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Butterfly Network, Inc. (BFLY)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 revenue of $21.5M (+5% YoY) landed at the high end of guidance; adjusted gross margin expanded to 63.9% despite a $17.4M non-cash inventory write-off that drove GAAP gross margin to -17.5% .
  • EPS (adjusted) of $(0.04) beat S&P Global consensus of $(0.065); revenue modestly beat the $21.2M consensus, reflecting higher ASPs from iQ3, e-commerce strength, and veterinary channel performance .
  • FY25 revenue guidance maintained at $91–$95M; adjusted EBITDA loss range tightened to $(32)–$(35)M from $(32)–$(37)M in Q2 (improved) and down from Q1’s $(37)–$(42)M .
  • Near-term catalysts: Compass AI launch before year-end, continued iQ3 mix shift (≈85% of probe volume), P5.1 moving to fab and Apollo AI chip development, and growing enterprise pipeline despite macro-related purchase delays; management flagged federal shutdown monitoring but sees limited near-term impact .

What Went Well and What Went Wrong

What Went Well

  • Adjusted gross margin rose to 63.9% (from 60.0% YoY) on higher ASPs and reduced software amortization; adjusted gross profit was $13.7M vs. $12.3M YoY .
  • iQ3 adoption exceeded expectations, driving ≈85% of probe volume in Q3, supporting pricing and margin improvements: “iQ3 has outsold iQ+ to a pretty significant magnitude” .
  • AI validation: JAMA study showed Butterfly’s Auto B-line Counter improved management in 35% of cases, reduced LOS by 30%, and saved $751K, strengthening enterprise ROI narrative .
  • Quote: “We’re unlocking the full value of Butterfly as a platform solution. This is how we lead the next chapter of ultrasound.” — CEO Joseph DeVivo .

What Went Wrong

  • GAAP gross margin fell to -17.5% due to a $17.4M non-cash inventory write-off tied to revising product mix assumptions (iQ+ vs iQ3), masking healthy underlying margins .
  • Enterprise/hospital deals delayed by macro/IT prioritization pressures; Q4 outlook depends on closing larger pipeline deals to reach upper guidance range .
  • Individual subscription churn persisted; software/services mix fell slightly to 32% of revenue as product growth outpaced software, though Compass AI rollout is expected to help .

Financial Results

Key Metrics vs Prior Quarters (chronological: Q1 → Q2 → Q3)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$21.2 $23.4 $21.5
Gross Margin (GAAP, %)63.0% 63.7% -17.5%
Adjusted Gross Margin (%)63.3% 63.7% 63.9%
EPS (GAAP)$(0.06) $(0.06) $(0.13)
Adjusted EPS$(0.04) $(0.03) $(0.04)

Q3 2025 Actuals vs S&P Global Consensus

MetricQ3 2025 ActualQ3 2025 Consensus
Revenue ($USD Millions)$21.5 $21.225*
EPS (Normalized/Primary)$(0.04) $(0.065)*

Values retrieved from S&P Global.*

Segment and Regional Mix

MetricQ1 2025Q2 2025Q3 2025
Product Revenue ($USD Millions)$14.164 $16.621 $14.556
Software & Other Services ($USD Millions)$7.061 $6.762 $6.933
U.S. Revenue ($USD Millions)$16.6 $17.2 $16.1
International Revenue ($USD Millions)$4.6 $6.2 $5.4

KPIs and Cash

KPIQ1 2025Q2 2025Q3 2025
Adjusted EBITDA ($USD Millions)$(9.1) $(6.2) $(8.1)
Cash & Cash Equivalents ($USD Millions)$155.2 $148.1 $144.2
Net Cash Used in Operating Activities ($USD Millions)$(11.68) $(18.84) $(21.73) (9M)
Normalized Cash Burn ($USD Millions)——$3.9

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025$96–$100M (Q1) $91–$95M (Q2 → maintained in Q3) Lowered in Q2; Maintained in Q3
Adjusted EBITDA LossFY 2025$(37)–$(42)M (Q1) $(32)–$(37)M (Q2) → $(32)–$(35)M (Q3) Improved (loss narrowed) in Q2; Further improved in Q3

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AI/Technology initiativesGarden partners growing; HeartFocus FDA-cleared; Compass AI announced for Q3 launch JAMA validation of Auto B-line; Compass AI on track before year-end; Gestational Age tool launched in Malawi/Uganda; P5.1 complete; Apollo AI chip begun Strengthening validation and pipeline; accelerating platform roadmap
Security postureGovRAMP SnapShot noted in late 2024; roadmap to additional certifications (context) ISO 27001, SOC-2 Type 2, C5 Germany, NHS DSPT achieved; FedRAMP targeted 2026 Material enhancement; enterprise readiness
Macro/ShutdownNo specific prior commentaryFederal shutdown at day 31; limited current impact; monitoring FDA and payer timing risks Watchful; manageable near-term
Enterprise pipeline/hospital delaysHomeCare pilot progressing; enterprise adoption growing Purchase decisions delayed; larger deals remain active; confidence on inevitability and Q4 guidance Timing headwinds; pipeline expanding
Product performance (iQ3)Record Q2 revenue/gross margin; higher ASPs iQ3 ≈85% of probe volume; ASPs lifting margins Mix shift to iQ3 continuing
Regulatory/Legal (RoHS)European Commission review submissions closed Aug 1; third-party review underway Awaiting decision; quiet period unless questions Pending outcome
R&D executionP5 chip and fourth-gen tech on horizon (Q2) P5.1 entering fab; Apollo AI development for edge AI (20x processing vs P5.1) Advancing hardware and edge AI

Management Commentary

  • “We delivered growth on top of last year’s record third quarter…while continuing to reduce our use of cash. We stayed on the offense — advancing AI, strengthening enterprise readiness, and pushing forward on technology milestones that will shape our future.” — CEO Joseph DeVivo .
  • “Adjusted gross margin…increased to 63.9%…driven by an increase in average selling prices, as well as a reduction in software amortization costs.” — Interim CFO Megan Carlson .
  • “If Butterfly iQ3 established performance parity…P5.1 will surpass them entirely…with the potential to make piezo handhelds a thing of the past.” — CEO Joseph DeVivo .
  • “We are reaffirming our full-year revenue guidance…$91M–$95M…[and] tightened our full-year adjusted EBITDA loss guidance to…$32M–$35M.” — Interim CFO Megan Carlson .

Q&A Highlights

  • Pipeline timing and Q4 confidence: Larger deals (100–200 probes; medical schools) pushed by macro/IT priorities; management confident in inevitability and guidance assumptions .
  • Software churn and Compass AI: Continued churn in individual subscriptions; enterprise subs up YTD; Compass AI expected to aid metrics .
  • P5.1 launch path and pricing: Execution risk viewed as low; pricing TBD; precedent suggests higher ASP/mix sustained by iQ3 performance .
  • Security certifications as differentiator: Cloud-first architecture and best-in-class posture; FedRAMP targeted; competitors catching up to cloud .
  • Regulatory/RoHS and iQ Station: RoHS review in process with third party; iQ Station in active development; updates when closer to dates .

Estimates Context

  • Revenue: Actual $21.5M vs S&P Global consensus $21.225M* — small beat, supported by iQ3 ASPs and US e-commerce/veterinary channel performance .
  • EPS (normalized): Actual $(0.04) vs S&P Global consensus $(0.065)* — beat driven by adjusted gross margin expansion and disciplined OpEx .
  • Note: Company reports adjusted EBITDA loss of $(8.1)M , while S&P Global “EBITDA Consensus Mean” may use a different methodology, limiting comparability*.

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Underlying profitability trend intact: Adjusted gross margin expanded to 63.9% despite GAAP headwind from a one-time inventory write-off, indicating structural margin improvement via iQ3 pricing and software amortization decline .
  • Mix shift and product cadence are catalysts: iQ3 at ≈85% of Q3 probe volume; P5.1 to fab and Apollo AI (edge AI) expand performance and TAM, with potential platform differentiation vs piezo handhelds .
  • Enterprise monetization hinges on Compass AI and workflow ROI: JAMA validation quantifies cost savings, LOS reduction; Compass AI launch before year-end should aid subscription retention and enterprise penetration .
  • FY25 outlook credible but Q4 execution matters: Revenue range maintained; adjusted EBITDA loss narrowed; closing larger pipeline deals is key to hitting upper end .
  • Balance sheet supports runway: $144M cash at Q3-end; normalized cash burn $3.9M indicates improving capital efficiency .
  • Watch regulatory/security milestones: Security accreditations bolster enterprise wins; RoHS decision pending; FedRAMP targeted 2026 .
  • Trade setup: Favorable near-term sentiment on Compass AI and margin resilience; monitor Q4 deal closures and macro/IT gating while tracking AI-driven product announcements and regulatory progress .