Butterfly Network (BFLY 5.54%), a medical device company known for its portable ultrasound technology, released its second quarter fiscal 2025 results on August 1, 2025. The headline news: it delivered a record gross margin of 63.7% (GAAP), narrowed its losses, and grew revenue by 9.0% compared to Q2 2024. However, revenue (GAAP) came in at $23.4 million, slightly shy of the $23.72 million projected by analysts. Non-GAAP earnings per share were $(0.03), better than the expected $(0.05) (adjusted). Management revised full-year revenue guidance lower, now projecting $91 million to $95 million for FY2025. versus its earlier target of approximately 20% year-on-year growth for FY2025. Overall, the quarter showed gains in operational efficiency and innovation, but slower revenue growth and a leadership change tempered the outlook.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| Revenue | $23.4 million | $23.72 million | $21.5 million | 8.8% |
| Gross Margin | 63.7 % | N/A | 58.6 % | 5.1 pp |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
About Butterfly Network: Business and Focus Areas
Butterfly Network creates handheld ultrasound devices that use semiconductor chips instead of traditional stones, making their products more portable, affordable, and versatile for healthcare providers. Its core business revolves around the Ultrasound-on-Chip technology, aiming to make medical imaging more accessible in hospitals, clinics, and even home care settings. The company targets not only doctors and hospitals but also expands its reach to nurses, veterinarians, and global health organizations.
Recently, Butterfly Network has concentrated on expanding its clinical partnerships and launching new AI-driven software. It emphasizes product innovation (the launch of the iQ3 device and upcoming P5 chip), growing its software and service offerings, and winning major enterprise and medical school customers. Success hinges on both rapid adoption of its technology and navigating strict medical device regulations while managing operating expenses and balancing cash use.
Quarter in Review: Financial and Strategic Highlights
Revenue (GAAP) increased 9% compared to the prior year, driven primarily by sales of Butterfly's handheld ultrasound devices and the delivery of semiconductor chips to a newly onboarded partner. Product revenue rose 25% to $14.2 million (GAAP), while Software and other services revenue (GAAP) remained flat at $6.8 million. Product revenue growth was mainly due to increased volume (80% of the growth), with the price impact primarily seen in international markets. U.S. revenue held steady, while international sales grew 19% year-over-year, benefiting from the iQ3 device’s recent launch in those markets.
Gross margin (GAAP) reached a record 63.7%, up 5.1 percentage points compared to the prior-year period, as a result of higher average selling prices and improved software and other services margins due to reduced software amortization and lower hosting costs. Management also reduced the quarterly cash used in operations to $7.1 million, marking its lowest level yet. Adjusted EBITDA loss narrowed to $6.2 million from $8.1 million a year earlier, indicating more disciplined operating expenses, with decreased R&D spending and higher investment in sales and marketing as new markets were opened.
The company continued to invest in its product pipeline, with the iQ3 handheld device (an affordable ultrasound) marking one year since launch. It is working toward the release of its next-generation P5 chip and fourth-generation device, which remain in development. The software ecosystem is another area of investment. The company plans to launch Compass AI, an enterprise ultrasound platform featuring artificial intelligence tools and voice control, in the third quarter. New applications and training tools, such as the ScanLab™ training app and MSK VUE for musculoskeletal diagnostics, are designed to broaden clinical utility and foster adoption in healthcare and educational settings.
Butterfly Network is on the verge of signing a second major enterprise hospital contract, described as being with a top-five global hospital, and successfully converted more medical school programs to a model where each student receives a probe. The recently completed Butterfly HomeCare pilot, supporting heart failure patients at home, showed reductions in hospital readmissions—a result that management says positions the solution for its first commercial state-level rollout by year-end. In software and AI, three AI-powered apps built on its Butterfly Garden partner platform received U.S. Food and Drug Administration clearance, expanding the clinical reach of its device ecosystem.
Looking Ahead: Guidance and Areas to Watch
Management revised its full-year revenue outlook for FY2025, now projecting $91 million to $95 million, down from previous estimates that implied approximately 20% growth. The updated range suggests about 13% revenue growth for FY2025 over the prior year. Despite reducing revenue guidance, the company now expects its adjusted EBITDA loss to improve to between $32 million and $37 million in FY2025. No specific per-share or per-segment earnings guidance was provided for upcoming quarters.
Butterfly Network does not currently pay a dividend. Looking forward, investors should monitor uptake of new AI-driven software, continued international expansion, and progress on securing additional hospital and medical school contracts. Ongoing leadership transitions and execution on product commercialization, especially for systems like Compass AI and the next-generation device platform, will be central themes to watch as 2025 advances.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
