Butterfly's Chip Technology Powers Midjourney's Full-Body Scanner Prototype

What happened

Butterfly Network disclosed that its Ultrasound-on-Chip modules are being used in Midjourney Medical's prototype full-body tomographic scanner, with 40 chips per system under a co-development agreement. While this validates Butterfly's semiconductor technology and could lead to licensing revenue, the deal remains early-stage with no commercial sales or royalties yet announced. The news arrives as Butterfly itself is still unprofitable, with Q2 2025 net loss of $13.8 million and cash burn requiring continued execution on enterprise software attach and cost control. Midjourney's scanner faces regulatory hurdles and competitive challenges, meaning financial impact for Butterfly is uncertain and likely years away. The announcement is a positive narrative boost but does not change the fundamental risk/reward equation with shares trading at ~5x 2025E sales.

Implication

The Midjourney partnership underscores Butterfly's chip technology potential beyond its own handheld devices, opening a new addressable market in OEM module supply. However, the prototype stage and lack of revenue guidance mean any upside is speculative. We continue to monitor enterprise software attach, gross margin expansion, and cash burn as the primary drivers for re-rating. If Butterfly can convert this co-development into a recurring licensing stream without diluting its core go-to-market, it could justify a higher multiple. For now, the stock's premium to pre-announcement levels seems excessive, and we advise patience until clearer revenue signals emerge.

Thesis delta

The Midjourney announcement adds a potential licensing revenue stream that was not in the prior thesis, but it does not alter our HOLD stance given the lack of commercial milestones and the still-uncertain path to profitability. The core thesis remains dependent on enterprise software adoption and operating leverage; this news is a positive optionality, not a fundamental shift.