Butterfly Network Jumps 22% on Needham Buy Rating

Butterfly Network Inc. (NYSE:BFLY) closed Tuesday at $9.93 per share, up 21.99 percent, after Needham & Company initiated coverage with a Buy rating and a $10 price target.

The target implied 22.8 percent upside from Monday's $8.14 close. Needham pointed to the company's capacitive micromachined ultrasonic transducer (cMUT) technology as the basis for its call, arguing the platform enables a new wave of medical technologies across multiple categories.

"We believe this Embedded business model should allow BFLY to participate in new markets, some of which represent significant opportunities," the firm wrote.

The Merge Labs Deal

The rating amplified momentum that was already building. Earlier this month, Sam Altman-backed Merge Labs selected Butterfly Network as its multi-year exclusive ultrasound-on-chip supplier for the development of brain-computer interfaces.

The deal carries multiple revenue streams: upfront and milestone-based license payments, hardware purchase commitments, and technology access fees. According to the company's disclosures, these flows immediately provide high-margin recurring cash, with ongoing royalties expected on future commercial sales. Butterfly retains the right to license its technology to other companies in the field.

The structure echoes a partnership already paying off. Through its deal with Midjourney, Butterfly generated $10.8 million in revenue — a 439 percent jump — and pushed gross margins to roughly 71 percent. Licensing and chip supply revenues from the Merge Labs agreement are expected to lift margins in similar fashion.

Hedge Funds Pile In

Institutional conviction is rising in tandem. Data from Insider Monkey show 33 hedge funds held positions in Butterfly Network in the second quarter, up from 26 in the first. Their combined committed capital more than doubled quarter-on-quarter, climbing to $425 million from $171 million — a 148 percent jump.

Glenview Capital remains the largest holder by a wide margin, with $120.7 million in the stock. Hood River Capital follows at $111 million, D E Shaw at $53.8 million, and ARK Investment at $42.8 million.

The combination of a fresh sell-side endorsement, a multi-year licensing deal backed by one of technology's most prominent investors, and a sharp build in institutional positions suggests Butterfly's licensing-first model is gaining traction. Whether the Merge Labs royalties materialize on commercial brain-computer interface sales will shape the next leg of the story.