Butterfly Network (BFLY) Q2 FY26 earnings call: guidance and Q&A

Butterfly's Embedded business is rapidly expanding, highlighted by Midjourney's announcement of a whole-body scanner and Aleph Neuro's breakthroughs in neurotechnology, including high-resolution 3D transcranial ultrasound and tongue movement tracking for speech. The company signed two new Embedded partnerships in Q2, bringing the total to 11, including another BCI company and a wearable for women's health. Management emphasized the scalability of the Embedded model, leveraging a common chip and software platform, with partners paying for development work and potential for significant revenue pops upon commercialization.

The core POCUS business saw several key accomplishments, including signing six more enterprise software deals for Compass AI, which has seen its pipeline increase fivefold since last year. Butterfly received provisional authorization to sell to the full VA and anticipates full FedRAMP certification in Q3, opening a significant channel with the U.S. government. Medical school partnerships continue to grow, with over 80% of U.S. medical schools having a presence, and a new novel partnership with VCOM representing over $10 million in total contract value over four years, aimed at tracking POCUS usage post-graduation.

While international revenue decreased 14% year-over-year to $5 million due to a tough Q2 2025 comparison and deals shifting into Q3 2026, the company expects improving performance for the balance of the year. A significant highlight was achieving regulatory authorization in Brazil, the largest medical device market in Latin America and one of the fastest-growing ultrasound markets globally, which opens the door to long-term growth opportunities.

Butterfly officially released its proprietary beam steering capabilities, iQ Slice and Fan, to both Garden and Embedded partners, fostering further development. A new Garden partner focused on precision needle-guidance with AI was added. Importantly, three existing Garden partner tools are expected to become commercially available by year-end, offering direct access into Butterfly's cloud and integrating AI results into clinical workflows, marking Garden's evolution from a developer ecosystem to a commercial AI platform.

The Home and Community Care business is set to begin managing its first commercial state on October 1st, with training for participating nurses underway in Q3. This initiative aims to reduce hospital admissions and readmissions for congestive heart failure patients in skilled nursing facilities. The revenue model will include a fixed fee based on population size and a variable charge per scan. Management expects revenue from this segment to begin in Q4 2026 and plans to discuss expanding to other states in the first half of 2027, emphasizing its potential to significantly reduce healthcare costs.

Butterfly's semiconductor roadmap is advancing, with the Apollo platform moving forward on schedule to deliver chips to Midjourney by late 2027/early 2028. The company is also making excellent progress on its next-generation probe, built on the P5.1 chip, which is on track for a Q1 2027 launch and is expected to deliver superior image quality, including harmonic imaging for cardiology. Later in 2027, Butterfly plans to enter the cart business with iQ Station, aiming to capture market share in the existing $1.6 billion to $2 billion POCUS cart market with a superior product offering.