Butterfly Network, Inc. is a pioneer of the Ultrasound-on-Chip™ semiconductor platform and a leader in semiconductor-based point of care ultrasound technology. The company combines proprietary hardware, intuitive software, services and educational offerings to make ultrasound more accessible. Its flagship solution enables clinicians to apply ultrasound information directly into clinical workflow through affordable pocket sized devices that pair with cloud connected…
Butterfly Network, Inc. is a pioneer of the Ultrasound-on-Chip™ semiconductor platform and a leader in semiconductor-based point of care ultrasound technology. The company combines proprietary hardware, intuitive software, services and educational offerings to make ultrasound more accessible. Its flagship solution enables clinicians to apply ultrasound information directly into clinical workflow through affordable pocket sized devices that pair with cloud connected software accessed via a mobile application. This combination of portable hardware and AI driven cloud linked software supports use in large health systems as well as in remote or resource limited settings.
Butterfly Network, Inc. generates revenue primarily from the sale of its handheld ultrasound devices, including the Butterfly iQ3, Butterfly iQ+, Butterfly iQ+ Bladder and Butterfly Move systems, along with related accessories such as cases, adaptors and carts. The company also offers software subscriptions—core, advanced and specialty plans—that provide cloud storage, image analysis, AI tools and workflow integration, and it sells professional services for large scale deployments, training and education. In addition, through its Butterfly Embedded™ program, it licenses its ultrasound‑on‑chip technology to third parties for co‑development of non competing applications, receiving up front fees, annual license payments and potential milestone based revenue. For the fiscal years ended December 31, 2025 and 2024, total revenue was $97.6 million and $82.1 million, respectively.
Butterfly Network, Inc. occupies a distinctive niche within the ultrasound industry by replacing traditional piezoelectric crystal probes with its semiconductor based Ultrasound‑on‑Chip™ platform, which eliminates lead based materials and enables compliance with EU RoHS standards without reliance on exemptions. While it competes with established manufacturers of cart based and handheld ultrasound systems, its technology offers whole body imaging on a single probe, lower power consumption and the ability to benefit from Moore's Law driven performance gains. The company further differentiates itself through AI enhanced software, cloud connectivity and a comprehensive ecosystem that includes tele guidance, automated measurement tools and education platforms, positioning it as a leader in the shift toward portable, affordable and digitally integrated point of care imaging.
Butterfly Network, Inc. serves a broad range of customers that includes hospitals, health systems, clinics, individual physicians, nurses and other healthcare professionals across various specialties. The company also sells to veterinarians and veterinary practices through its Butterfly iQ Vet line and works with non governmental organizations and global health partners to deploy its devices in low resource settings. Although specific customer names are not disclosed, the filing notes that Butterfly devices have been purchased by clinicians in most of the 100 largest U. S. healthcare systems.
Sectors:Healthcare · TechnologySector rationaleThe company's primary revenue is generated from the sale of handheld ultrasound devices (Butterfly iQ series) and related software subscriptions sold to hospitals, clinics, and physicians for patient care. A secondary sector of Technology is justified because the company licenses its proprietary 'Ultrasound-on-Chip' semiconductor technology to third parties for co-development, creating a distinct revenue stream based on IP licensing.Industries:+1 moreDiagnostic EquipmentHealthcarePrimaryButterfly Network manufactures and sells clinical diagnostic equipment, specifically handheld ultrasound devices like the Butterfly iQ3 and Butterfly iQ+, which are used for point-of-care imaging. Its revenue is driven by the sale of these diagnostic instruments and the associated AI-driven software and consumables.Healthcare ITTechnologySecondaryThe company sells software subscriptions (core, advanced, and specialty plans) that provide cloud storage, image analysis, and workflow integration specifically designed for clinical ultrasound data and healthcare professionals.Animal HealthHealthcareSecondaryThe company has a dedicated business line for animal health, selling the Butterfly iQ Vet line specifically to veterinarians and veterinary practices.Classified using BQ-MICSCIK: 0001804176
Investment Thesis
▲ Bull case
Butterfly is positioned at the inflection point of a technological convergence where semiconductor-based ultrasound, AI, and cloud integration are creating exponential growth opportunities that the market is undervaluing. The company's Ultrasound-on-Chip™ architecture enables real-time adaptive imaging that transcends traditional diagnostic ultrasound by allowing continuous learning and adjustment of signal transmission and reception through AI-powered compute. This creates a closed-loop system where sensing, thinking, and acting happen continuously, positioning Butterfly not just as an imaging device provider but as the foundational sensing layer for the human body. The recent FDA clearance of the gestational age AI tool—validated on over 21 million images and highlighted by the FDA itself—demonstrates Butterfly's ability to deliver clinically validated, regulatory-compliant AI applications that solve critical global health gaps, particularly in underserved regions where prenatal care is lacking. This capability can be pushed via cloud updates to existing users worldwide, unlocking immediate scalability in global health markets and creating a flywheel effect where each new AI application increases probe utilization and drives recurring revenue through Butterfly Garden and Embedded partnerships. The market is underestimating how this regulatory validation de-risks future AI tool approvals and accelerates adoption in both developed and emerging markets.
Butterfly Embedded is emerging as a high-margin, scalable growth engine that is being overlooked due to its early-stage presentation, yet it represents a transformative shift beyond point-of-care ultrasound into becoming an enabling technology for entirely new industries. The company has secured nine Embedded partners, including a material deal with Midjourney that drove 147% year-over-year Embedded revenue growth in Q1 FY26, and is actively negotiating additional partnerships that could replicate similar near-term financial impact. These partnerships are not incremental; they represent the formation of new markets where ultrasound becomes a native sensing capability inside other systems—such as wearables, robotics, and neuromodulation—enabled by Butterfly’s programmable chip architecture. Unlike traditional medical device sales that require significant sales force investment, Embedded generates revenue through licensing fees and chip sales with minimal incremental cost, creating a capital-efficient, recurring revenue stream. The Apollo chip, designed to process 20x the data of current generations and stream real-time ultrasound data directly into GPU memory, will be a major catalyst for this segment, enabling on-device AI compute for applications far beyond imaging, including targeted drug delivery and brain-computer interfaces. The market is failing to recognize that Butterfly Embedded is not just a side business but a platform play that could eventually surpass core POCUS in profitability and scalability, leveraging the same ultrasound-on-chip foundation to tap into adjacent markets without duplicating commercial infrastructure.
The Home and Community Care initiative is a foundational shift in care delivery that is being underestimated as a mere pilot program, when in fact it represents a disruptive model with clear path to profitability and national scalability by 2027. Butterfly’s vision goes beyond selling probes to training nurses and caregivers to perform AI-guided scans at the patient bedside—such as for congestive heart failure, bladder infections, or deep vein thrombosis—enabling real-time specialist consultation and reducing unnecessary hospital visits, ambulance transports, and costly diagnostics. The initial feasibility pilot showed meaningful reductions in admissions and readmissions, and the company is now focused on securing its first commercial agreement in H1 FY26 to launch real-world operations in Q3 FY26, with the explicit goal of demonstrating operational viability, incrementality, profitability, and improved patient outcomes in a single state before expanding nationwide. This model creates a flywheel where increased utilization drives better outcomes, which drives further adoption and reimbursement potential. Unlike traditional medical device adoption that relies on physician behavior change, this approach empowers frontline caregivers with AI decision support, making it more scalable and sustainable. The market is ignoring how this initiative could unlock new reimbursement pathways, create defensible relationships with state health systems and skilled nursing facilities, and transform Butterfly from a hardware vendor into an integral part of the care delivery ecosystem—potentially generating recurring service revenue alongside probe sales.
Butterfly is positioned at the inflection point of a technological convergence where semiconductor-based ultrasound, AI, and cloud integration are creating exponential growth opportunities that the market is undervaluing. The company's Ultrasound-on-Chip™ architecture enables real-time adaptive imaging that transcends traditional diagnostic ultrasound by allowing continuous learning and adjustment of signal transmission and reception through AI-powered compute. This creates a closed-loop system where sensing, thinking, and acting happen continuously, positioning Butterfly not just as an imaging device provider but as the foundational sensing layer for the human body. The recent FDA clearance of the gestational age AI tool—validated on over 21 million images and highlighted by the FDA itself—demonstrates Butterfly's ability to deliver clinically validated, regulatory-compliant AI applications that solve critical global health gaps, particularly in underserved regions where prenatal care is lacking. This capability can be pushed via cloud updates to existing users worldwide, unlocking immediate scalability in global health markets and creating a flywheel effect where each new AI application increases probe utilization and drives recurring revenue through Butterfly Garden and Embedded partnerships. The market is underestimating how this regulatory validation de-risks future AI tool approvals and accelerates adoption in both developed and emerging markets.
Butterfly Embedded is emerging as a high-margin, scalable growth engine that is being overlooked due to its early-stage presentation, yet it represents a transformative shift beyond point-of-care ultrasound into becoming an enabling technology for entirely new industries. The company has secured nine Embedded partners, including a material deal with Midjourney that drove 147% year-over-year Embedded revenue growth in Q1 FY26, and is actively negotiating additional partnerships that could replicate similar near-term financial impact. These partnerships are not incremental; they represent the formation of new markets where ultrasound becomes a native sensing capability inside other systems—such as wearables, robotics, and neuromodulation—enabled by Butterfly’s programmable chip architecture. Unlike traditional medical device sales that require significant sales force investment, Embedded generates revenue through licensing fees and chip sales with minimal incremental cost, creating a capital-efficient, recurring revenue stream. The Apollo chip, designed to process 20x the data of current generations and stream real-time ultrasound data directly into GPU memory, will be a major catalyst for this segment, enabling on-device AI compute for applications far beyond imaging, including targeted drug delivery and brain-computer interfaces. The market is failing to recognize that Butterfly Embedded is not just a side business but a platform play that could eventually surpass core POCUS in profitability and scalability, leveraging the same ultrasound-on-chip foundation to tap into adjacent markets without duplicating commercial infrastructure.
The Home and Community Care initiative is a foundational shift in care delivery that is being underestimated as a mere pilot program, when in fact it represents a disruptive model with clear path to profitability and national scalability by 2027. Butterfly’s vision goes beyond selling probes to training nurses and caregivers to perform AI-guided scans at the patient bedside—such as for congestive heart failure, bladder infections, or deep vein thrombosis—enabling real-time specialist consultation and reducing unnecessary hospital visits, ambulance transports, and costly diagnostics. The initial feasibility pilot showed meaningful reductions in admissions and readmissions, and the company is now focused on securing its first commercial agreement in H1 FY26 to launch real-world operations in Q3 FY26, with the explicit goal of demonstrating operational viability, incrementality, profitability, and improved patient outcomes in a single state before expanding nationwide. This model creates a flywheel where increased utilization drives better outcomes, which drives further adoption and reimbursement potential. Unlike traditional medical device adoption that relies on physician behavior change, this approach empowers frontline caregivers with AI decision support, making it more scalable and sustainable. The market is ignoring how this initiative could unlock new reimbursement pathways, create defensible relationships with state health systems and skilled nursing facilities, and transform Butterfly from a hardware vendor into an integral part of the care delivery ecosystem—potentially generating recurring service revenue alongside probe sales.
Butterfly’s financial performance remains heavily dependent on volatile probe sales and early-stage growth initiatives, with core business growth decelerating to just 10% year-over-year in Q1 FY26 despite strong overall revenue growth, signaling weakening demand in its foundational point-of-care ultrasound market. While total revenue grew 25%, this was driven almost entirely by a 147% surge in Butterfly Embedded revenue from the Midjourney partnership—a single, non-recurring catalyst that masks underlying softness in the core business. Probe sales only increased 5% year-over-year, and the mix shift toward higher-priced iQ3 units (driven by a 39% increase in iQ3 sales versus a 43% decline in lower-priced iQ+ sales) artificially inflated ASP by 11%, suggesting the company is relying on price mix rather than genuine volume expansion to drive growth. This dynamic indicates market saturation or competitive pressure in the core POCUS segment, where growth is increasingly dependent on upselling existing users rather than acquiring new customers. The embedded business, while impressive in growth rate, remains a small fraction of total revenue ($5.7M of $26.5M in Q1 FY26) and is highly dependent on a handful of strategic partnerships; over-reliance on such deals creates concentration risk, as the loss or delay of a single partner like Midjourney could severely impact Embedded performance and overall guidance.
The company’s path to profitability remains uncertain and dependent on aggressive reinvestment that is delaying margin expansion, with adjusted EBITDA losses still projected at $21–$25 million for FY26 despite claims of operational discipline. Although Q1 FY26 adjusted EBITDA loss improved to $6.1 million from $9.1 million in the prior year, this improvement was driven primarily by higher-margin Embedded revenue and cost control—not by operating leverage in the core business. Management continues to guide for significant investment in Home and Community Care, Compass AI enterprise sales, and Embedded partnership development, explicitly stating that these initiatives require upfront spending with returns expected over “years, not quarters.” This implies that profitability is perpetually being pushed further into the future, and the company may never achieve sustainable operating leverage if revenue growth fails to outpace its investments in sales, R&D, and market development. The gross margin improvement to 69% was aided by the higher-margin Embedded mix and lower software amortization, not by scale efficiencies in core operations, raising concerns that the underlying business model lacks inherent scalability to profitability without continuous external catalysts.
Regulatory and macroeconomic risks are being downplayed, particularly regarding the RoHS Lead Exemption in the EU and the long-term viability of Butterfly’s differentiation in an increasingly competitive ultrasound market. Although Butterfly successfully advocated for a reduced 2-year exemption term (down from the typical 2–7 years) based on OKYO’s confirmation of CMA as a technically viable alternative, the exemption remains in place for two more years, during which competitors can continue selling lead-based piezoelectric crystal devices without facing the same environmental compliance pressures. This creates an uneven playing field where Butterfly may face cost disadvantages if it must transition to alternative materials while rivals retain access to cheaper, established technology. Furthermore, the company’s reliance on FDA clearance as a moat is overstated; while the gestational age AI tool clearance was a significant achievement, the broader AI-enabled ultrasound software landscape is crowded with thousands of FDA submissions, many of which may lack rigorous clinical validation but could still gain clearance through less stringent pathways. Butterfly’s emphasis on clinical rigor may slow its time-to-market relative to competitors prioritizing speed over validation, especially in fast-moving AI applications. The macro environment—including ongoing Middle East conflict and tariff exposure—was dismissed as having only “minor” impacts, but any escalation could disrupt global supply chains for semiconductor components or reduce healthcare capital expenditures in key international markets, directly affecting Butterfly’s ability to scale its core and Embedded businesses.
Butterfly’s financial performance remains heavily dependent on volatile probe sales and early-stage growth initiatives, with core business growth decelerating to just 10% year-over-year in Q1 FY26 despite strong overall revenue growth, signaling weakening demand in its foundational point-of-care ultrasound market. While total revenue grew 25%, this was driven almost entirely by a 147% surge in Butterfly Embedded revenue from the Midjourney partnership—a single, non-recurring catalyst that masks underlying softness in the core business. Probe sales only increased 5% year-over-year, and the mix shift toward higher-priced iQ3 units (driven by a 39% increase in iQ3 sales versus a 43% decline in lower-priced iQ+ sales) artificially inflated ASP by 11%, suggesting the company is relying on price mix rather than genuine volume expansion to drive growth. This dynamic indicates market saturation or competitive pressure in the core POCUS segment, where growth is increasingly dependent on upselling existing users rather than acquiring new customers. The embedded business, while impressive in growth rate, remains a small fraction of total revenue ($5.7M of $26.5M in Q1 FY26) and is highly dependent on a handful of strategic partnerships; over-reliance on such deals creates concentration risk, as the loss or delay of a single partner like Midjourney could severely impact Embedded performance and overall guidance.
The company’s path to profitability remains uncertain and dependent on aggressive reinvestment that is delaying margin expansion, with adjusted EBITDA losses still projected at $21–$25 million for FY26 despite claims of operational discipline. Although Q1 FY26 adjusted EBITDA loss improved to $6.1 million from $9.1 million in the prior year, this improvement was driven primarily by higher-margin Embedded revenue and cost control—not by operating leverage in the core business. Management continues to guide for significant investment in Home and Community Care, Compass AI enterprise sales, and Embedded partnership development, explicitly stating that these initiatives require upfront spending with returns expected over “years, not quarters.” This implies that profitability is perpetually being pushed further into the future, and the company may never achieve sustainable operating leverage if revenue growth fails to outpace its investments in sales, R&D, and market development. The gross margin improvement to 69% was aided by the higher-margin Embedded mix and lower software amortization, not by scale efficiencies in core operations, raising concerns that the underlying business model lacks inherent scalability to profitability without continuous external catalysts.
Regulatory and macroeconomic risks are being downplayed, particularly regarding the RoHS Lead Exemption in the EU and the long-term viability of Butterfly’s differentiation in an increasingly competitive ultrasound market. Although Butterfly successfully advocated for a reduced 2-year exemption term (down from the typical 2–7 years) based on OKYO’s confirmation of CMA as a technically viable alternative, the exemption remains in place for two more years, during which competitors can continue selling lead-based piezoelectric crystal devices without facing the same environmental compliance pressures. This creates an uneven playing field where Butterfly may face cost disadvantages if it must transition to alternative materials while rivals retain access to cheaper, established technology. Furthermore, the company’s reliance on FDA clearance as a moat is overstated; while the gestational age AI tool clearance was a significant achievement, the broader AI-enabled ultrasound software landscape is crowded with thousands of FDA submissions, many of which may lack rigorous clinical validation but could still gain clearance through less stringent pathways. Butterfly’s emphasis on clinical rigor may slow its time-to-market relative to competitors prioritizing speed over validation, especially in fast-moving AI applications. The macro environment—including ongoing Middle East conflict and tariff exposure—was dismissed as having only “minor” impacts, but any escalation could disrupt global supply chains for semiconductor components or reduce healthcare capital expenditures in key international markets, directly affecting Butterfly’s ability to scale its core and Embedded businesses.