumes at minimal cost, resulting in low capital expenditure once deployed."

Industry Context

The company operates in the rapidly evolving post-quantum cryptography encryption industry, which is poised for significant transformation as traditional Public Key Infrastructure (PKI) becomes vulnerable to quantum computer attacks. This creates a robust demand for quantum-safe encryption solutions. Arqit's symmetric key agreement technology positions it uniquely against competitors like Post-Quantum Algorithms (PQAs), which are still unproven against quantum threats, and Quantum Key Distribution (QKD), which faces limitations in scalability and cost. The company's focus on government, defense, telecommunications, and confidential computing aligns with sectors identified as early adopters and large potential revenue opportunities for post-quantum security. Collaborations with entities like Vodafone and Oracle Defense Ecosystem indicate a strategic alignment with broader industry trends towards enhanced cybersecurity and secure cloud environments.

Comparison to Industry Standards

• Arqit's encryption solution is patented and its security proof has been independently validated by GCHQ Accredited Centre of Excellence in Cyber Security at the University of Surrey and PA Consulting, aligning with leading security agency guidance for post-quantum cyber security preparedness, including the National Security Agency's Commercial Solutions for Classified Symmetric Key Management Requirements Annex 3.0.
• The company's symmetric key cryptography is deemed highly secure against quantum computational threats, unlike asymmetric cryptography commonly used today, which is at risk.
• Arqit's solutions are compliant with existing communications and security protocols, including AES-256, IPsec, TLS, and solution architectures aligned with the National Security Agency's Commercial Solutions for Classified Symmetric Key Management Requirements Annex 3.0.
• Competing alternatives like Post-Quantum Algorithms (PQAs) are based on mathematical principles vulnerable to quantum computers, with many proposed PQAs already broken by classical computers, and lack global consensus for adoption.
• Quantum Key Distribution (QKD) is provably secure but limited by high-cost infrastructure, fragility, and distance degradation, making it less globally scalable and cost-effective compared to Arqit's software-based solution.
• The global enterprise key-management/discovery market was valued at approximately US $2.40 billion in 2024 and is projected to reach nearly US $7.74 billion by 2033, indicating a growing market that Arqit aims to capture.
• The global confidential-computing market was estimated at approximately US $5.46 billion in 2023, with forecasts extending to about US $153.84 billion by 2030, representing a significant future revenue opportunity for Arqit's embedded solutions like those demonstrated with Intel TDX enclaves.

Management Changes

Corporate Governance

Legal Proceedings

• A putative class action lawsuit (Federal Action) was filed on May 6, 2022, in the U.S. District Court for the Eastern District of New York, alleging violations of federal securities laws related to business prospects and projections.
• On March 28, 2025, the court denied the motion to dismiss the Federal Action.
• On October 20, 2025, a term sheet was executed to settle the Federal Action for $7 million, pending documentation and court approval.
• A putative class action (State Court Action) was filed on April 18, 2023, in the Supreme Court of the State of New York, based on nearly identical allegations as the Federal Complaint.
• On January 9, 2024, the State Court Action was stayed pending resolution of the Federal Action.
• The company continues to cooperate with and respond to queries from the SEC in connection with their ongoing investigation, including voluntary document productions and interviews.

Related Party Transactions

• In September 2024, existing shareholders Heritage Assets SCSP, Ropemaker Nominees Limited, Carlo Calabria, and Garth Ritchie participated in a registered direct offering, purchasing 5,440,000 ordinary shares and receiving unregistered warrants to purchase up to 5,440,000 shares.
• Arqit director Manfredi Lefebvre d'Ovidio has shared investment and voting power over shares held by Heritage Assets SCSP.
• Arqit director Stephen Chandler is on the investment committee of Notion Capital Managers LLP, the beneficial owner of shares held by Ropemaker Nominees Limited.
• Carlo Calabria and Garth Ritchie are both Arqit directors and participated in the September 2024 offering.
• In the year ended September 30, 2025, Arqit Limited paid $547,200 to Notion Capital for professional services provided by Arqit CEO Andrew Leaver and Rob Soffel, who is an Operating Partner at Notion Capital Managers LLP.
• In September 2023, existing shareholders Heritage Assets SCSP, Ropemaker Nominees Limited, and Carlo Calabria purchased 317,407 ordinary shares and warrants in a registered direct offering.

Stakeholder Impact

• **Shareholders**: Potential for dilution from ongoing capital raises and warrant exercises. The $7 million legal settlement will impact financial results. Reduced losses and revenue growth could positively impact investor confidence, but continued unprofitability and reliance on external funding pose risks. The reverse share split aimed to maintain Nasdaq listing, impacting share count and price per share.
• **Employees**: Share-based compensation is a significant component of administrative expenses, indicating an incentive structure. The company's growth strategy relies on attracting and retaining highly skilled personnel, suggesting positive opportunities for employees.
• **Customers**: The company's focus on delivering quantum-safe encryption solutions and compliance with security agency guidance aims to provide enhanced data and communication security, addressing evolving cyber threats. The acquisition of Ampliphae enhances risk advisory services for customers.
• **Regulatory Authorities**: The company is subject to SEC reporting requirements, Nasdaq listing rules, and various governmental trade controls and data protection laws. Ongoing SEC investigation and compliance efforts indicate significant regulatory scrutiny.

Next Steps

• Continue to invest and increase investments in sales, marketing, and product development.
• Fully commercialize products and achieve sustained profitability.
• Maintain and increase the number of channel partnerships to develop annual recurring revenues.
• Develop and introduce new capabilities and innovations to product offerings.
• Recruit and retain a large number of skilled, specialized, and dedicated employees.
• Monitor and react to evolving privacy and data security regimes, updating compliance measures as needed.
• Finalize documentation and obtain court approval for the $7 million legal settlement in the Federal Action.
• File a status update with the court by December 19, 2025, regarding the Federal Action settlement.
• Potentially recover proceeds from the disposal of satellite assets in a future period.
• Announce additional product or service offerings through existing and new partners in fiscal year 2026.

Key Dates

Recommendation

Arqit Quantum Inc. is in a transitional phase, showing improved financial metrics with reduced losses and increased revenue, alongside successful capital raises that bolster its liquidity. Strategic partnerships and product advancements in the critical quantum cybersecurity space are positive indicators for future growth. However, the company remains unprofitable, administrative expenses are rising, and there's an ongoing legal settlement, which introduces uncertainty. The reliance on continuous capital raises and the early stage of market adoption for its core products suggest that while the long-term potential is significant, the near-term path to sustained profitability is still unproven. A 'hold' recommendation is appropriate for investors who are comfortable with the inherent risks of an early-stage technology company in a nascent market, allowing them to monitor the execution of its commercialization strategy and the resolution of legal matters before making further investment decisions.

Keywords

Quantum Cybersecurity, Symmetric Key Agreement, SKA-Platform, Post-Quantum Cryptography, Encryption Intelligence, NetworkSecure, Cybersecurity Software, Quantum-Safe Encryption, Zero Trust Architecture, SEC Filing, 20-F, Financial Results, Capital Raise, Warrants, Intellectual Property, Government Contracts, Telecommunications Security, Confidential Computing, Risk Management, Nasdaq