10-Q: Butterfly Network Q2 2026 Earnings: Revenue Up, Losses Narrow

Butterfly Network reports a significant increase in revenue driven by software and services, alongside a reduction in operational losses for the second quarter of 2026.

Summary

• Butterfly Network reported total revenue of $32.6 million for the three months ended June 30, 2026, a 39.5% increase compared to $23.4 million in the same period of 2025.
• Software and other services revenue surged by 149.8% to $16.9 million, primarily due to growth in Embedded partnerships, including the co-development with Midjourney, Inc.
• Product revenue saw a slight decrease of 5.4% to $15.7 million, impacted by the non-recurrence of prior-year semiconductor chip sales.
• Gross profit increased to $23.3 million from $14.9 million year-over-year, with a gross profit margin of 71.4% compared to 63.7%.
• Operating expenses increased to $37.0 million from $31.0 million, driven by higher R&D and G&A costs.
• The net loss for the quarter was $12.9 million, an improvement from $13.8 million in the prior year's second quarter.
• The company ended the quarter with $124.7 million in cash and cash equivalents, and expects current cash and cash flows to be sufficient for at least the next 12 months.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a moderately positive report, with strong revenue growth and an improving loss, driven by a strategic shift to higher-margin services, though product revenue decline and ongoing litigation present areas of concern.

Positives

• Total revenue increased by 39.5% to $32.6 million in Q2 2026 compared to Q2 2025.
• Software and other services revenue grew significantly by 149.8% to $16.9 million, indicating strong adoption of their service offerings.
• Gross profit margin improved to 71.4% from 63.7% in the prior year's quarter.
• Net loss narrowed to $12.9 million from $13.8 million year-over-year.
• Units fulfilled increased by 22.5% in Q2 2026 compared to Q2 2025, driven by higher probe sales.
• Software and other services mix increased to 51.8% of total revenue, up from 28.9% in Q2 2025, indicating a favorable shift towards higher-margin revenue streams.

Negatives

• Product revenue decreased by 5.4% to $15.7 million in Q2 2026.
• Operating expenses increased by 19.2% to $37.0 million in Q2 2026.
• The company reported a net loss of $12.9 million for the quarter.
• General and administrative expenses increased by 24.4% to $11.4 million, partly due to a provision for credit losses.
• Other operating expenses increased significantly by 80.6% to $3.6 million, largely due to litigation-related costs.

Risks

• The company's growth depends on its ability to attract and retain customers.
• The business could be harmed if the company fails to manage its growth effectively.
• The company's business is subject to a variety of U.S. and foreign laws, which are subject to change and could adversely affect its business.
• Changes in applicable laws or regulations could impact the company's business.
• The company's ability to protect or enforce its intellectual property rights is a risk.
• Economic downturns and political and market conditions beyond the company's control could adversely affect its business.
• The company is involved in ongoing litigation, including a putative class action lawsuit and stockholder derivative actions, which could result in significant damages or costs.
• The company has indemnification obligations to certain defendants in ongoing litigation that may be implicated later.

Future Outlook

The company expects that its existing cash and cash flows from operations will be sufficient to meet its anticipated liquidity, working capital, and capital expenditure requirements and fund its operations for at least the next 12 months. The company anticipates a continued shift in its revenue mix towards software and other services as adoption of its devices increases and Embedded collaborations grow.

Management Comments

• "Butterfly developed ultrasound devices that can perform whole-body imaging in a single handheld probe because they are powered by our proprietary semiconductor technology instead of piezoelectric crystals."
• "Our Ultrasound-on-Chip makes ultrasound more accessible outside of large healthcare institutions, while our software is intended to make the product easy to use, fully integrated with the clinical workflow, and accessible on a users smartphone, tablet, and almost any hospital computer system connected to the Internet."
• "We aim to enable the delivery of imaging information anywhere at point-of-care to drive earlier detection throughout the body and remote management of health conditions."
• "We expect that our existing cash and cash flows from operations will be sufficient to meet our anticipated liquidity, working capital, and capital expenditure requirements and fund our operations for at least the next 12 months."

Industry Context

StockSavvy.ai notes that Butterfly Network's Q2 2026 results reflect a significant industry trend towards recurring revenue models in medical technology, with software and services becoming increasingly important drivers of growth and profitability. The company's focus on accessible, portable ultrasound technology positions it to capitalize on the growing demand for point-of-care diagnostics.

Comparison to Industry Standards

• The shift towards a higher software and services revenue mix (51.8% in Q2 2026) aligns with industry trends where companies are increasingly leveraging subscription-based models for predictable revenue and higher margins, a strategy seen in companies like Philips and GE Healthcare in their digital health divisions.
• The reported net loss, while improved, is still substantial, which is not uncommon for companies in the disruptive medical technology sector investing heavily in R&D and market expansion. Competitors like Hologic and Siemens Healthineers also experience periods of significant investment impacting short-term profitability.
• The increase in R&D spending (26.8% year-over-year) indicates a commitment to innovation, a critical factor for maintaining a competitive edge in the rapidly evolving medical imaging market, where continuous product development is essential.

Legal Proceedings

• A putative class action lawsuit (Rose v. Butterfly Network, Inc., et al.) alleging false and misleading statements related to post-Business Combination prospects.
• Stockholder derivative actions (Koenig v. Todd M. Fruchterman, et al. and Bhavsar v. Todd M. Fruchterman, et al.) alleging violations of the Exchange Act and breach of fiduciary duty.
• A civil action (Sezonov v. Longview Investors LLC, et al.) arising from the Business Combination, asserting claims for breaches of fiduciary duty and unjust enrichment.
• The company has recognized an estimated liability of $10.0 million for loss contingencies related to indemnification obligations in the Sezonov litigation, with a corresponding $10.0 million insurance recovery asset.

Stakeholder Impact

• Shareholders: Potential for increased value due to revenue growth and narrowing losses, but offset by ongoing litigation risks and net losses.
• Employees: Continued investment in R&D and commercial teams, but also potential impact from G&A cost increases.
• Customers: Access to innovative and increasingly accessible medical imaging technology.
• Suppliers: Continued inventory purchase commitments, with $2.0 million in minimum commitments as of June 30, 2026.

Next Steps

• Continue to invest in product and software development.
• Expand commercial capabilities and healthcare system relationships.
• Grow Embedded collaborations and co-development partnerships.
• Monitor and manage litigation and associated liabilities.

Key Dates

Recommendation

The company shows promising revenue growth and a narrowing loss, driven by a strategic shift to software and services. However, the persistent net losses, significant operating expenses, and ongoing substantial legal proceedings introduce considerable risk. While the positive revenue trends are encouraging, the path to profitability remains uncertain, warranting a 'hold' recommendation until greater clarity on litigation outcomes and sustained profitability emerges.

Keywords

digital health, ultrasound technology, medical imaging, semiconductor, software subscriptions, Embedded partnerships, Midjourney, Inc., point-of-care