Butterfly Network Stock Drops 14% on Midjourney Ultrasound Scanner

Butterfly Network, Inc. (NYSE: BFLY) shares fell 14% on June 27, closing at $1.08 after Midjourney, a leading generative AI company, announced its entry into the medical imaging market with an ultrasound scanner. The sell-off erased approximately $120 million from Butterfly Network's market capitalization in a single session, based on Yahoo Finance data. Midjourney's device represents a significant competitive threat to Butterfly's core point-of-care ultrasound (POCUS) system and its proprietary single-crystal silicon chip technology. The product announcement was detailed in a June 27 report from finance.yahoo.com.

Context — why this matters now

Butterfly Network pioneered handheld ultrasound with its FDA-cleared iQ+ device in 2017, achieving a $1.5 billion valuation via a SPAC merger in 2021. The company’s innovation centered on replacing thousands of piezoelectric crystals with a single semiconductor-based transducer, dramatically lowering device cost. The last major competitive shock to the sector occurred in 2022, when GE Healthcare’s Vscan Air launch contributed to a 40% annual share price decline for Butterfly Network.

The current backdrop features a crowded POCUS market valued at $8.7 billion globally. The competitive landscape includes established players like Philips, GE HealthCare, and Fujifilm alongside smaller, specialized firms. Midjourney’s entry is significant because it leverages its foundational expertise in generative AI models to potentially automate image interpretation, a key battleground for improving clinician workflow. The catalyst is Midjourney’s pivot from pure software to integrated hardware, seeking to dominate the AI-enhanced diagnostic layer of medical imaging.

Data — what the numbers show

Butterfly Network's stock closed at $1.08 on June 27, down 14.3% on the day. The company's market capitalization now stands near $435 million, down over 94% from its post-merger peak of $7.2 billion in February 2021. Daily trading volume surged to 42.5 million shares, more than quadruple the 30-day average of 10.3 million shares. Butterfly Network reported Q1 2026 revenue of $18.2 million, a 5.8% year-over-year decline.

A comparison of key financial metrics highlights the company’s challenged position.

Metric	Butterfly Network (BFLY)	GE HealthCare (GEHC) - Ultrasound Segment (Q1 2026)
Revenue (LTM)	$74.1M	$4.1B
Gross Margin	63.1%	~59%
R&D as % of Revenue	73.5%	Not Disclosed

The data shows Butterfly Network’s revenue is a fraction of a major competitor’s single segment, while its research and development spending consumes a massive portion of its income. This limits its financial capacity to respond to new competitive threats like Midjourney’s. The sell-off outpaced the broader Health Care Select Sector SPDR Fund (XLV), which was flat on the day.

Analysis — what it means for markets / sectors / tickers

The immediate second-order effect is a reassessment of pure-play POCUS companies. Other speculative healthcare technology stocks with high software valuations relative to hardware moats may face similar scrutiny. Conversely, established imaging giants with diversified portfolios and deep R&D budgets, such as Siemens Healthineers (SHL) and GE HealthCare (GEHC), could see increased interest as defensive plays. Midjourney’s move validates the strategic importance of AI in imaging, potentially benefiting AI software firms like Nuance Communications, a Microsoft subsidiary.

The key risk to this analysis is that Midjourney’s device remains a prototype without FDA clearance or proven clinical efficacy. Regulatory pathways for AI-integrated devices are complex and time-consuming. However, the market reaction suggests investors are prioritizing the threat of disruption over these near-term hurdles. Positioning data shows a surge in put option volume for BFLY, indicating bearish bets. Flow is likely rotating out of single-product medtech names perceived as vulnerable to AI disruption and into larger-cap, diversified medical equipment makers.

Outlook — what to watch next

The primary catalyst is the anticipated FDA 510(k) submission and potential clearance for Midjourney’s ultrasound device. No official date has been set, but regulatory filings typically occur 12-18 months after a product announcement. For Butterfly Network, monitor its Q2 2026 earnings report, expected in early August, for management commentary on competitive response and any potential downward revisions to full-year guidance.

Key technical levels for BFLY to watch are the June 27 low of $1.05 as immediate support and the 2026 year-to-date low of $0.98. A breach of $0.98 could trigger further downside targeting the $0.75 support zone from 2025. On the upside, resistance is firm at the $1.30 level, which served as support throughout Q2. The stock’s performance will remain highly sensitive to any updates from Midjourney regarding commercial partnerships or pilot programs for its new scanner.

Frequently Asked Questions

What does Midjourney’s ultrasound scanner mean for Butterfly Network’s technology?

Midjourney’s scanner directly challenges Butterfly Network’s core value proposition of low-cost, portable ultrasound enabled by its proprietary chip. If Midjourney’s device pairs comparable hardware with superior, generative AI-driven image analysis and interpretation, it could commoditize the hardware component where Butterfly competes. This pressures Butterfly to accelerate its own AI software development, a costly endeavor for a company already spending over 73% of its revenue on R&D.

How does this competitive threat compare to past challenges Butterfly Network has faced?

Past challenges from GE and Philips involved established competitors iterating on existing technology within known regulatory frameworks. Midjourney’s threat is more existential as it originates from outside traditional medtech, applying a disruptive AI-first approach. The 2022 decline was driven by execution issues and market share loss. The 2026 decline is driven by the fear of a potential paradigm shift in how ultrasound value is created, moving from the transducer to the AI model.

Could Butterfly Network become an acquisition target following this stock drop?

Butterfly Network’s depressed valuation below $500 million and its still-valuable FDA-cleared platform and installed base make it a more plausible acquisition target for a larger firm seeking POCUS market entry. Potential acquirers could include technology companies entering healthcare or diversified medtech firms looking to bolster their AI capabilities. However, any acquisition would likely come at a modest premium to the current distressed price, given the intensified competitive landscape.

Bottom Line

Midjourney’s hardware pivot has introduced a severe new competitive risk that the market judges could fundamentally erode Butterfly Network’s business model.