10-K: Butterfly Network Reports Revenue Growth Amidst Rising Losses

Butterfly Network saw a 19% revenue increase in 2025, driven by new product launches and strategic partnerships, despite a rise in net losses and significant inventory write-downs.

Summary

• Total revenue increased by 19.0% to $97.6 million in 2025, up from $82.1 million in 2024.
• Product revenue grew by 17.1% to $63.4 million in 2025, primarily due to the launch of Butterfly iQ3 and iQ3 Vet probes.
• Software and other services revenue increased by 22.7% to $34.2 million in 2025, driven by Butterfly Embedded partnerships.
• Net loss for 2025 was $77.1 million, an increase from $72.5 million in 2024.
• Gross profit decreased to $45.7 million in 2025 from $48.8 million in 2024, with gross margin falling from 59.5% to 46.9%.
• A non-recurring charge of $17.4 million for excess and obsolete inventory significantly impacted cost of product revenue in 2025.
• Operating expenses totaled $132.1 million in 2025, up from $123.2 million in 2024.
• Research and development expenses decreased by 4.1% to $36.3 million in 2025.
• Sales and marketing expenses increased by 10.4% to $45.9 million in 2025.
• General and administrative expenses decreased by 1.4% to $39.2 million in 2025.
• Other operating expenses surged by 165.1% to $10.8 million in 2025, mainly due to $7.1 million in higher legal costs, including a $3.0 million accrued loss contingency.
• Cash and cash equivalents stood at $150.5 million as of December 31, 2025, benefiting from an $81.0 million net capital raise in January 2025.
• The company entered into a Co-Development and Licensing Agreement with Midjourney, Inc. in November 2025, including a $15 million one-time fee and a $10 million annual license fee.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a mixed report with significant revenue growth and strategic advancements, but the increasing net losses and a substantial inventory write-down indicate ongoing profitability challenges and operational inefficiencies.

Positives

• Total revenue increased by 19.0% year-over-year, demonstrating strong top-line growth.
• Product revenue saw a 17.1% increase, driven by the successful launch and uptake of the Butterfly iQ3 and iQ3 Vet probes.
• Software and other services revenue grew by 22.7%, indicating increasing adoption of higher-margin offerings and successful Butterfly Embedded partnerships.
• The company secured a significant Co-Development and Licensing Agreement with Midjourney, Inc., including a $15 million one-time fee and a $10 million annual license fee, validating its Ultrasound-on-Chip technology.
• A public offering in January 2025 raised $81.0 million in net proceeds, significantly bolstering the company's cash position.
• Research and development expenses decreased by 4.1%, reflecting increased efficiency and utilization of lower-cost geographies.
• The company reported effective internal control over financial reporting as of December 31, 2025.
• Global health partnerships, such as the Gates Foundation initiative in sub-Saharan Africa, demonstrate the technology's impact and potential for broader adoption in underserved communities.

Negatives

• Net loss increased to $77.1 million in 2025 from $72.5 million in 2024, indicating continued unprofitability.
• Gross profit declined and gross margin significantly decreased from 59.5% in 2024 to 46.9% in 2025, primarily due to a $17.4 million charge for excess and obsolete inventory.
• Other operating expenses increased by 165.1%, largely due to $7.1 million in higher legal costs, including a $3.0 million accrued loss contingency related to a civil action.
• The company has an accumulated deficit of $879.2 million as of December 31, 2025.
• Dependence on single suppliers for key components (TSMC for wafers, Benchmark for manufacturing) poses supply chain risks.
• Ongoing securities class action lawsuit and stockholder derivative actions could result in substantial costs and divert management attention.

Risks

• Limited history of generating revenue and anticipated continued losses for at least the next several years.
• Success depends on market acceptance of products and services, and the ability to develop and commercialize new offerings.
• Medical device development is costly and subject to rapid technological change, which may render current or future devices obsolete.
• Dependence on the success of sales and customer acquisition and retention strategies.
• Research and development efforts may not succeed in developing commercially successful products and technologies.
• Reliance on limited or sole suppliers for some materials and components, which could lead to supply disruptions or increased costs.
• Acquisitions, joint ventures, or other strategic transactions, including the Butterfly Embedded program, could disrupt business, cause dilution, and harm the company.
• Inability to continue developing an adequate sales and marketing organization could hinder market awareness and product sales.
• Operation in highly competitive markets with potential for increased competition and industry disruption.
• Extensive government regulation (FDA, international) could restrict development, marketing, sale, and distribution of products and incur significant costs.
• Subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection, and AI, which are subject to change and uncertain interpretation.
• Increased cybersecurity requirements, vulnerabilities, threats, and sophisticated computer crimes pose risks to systems, networks, products, and data, as well as reputation.
• Issues relating to the responsible use of technologies, including AI in offerings, may result in reputational or financial harm and liability.
• Inability to protect intellectual property could adversely impact technological or competitive advantage.
• Need or choice to obtain licenses from third parties to advance research or commercialize products, with no assurance of obtaining such licenses.
• Out-licensing intellectual property to third parties carries risks if licensees fail to comply with obligations or disputes arise.
• Failure to maintain proper and effective internal controls could impair the ability to produce accurate and timely financial statements.
• Risk of product liability claims, potentially leading to damages, fines, penalties, and injunctions.
• Currently subject to a securities class action lawsuit and stockholder derivative actions, with indemnification obligations to certain defendants, the unfavorable outcomes of which may have a material adverse effect.
• Historically volatile common stock price, which may affect the price at which shares can be sold.
• Dual class structure of common stock concentrates voting power with the founder, limiting investor influence.
• Delaware law and provisions in the certificate of incorporation and bylaws could make a takeover proposal more difficult.
• Unfavorable global economic conditions, including inflation and interest rates, could adversely affect business.
• Changes in applicable tax laws and regulations could adversely affect business.
• Ability to use net operating losses and certain other tax assets to offset future income may be subject to limitations.
• Could be adversely affected by violations of the FCPA and other worldwide anti-bribery laws.
• Broad-based domestic and international government initiatives to reduce healthcare spending may reduce reimbursement rates.

Future Outlook

The company plans to continually improve and expand its product and service offerings, focusing on nurturing core POCUS capabilities, capturing new and adjacent markets like home care services and veterinary, and leveraging its Ultrasound-on-Chip technology into non-competitive markets through collaborations. It anticipates further enhancing software capabilities, pursuing regulatory authorizations, and validating at-home applications through focused clinical trials. The strategy also includes continued financial discipline and investment in semiconductor platform development.

Management Comments

• "We believe that, with our current products and solutions, we have created a new standard for medical imaging, and we are focused on staying at the leading edge of technical innovation."
• "Butterfly has become a more efficient business while simultaneously investing in long-term growth and innovation."
• "Going forward, Butterfly has a strategy and product roadmap to drive growth in the core POCUS business by continuing to go deeper into hospital enterprises and academic institutions."
• "We remain committed to developing patient-focused delivery models, and we believe ultrasound imaging may find a market in home care settings with at-home medical personnel."
• "This is a powerful new channel that can reduce hospital readmissions, lower cost, and expand Butterflys reach beyond the hospital." (referring to HomeCare Services Business)
• "Going forward, we will continue to invest in our semiconductor platform development, as we focus on Butterfly Embedded co-development opportunities as a key strategic pillar with vast opportunity to unlock the full value of our core technology."
• "Our employees embody our mission to democratize healthcare and to make medical imaging accessible to everyone around the world by using our proprietary technology."
• "We believe our differentiated Butterfly handheld device and our growing user base of Butterfly practitioners, with sales to or agreements with most of the 100 largest U.S. healthcare systems and devices deployed across approximately 100 countries, position us well to compete in the existing ultrasound market and to potentially expand into emerging markets."

Industry Context

StockSavvy.ai notes that Butterfly Network is positioned at the intersection of digital health, AI integration, and point-of-care medical imaging, aligning with broader industry trends towards decentralized, affordable, and data-driven healthcare. The company's Ultrasound-on-Chip technology offers a distinct advantage over traditional piezoelectric crystal-based devices, particularly in terms of miniaturization, cost-effectiveness, and compliance with environmental regulations like EU RoHS. The expansion into home care services and veterinary markets reflects a strategic move to diversify revenue streams and address unmet needs in underserved segments, leveraging the portability and ease-of-use of its devices. The AI partnership ecosystem (Butterfly Garden) and enterprise software (Compass AI) are crucial for accelerating adoption and integrating into existing health system infrastructures, a key trend for scaling medical technology.

Comparison to Industry Standards

• Butterfly's Ultrasound-on-Chip technology is fundamentally different from incumbent POCUS devices, which are viewed as mere extensions of cart-based hospital workflows and rely on 60-year-old analog piezoelectric crystal technology.
• Traditional cart-based ultrasound equipment typically ranges from $30,000 to $120,000 or more, while incumbent POCUS handheld devices average $10,000 (with probes costing $3,000-$7,000 each, often requiring multiple probes). In contrast, Butterfly iQ+ is listed at approximately $2,700, and Butterfly iQ3 at approximately $3,900, making them significantly more affordable.
• Many traditional piezoelectric crystal ultrasound systems contain lead at levels deemed hazardous by EU RoHS, requiring exemptions. Butterfly's Ultrasound-on-Chip technology allows for RoHS-compliance without needing such exemptions.
• Butterfly's single probe offers more versatile imaging capabilities compared to incumbent handheld ultrasound systems that rely on piezoelectric crystals and often require multiple probes for comparable indications.
• The company believes its Ultrasound-on-Chip technology allows its devices to benefit from Moore's Law, driving miniaturization, affordability, and advanced features, similar to the transformation seen in the photography industry with digital cameras.
• Butterfly iQ3 is noted for its 'best-in-class image quality' among handheld ultrasound devices.
• The Compass AI enterprise software is designed to integrate securely into health systems' clinical and administrative systems (e.g., PACS and EMR), offering a streamlined workflow that reduces the exam documentation burden typically associated with traditional ultrasound systems.

Management Changes

Corporate Governance

Legal Proceedings

• A securities class action lawsuit, Rose v. Butterfly Network, Inc., et al., filed on February 16, 2022, alleges false and misleading statements and/or omissions about post-Business Combination business and financial prospects.
• Two stockholder derivative actions, Koenig v. Todd M. Fruchterman, et al. (filed June 21, 2022) and Bhavsar v. Todd M. Fruchterman, et al. (filed November 28, 2023), allege violations of Section 14(a) of the Exchange Act, breach of fiduciary duty, and gross mismanagement.
• A civil action, Sezonov v. Longview Investors LLC, et al., filed on December 13, 2023, pursues claims on behalf of a putative class action arising from the Business Combination, alleging breaches of fiduciary duty, unjust enrichment, civil conspiracy, and aiding and abetting. The company recognized a $3.0 million estimated liability for a loss contingency in Q4 2025 related to indemnification obligations in this case.

Related Party Transactions

• Dr. Rothberg, a director, holds all issued and outstanding shares of Class B common stock, giving him approximately 71% of the voting power, which allows him to control matters submitted to stockholders for approval.
• The company has indemnification obligations to certain defendants, including a current board member (Mr. Robbins), in the Sezonov v. Longview Investors LLC, et al. civil action, leading to a $3.0 million accrued loss contingency in 2025.

Stakeholder Impact

• Shareholders face potential dilution from future equity issuances, stock price volatility, and limited influence due to concentrated voting power, as well as risks from ongoing legal proceedings.
• Employees are offered a competitive total rewards package, including 100% covered medical/dental/vision, employer-funded health savings accounts, and an employee assistance program, but the company has also increased utilization of personnel in lower-cost geographies.
• Customers benefit from increased access to affordable ultrasound imaging, workflow efficiency, and potential for earlier disease detection and prevention, but face risks from product recalls, cybersecurity breaches, and changes in healthcare reimbursement policies.
• Suppliers, particularly single-source providers like TSMC and Benchmark, are critical to the company's operations, and any disruption could impact the company's ability to deliver products.
• Creditors are impacted by the company's ongoing net losses and its need for additional financing to fund operations and growth initiatives.

Next Steps

• Continue commercializing existing products and services and developing new ones.
• Obtain and maintain regulatory authorization for products in relevant jurisdictions.
• Identify, in-license, or acquire additional technology to enhance offerings.
• Maintain existing license, manufacturing, and supply agreements.
• Expand sales and marketing organization, particularly to health systems and large institutions.
• Drive adoption of devices in out-of-hospital settings, including clinics, emergency medical services, and home care.
• Continue investing in semiconductor platform development and Butterfly Embedded co-development opportunities.
• Validate at-home applications through focused clinical trials and seek additional regulatory authorizations.
• Develop new innovative products, services, and software applications in partnership with healthcare systems.
• Refine global go-to-market approach by optimizing distribution networks, investing in partner training, and ensuring regulatory compliance.
• Vigorously defend against ongoing securities class action lawsuit and stockholder derivative actions.
• Joseph DeVivo's Rule 10b5-1 trading arrangement for up to 1,000,000 shares of Class A common stock will begin on March 13, 2026, and end on March 31, 2027.

Key Dates

Recommendation

Butterfly Network demonstrates strong revenue growth and strategic expansion into new markets and partnerships, including a significant co-development deal with Midjourney. However, the company continues to incur substantial net losses, exacerbated by a large inventory write-down and increased legal expenses in 2025. While the long-term vision and technological differentiation are compelling, the path to profitability remains uncertain, and ongoing litigation and supply chain dependencies present notable risks. A 'Hold' recommendation reflects the potential for future growth balanced against current financial challenges and operational risks.

Keywords

Ultrasound-on-Chip, POCUS, medical imaging, digital health, AI, healthcare technology, medical devices, point-of-care, semiconductor, diagnostics, telemedicine, veterinary medicine, SEC filing, 10-K