Butterfly Network Q3 Earnings Call Highlights

Key Points

• Butterfly Network’s Q3 revenue rose 52% year over year to $32.6 million, beating the high end of guidance by 9%, driven by more than 1,000% growth in its Embedded business and stronger U.S. enterprise demand.
• Profitability improved significantly, with adjusted gross margin reaching a record 73% and the adjusted EBITDA loss narrowing to $1.2 million. The company raised its 2026 revenue outlook to $123 million–$126 million and expects an adjusted EBITDA loss of $12 million–$15 million.
• Butterfly is prioritizing multi-year enterprise contracts, international institutional sales, government opportunities following FedRAMP authorization, and new technology partnerships. Management maintained its goal of achieving adjusted EBITDA and cash-flow positivity by 2028, while preserving financing flexibility through potential equity offerings.

Butterfly Network NYSE: BFLY reported third-quarter 2026 revenue of $32.6 million, up 52% from a year earlier and 9% above the high end of its guidance range, as growth in its Embedded business and enterprise-focused point-of-care ultrasound operations lifted results.

The company also posted its highest gross margin to date and raised its full-year outlook for revenue and adjusted EBITDA. Chief Executive Officer Joseph DeVivo said the company’s strategy is increasingly centered on multi-year enterprise contracts in the U.S., international expansion using its domestic sales approach, and Embedded partnerships that can provide development revenue upfront and potential licensing, chip sales and revenue-sharing opportunities over time.

Revenue Growth Led by Embedded Business

Third-quarter Core POCUS revenue was $21.5 million, up 5% year over year, while Butterfly Embedded revenue reached $11.1 million, an increase of more than 1,000% from the prior-year period. Chief Financial Officer John Doherty said Embedded growth was primarily driven by the Midjourney partnership and newly signed agreements with Merge Labs and Bridge Neurotech.

U.S. revenue rose 71% year over year to $27.5 million, supported by Embedded revenue and Core business demand. International revenue declined 5% to $5.1 million as certain expected deals shifted into the fourth quarter and some partners worked through inventory, Doherty said.

Butterfly sold 5% more probe units overall during the quarter. Sales of its iQ3 device increased 8% year over year, while iQ+ sales declined 9%. Average selling price rose 1%, reflecting a greater mix of iQ3 sales, partly offset by a September subscription promotion.

The company’s U.S. health systems and hospitals business grew 15% during the quarter, according to DeVivo. Butterfly closed five enterprise deals with total contract values above $1 million and 10 with total contract values in the six figures. Management said the contracts are generally multi-year arrangements and can support recurring software revenue and additional probe purchases as systems expand deployment.

DeVivo said Compass AI, Butterfly’s data-management platform, is designed to manage point-of-care ultrasound imaging across a health system, including equipment from other manufacturers. He said the platform can help hospitals improve scan documentation, compliance and reimbursement workflows, while also providing an opportunity for Butterfly to expand hardware adoption.

Margins Improve as Company Raises Outlook

Gross profit was a record $23.8 million, compared with a gross loss of $3.8 million a year earlier. Butterfly noted that the prior-year period included a $17.5 million write-down. On an adjusted basis, gross margin expanded to 73% from 64%, aided by the higher-margin Embedded revenue mix and a tariff refund under the International Emergency Economic Powers Act.

Adjusted EBITDA loss narrowed to $1.2 million from $8.1 million in the third quarter of 2025. Cash and cash equivalents totaled $122 million at the end of September, while quarterly cash use was $2.4 million, compared with $3.9 million in the prior-year quarter.

For full-year 2026, Butterfly now expects revenue of $123 million to $126 million, representing growth of approximately 26% to 29% over 2025. The outlook implies fourth-quarter revenue of $31 million to $34 million. The company expects a full-year adjusted EBITDA loss of $12 million to $15 million, implying a fourth-quarter loss of $3 million to $6 million.

Doherty cautioned that Embedded revenue may not be evenly distributed across quarters because it depends on partnership program timing, development milestones and the conversion of pipeline opportunities into contracts.

International, Government and Home-Care Initiatives

Management said it is changing its international commercial strategy after continued softness outside the U.S. Historically, the company relied heavily on distributors focused on individual clinicians. Butterfly now plans to pursue larger institutional and enterprise customers internationally using elements of its U.S. strategy.

DeVivo said the company expects improved international performance in the fourth quarter and into 2027. Doherty added that the company believes investments needed to support the initiative are included in its guidance and should focus on higher-return opportunities rather than require a major incremental spending program.

Butterfly also received FedRAMP authorization during the quarter, allowing it to pursue business with U.S. federal agencies. DeVivo said the company is beginning to be included in requests for information related to larger government opportunities, though he characterized the potential as more significant for 2027 than the current fourth quarter.

In Home & Community Care, Butterfly completed program approvals in the third quarter and expects scanning to begin in November, with initial revenue anticipated in the fourth quarter. The initial effort is focused on congestive heart failure patients in nursing-home settings, with the goal of reducing hospital admissions and readmissions. Management said it is also discussing additional applications, including bladder scanning, sepsis assessment and cardiac imaging, but intends to focus first on the initial program.

Technology Roadmap and Capital Flexibility

Butterfly said it signed five new Butterfly Garden partners during the quarter across emergency medicine, global health, telemonitoring and veterinary applications. DeepEcho launched an application providing AI-powered fetal imaging analysis and automated measurements, initially targeting underserved international markets and offering U.S. educational access.

The company added three Embedded partners in brain-computer-interface applications, including Merge Labs and Bridge Neurotech. It also said Mendaera, an existing Embedded partner, launched a handheld robotic system for real-time needle guidance using Butterfly technology.

DeVivo said Butterfly remains on schedule with development of its Apollo technology and plans to release a limited batch of wearable devices to Embedded co-development partners for research and development. The company expects to introduce a next-generation product using its P5.1 chip in early 2027. According to DeVivo, the chip will add tissue harmonics, and Butterfly expects the new device to expand its ability to compete in image-quality-sensitive settings such as intensive care and cardiology.

Separately, Butterfly filed a new universal shelf registration statement that permits it to issue up to $150 million of securities over three years and established an at-the-market equity program of up to $150 million. Doherty said the company has no immediate need for cash and described the filing as a measure to preserve financing flexibility. Management reiterated its goal of becoming adjusted EBITDA and cash-flow positive by 2028.

About Butterfly Network (NYSE:BFLY)

Butterfly Network, Inc develops portable medical imaging technology designed to make ultrasound more accessible across hospitals, clinics, emergency-care settings and other care environments. The company's core products use a semiconductor-based ultrasound-on-chip platform, replacing conventional ultrasound systems' large arrays of piezoelectric transducers with a compact, software-driven probe.

Its product portfolio includes the Butterfly iQ, iQ+, and iQ3 handheld ultrasound systems, which connect to compatible mobile devices and provide imaging across multiple clinical applications.

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