AI Integration And Telemedicine Will Expand Portable Ultrasound Markets

Key Takeaways

• Butterfly's advancements in AI-driven imaging and ecosystem development position it for accelerating mass adoption, top-line growth, and margin expansion within enterprise healthcare.
  
• Early-mover advantages in global deployment and home care applications could drive new, recurring, and higher-quality revenue streams as healthcare shifts to more decentralized models.
  
• Shrinking software revenue, heavy cash burn, tough competition, and pressured hospital budgets threaten profitability, forcing reliance on less profitable hardware and risking long-term growth.

Catalysts

Develops, manufactures, and commercializes ultrasound imaging solutions in the United States and internationally.

• While analyst consensus is already positive on the iQ3 launch, it likely underestimates the transformative potential of Butterfly's generational leap in image quality and AI-enabled workflows, which is now driving Butterfly to win entire hospital system-wide deployments-an early sign that mass enterprise adoption could accelerate both revenue growth and gross margins beyond current projections.
  
• Analysts broadly agree on the value of international expansion, but they may be undervaluing the effect of Butterfly's regulatory progress and ability to rapidly deploy across major global health initiatives; as healthcare infrastructure spending rises in emerging markets and affordable, portable imaging becomes essential, Butterfly's early-mover advantage could translate into surging volumes and premium pricing, providing dramatic top-line growth and operating leverage.
  
• The shift in healthcare delivery toward decentralized, value-based, and point-of-care settings is reaching a tipping point, and Butterfly's unique combination of hardware, AI, and educational apps directly positions it as the default ultrasound platform for an aging global population, setting up a multiyear expansion in addressable market and recurring software revenue streams.
  
• Butterfly's HomeCare vertical, leveraging proprietary AI guidance and cloud infrastructure, has demonstrated the ability to cut readmissions by at least half in pilot programs; if scaled to even a fraction of the tens of thousands of patients managed by just one initial HomeCare customer, this could launch an entirely new high-growth, high-margin revenue model with predictable annual contract value, structurally improving earnings quality.
  
• The launch and scaling of Butterfly Garden as an open AI-powered ecosystem-combined with next-generation software Compass AI-will create a self-reinforcing network effect of clinical apps, attracting more developers and institutions, further accelerating software mix and potentially making Butterfly the dominant platform in handheld imaging, boosting both revenue velocity and margin expansion.

Butterfly Network Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Butterfly Network compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Butterfly Network's revenue will grow by 18.8% annually over the next 3 years.
• Even the bullish analysts are not forecasting that Butterfly Network will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Butterfly Network's profit margin will increase from -71.8% to the average US Medical Equipment industry of 12.5% in 3 years.
• If Butterfly Network's profit margin were to converge on the industry average, you could expect earnings to reach $18.3 million (and earnings per share of $0.06) by about August 2028, up from $-62.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 83.7x on those 2028 earnings, up from -5.7x today. This future PE is greater than the current PE for the US Medical Equipment industry at 27.2x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.61%, as per the Simply Wall St company report.

Butterfly Network Future Earnings Per Share Growth

Risks

• The company is experiencing delays and uncertainty in closing large hospital, enterprise, and publicly funded health deals due to changes and downward pressure in government and hospital healthcare funding, which could continue to constrain top-line revenue growth for an extended period.
  
• There is a persistent challenge in driving recurring software and services revenue, as individual software subscription renewals are experiencing notable churn and software and services as a percentage of total revenue is shrinking, placing continued reliance on lower-margin hardware for revenue and posing a risk to future profit margins and long-term earnings growth.
  
• Butterfly faces continued high levels of cash burn, with a trailing twelve-month use of cash at forty-six million dollars, and although improving, the company still forecasts a substantial adjusted EBITDA loss for the full year, which raises the risk of eventual dilution or under-investment in R&D, both of which could negatively impact long-term net margins and shareholder value.
  
• The competitive landscape for point-of-care ultrasound devices is intensifying as established medical imaging players rapidly advance in AI and machine learning offerings, which threatens Butterfly's ability to maintain product differentiation, could lead to pricing pressure, and risks erosion of future gross margins and market share.
  
• Hospital and healthcare consolidation is increasing the pricing power of large procurement organizations, making contract negotiations tougher for device vendors like Butterfly and putting persistent downward pressure on per-device profit margins, which could negatively affect both revenue growth and overall profitability.

Valuation

• The assumed bullish price target for Butterfly Network is $4.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Butterfly Network's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $4.0, and the most bearish reporting a price target of just $2.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $146.9 million, earnings will come to $18.3 million, and it would be trading on a PE ratio of 83.7x, assuming you use a discount rate of 7.6%.
• Given the current share price of $1.43, the bullish analyst price target of $4.0 is 64.2% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.