0001804176-26-000016
SEC filingRevenue grew 25% YoY to $26.5M driven by Embedded partnerships, with gross margin improving to 68.9% from 63.0% on software mix shift.
For the three months ended March 31, 2026, total revenue increased 25.0% to $26.5 million from $21.2 million in the prior-year period. Product revenue grew 3.5% to $14.7 million, driven by higher probe sales volume in international distributor and veterinary channels, notably the iQ3 Vet probe launched in late 2025. Software and other services revenue surged 68.2% to $11.9 million, primarily from Embedded partnerships. Gross profit rose 36.7% to $18.3 million, with gross margin expanding 590 basis points to 68.9%, reflecting the favorable mix shift toward higher-margin software revenue. Operating expenses increased modestly by 1.0% to $32.2 million, with R&D down 3.9% and sales and marketing down 1.7%, while G&A increased 12.7% due to higher headcount and professional services. Loss from operations improved 24.9% to $(13.9) million from $(18.5) million. Net loss narrowed to $(12.7) million from $(14.0) million, benefiting from lower operating loss and a $0.4 million gain in fair value of warrant liabilities.
Butterfly operates as a single reportable segment but discloses two revenue streams: Product and Software & Other Services. Product revenue growth of 3.5% was modest, driven by volume gains in international/vet channels and a favorable shift to higher-priced iQ3 probes. Software & Other Services revenue grew 68.2%, now representing 44.8% of total revenue (up from 33.3% a year ago), driven by Embedded partnership services and out-licensing. This mix shift is a key margin driver, as software revenue carries lower cost of revenue (15.9% margin vs. 43.4% for product). Cost of software services declined 6.5% due to lower amortization, while cost of product revenue rose 9.1% on higher volume and warranty adjustments. The Embedded program is a strategic growth area, providing both revenue and profitability tailwinds.
Management expects the revenue mix to continue shifting toward software and other services as device adoption increases and Embedded collaborations grow. The company plans to invest in commercial capabilities and software development, with R&D focused on new products and services. No specific financial guidance was provided, but the company stated existing cash ($138.0M) and cash flows are sufficient for at least 12 months. Key uncertainties include litigation costs (a $3.3M loss contingency and $6.0M insurance recovery recognized in Other expenses) and supply chain dynamics. The iQ3 Vet launch and international distribution expansion are expected to support product revenue, while Embedded partnerships are the primary growth engine for software revenue.
Butterfly Network had $138.0M in cash and equivalents as of March 31, 2026, down from $150.5M at year-end, reflecting $13.9M used in operations and $1.0M in capex. The company carries no debt, with total stockholders' equity of $191.2M. Inventories declined to $59.3M from $61.4M, driven by lower finished goods. Deferred revenue (current and non-current) totaled $32.3M, and remaining performance obligations were $91.4M, with 55% expected within 12 months.
The company has $3.3M in minimum inventory purchase commitments under a non-cancellable supply agreement with a third-party manufacturer, with a related vendor advance asset of $1.0M and accrued purchase commitment liability of $0.1M. No additions to the liability were recorded in Q1 2026. Additionally, the company maintains a $3.0M estimated liability for loss contingencies (including $6.0M total but offset by a $6.0M insurance recovery) related to litigation indemnification.
No share buybacks or dividends were declared or paid. Capital expenditures were $0.95M (3.6% of revenue), primarily for property, equipment, and capitalized software. There is no debt or lease financing beyond operating leases ($17.0M in liabilities). Stock-based compensation was $5.5M, down from $6.3M a year ago.
Butterfly operates as a single reportable segment. Revenue disaggregation reveals two business lines: Core ($20.8M) and Embedded ($5.7M). Embedded grew significantly from $2.3M in Q1 2025. Geographically, 81% of revenue came from the United States ($21.4M) and 19% internationally. Software and other services revenue ($11.9M) grew 68% YoY, while product revenue ($14.7M) grew 3.5%.