10-Q: Butterfly Network Q1 2026 Earnings: Revenue Up, Net Loss Narrows

Butterfly Network reported a 25% increase in total revenue for the first quarter of 2026, driven by strong growth in software and services, while net loss narrowed compared to the prior year period.

Summary

• Butterfly Network reported total revenue of $26.53 million for the first quarter ended March 31, 2026, a 25% increase from $21.23 million in the same period of 2025.
• Product revenue saw a modest increase of 3.5% to $14.65 million, attributed to higher probe sales volume in international and veterinary channels, boosted by the iQ3 Vet probe launch.
• Software and other services revenue surged by 68.2% to $11.88 million, primarily due to increased revenue from Embedded partnerships.
• Gross profit increased by 36.6% to $18.29 million, with gross margin improving to 68.9% from 63.0% in the prior year.
• Operating expenses were $32.16 million, a slight increase from $31.85 million in Q1 2025, but as a percentage of revenue, they decreased significantly to 121.2% from 150.0%.
• The net loss for the quarter was $12.68 million, an improvement from a net loss of $13.97 million in the first quarter of 2025.
• Net loss per share was $0.05 for both periods.
• The company ended the quarter with $137.95 million in cash and cash equivalents.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report, with strong revenue growth driven by the high-margin software and services segment, and a narrowing net loss. While still unprofitable, the operational improvements and strategic revenue diversification are encouraging signs.

Positives

• Total revenue increased by 25% to $26.53 million.
• Software and other services revenue grew significantly by 68.2% to $11.88 million.
• Gross profit increased by 36.6% to $18.29 million.
• Gross margin improved to 68.9% from 63.0%.
• Net loss narrowed to $12.68 million from $13.97 million.
• Operating expenses as a percentage of revenue decreased to 121.2% from 150.0%.
• Units fulfilled increased by 4.9% to 5,023 units.
• Software and other services mix increased to 44.8% of total revenue.

Negatives

• The company continues to operate at a net loss.
• General and administrative expenses increased by 12.7% to $10.82 million.
• Despite revenue growth, operating expenses still exceeded revenue, resulting in an operating loss of $13.87 million.

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.
• Current expectations and assumptions are subject to risks, assumptions, estimates, and uncertainties.
• The business is subject to a variety of U.S. and foreign laws, which are subject to change and could adversely affect the business.
• The pricing of products and services, and reimbursement for medical procedures conducted using medical products and services, could be impacted.
• Changes in applicable laws or regulations could adversely affect the business.
• The ability to protect or enforce intellectual property rights is a risk.
• Economic downturns and political and market conditions beyond the company's control pose risks.
• 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 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 an improvement in profitability and margin expansion over time as its revenue mix shifts increasingly towards software and other services. It plans to continue making substantial investments in product and software development, clinical, and regulatory capabilities, and expects to increase investments in its commercial capabilities.

Management Comments

• The company is an innovative digital health business transforming care through a unique combination of portable, semiconductor-based ultrasound technology, intuitive software, services, and educational offerings that can make medical imaging more accessible than ever before.
• Butterfly's solution enables the practical application of ultrasound information into the clinical workflow through affordable hardware that fits in a healthcare professional's pocket and is paired with cloud-connected software that is easily accessed through a mobile application.
• 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 believe that the software and other services mix is a key indicator of the profitability of our business, and thus we believe that this measure is useful to investors.

Industry Context

StockSavvy.ai notes that Butterfly Network's Q1 2026 results reflect a continued trend in the digital health sector towards integrated hardware and software solutions, with a growing emphasis on recurring revenue models like SaaS. The significant increase in software and services revenue, driven by partnerships, aligns with industry efforts to expand market reach and create sticky customer relationships beyond initial hardware sales. The company's focus on making medical imaging more accessible aligns with broader healthcare initiatives aimed at improving patient outcomes and reducing costs through point-of-care diagnostics.

Comparison to Industry Standards

• The company's gross margin of 68.9% is strong, particularly for a hardware-involved technology company, suggesting efficient cost management in its product delivery.
• The significant growth in software and services revenue (68.2%) outpaces many established medical device companies that are also transitioning to recurring revenue models, indicating successful execution in this area.
• While the company is still operating at a net loss, the narrowing of this loss by 9.3% year-over-year, coupled with a 25% increase in total revenue, suggests a positive trajectory towards profitability, which is a key benchmark for growth-stage companies in the medtech industry.
• The increase in units fulfilled by 4.9% indicates market adoption, though it is a smaller growth rate compared to the revenue growth, suggesting a higher average selling price or a greater contribution from services in the current period.

Legal Proceedings

• A putative class action lawsuit (Rose v. Butterfly Network, Inc., et al.) alleges false and misleading statements and omissions about post-Business Combination business and financial prospects.
• Two stockholder derivative actions (Koenig v. Todd M. Fruchterman, et al. and Bhavsar v. Todd M. Fruchterman, et al.) allege violations of the Exchange Act and breach of fiduciary duty, premised on inadequate internal controls and misleading representations.
• A stockholder is pursuing claims in Sezonov v. Longview Investors LLC, et al. for breaches of fiduciary duty, unjust enrichment, civil conspiracy, and aiding and abetting breaches of fiduciary duty, arising from the Business Combination.

Stakeholder Impact

• Shareholders may see positive impact from revenue growth and narrowing losses, but continued unprofitability remains a concern.
• Employees may be impacted by continued investment in R&D and commercial capabilities, potentially leading to growth opportunities.
• Customers benefit from the increasing accessibility and integration of ultrasound technology into clinical workflows.
• Suppliers may see increased demand for components and manufacturing services due to higher probe sales volume.

Next Steps

• Continue to invest in product and software development.
• Expand commercial capabilities and increase investments in sales and marketing.
• Grow adoption at large-scale healthcare systems and drive awareness of usability.
• Continue to develop relationships with larger healthcare systems.
• Further develop SaaS and other service offerings.

Key Dates

Recommendation

The company shows positive momentum with strong revenue growth, particularly in its higher-margin software and services segment, and a narrowing net loss. However, it remains unprofitable, and the ongoing legal proceedings present significant uncertainty. While the strategic direction is promising, the path to consistent profitability and the resolution of legal challenges warrant a cautious 'hold' stance until further clarity emerges.

Keywords

Butterfly Network, 10-Q, Quarterly Report, Medical Imaging, Ultrasound, Digital Health, Revenue, Net Loss, Financial Statements, SEC Filing