Shares of Butterfly Network surged 55.87% to close at $8.90 on Thursday, June 18, with the stock continuing to gain in after-hours trading, as investors reacted to a partnership announcement with AI startup Midjourney that has thrust the small-cap medical imaging company into the spotlight. Here’s what’s driving the rally — and what analysts say about whether the stock is a buy or a sell heading into the rest of 2026.

What Sparked the Surge

Butterfly Network jumped over 50% at one point after Midjourney said it built a full-body ultrasound scanner from Butterfly modules. The deal brings back focus to a five-year licensing and co-development agreement that could mean as much as $74 million in expected payments for Butterfly.

Midjourney’s current scanner prototype incorporates 40 Butterfly Ultrasound-on-Chip imaging modules. The components were licensed to Midjourney as part of a co-development agreement signed by the two parties last year. Butterfly CEO Joseph DeVivo described the technology in striking terms: “Midjourney has unveiled an extraordinary whole-body scanner — no radiation, no magnetic risk, low cost, and accessible — with about half a million sensors scanning simultaneously and over two petaflops of processing power.”

Midjourney’s Ambitious Vision

The AI company’s plans for the technology extend well beyond a single prototype. Midjourney said in its blog that it will establish a health facility in San Francisco to house its body-scanning equipment, which will open at the end of 2027. “The center itself is a flagship health spa we are calling the ‘Midjourney Spa.’ It will have hot tubs, saunas, cold plunges, and 10 scanners with the capability to do more body scans a year than all MRI scanners on Earth combined,” the startup said in its blog. “Our ambitious goal is by 2031 to have a fleet of over 50,000 scanners worldwide — with a total scanning capacity of a billion scans a month.”

A Stock That Had Already Been Building Momentum

Thursday’s surge extended a longer-running rally for Butterfly Network stock. BFLY shares soared 55.9% in the last trading session to close at $8.90. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock’s 30.1% gain over the past four weeks. BFLY stock has nearly doubled in value so far this year and has more than tripled over the last 12 months, outperforming the S&P 500.

The Bull Case

Beyond the headline-grabbing Midjourney news, several analysts point to Butterfly’s broader strategic positioning as a reason for optimism. BFLY is being positioned as a core point-of-care imaging platform, not just another device maker. Integration of DESKi’s HeartFocus AI into Butterfly Network probes supports a “clinician-friendly” echo workflow for less-trained users. BFLY is framed as an AI ecosystem partner in cardiac imaging, reinforcing a long runway for partnerships and licensing-driven revenue.

The company’s underlying financial performance has also shown encouraging momentum heading into the rally. Butterfly said first-quarter revenue came in at $26.5 million, up 25% on the year. Gross margin climbed to 68.9%. The company stuck with its 2026 revenue outlook of $117 million to $121 million.

Management has also been actively courting growth-focused investors in recent days. Management is presenting at the William Blair 46th Annual Growth Stock Conference and then joining TD Cowen’s Medical Devices Emerging Growth Call Series — exposure that, while not changing fundamentals overnight, can fuel sharp re-ratings and speculative runs, especially when the float is hunting for a new narrative.

The Bear Case

Despite the enthusiasm, several red flags warrant caution before treating Thursday’s rally as a sure thing. Over the past three months, insiders sold $4.2 million worth of shares, with no insider buying reported — a pattern that may raise concerns among investors regarding the company’s near-term outlook even as the stock price climbs.

The company’s underlying profitability also remains a significant concern. Butterfly Network’s GF Score of 61 indicates a moderate level of overall quality, with strong financial strength but weak profitability. The company’s profitability rank is concerning, sitting at 1 out of 10, indicating challenges in generating consistent profits. The financials still show heavy red ink, with negative margins and free cash flow around negative $14.84 million last quarter.

Valuation is also stretched relative to current sales. The company’s price-to-sales ratio stands at 18.54, suggesting that investors are paying a premium for each dollar of sales, reflecting high expectations for future growth that the company has not yet delivered on a profitability basis.

A Story Still in Its Early Stages

Several analysts have cautioned that the Midjourney partnership, while genuinely promising, remains in a very early phase with significant execution risk still ahead. This is still an early story — regulatory clearance, commercialization, scaling up production, and milestone payments are all unresolved. The scanner still has hurdles with regulatory sign-off, how much buyers want it, actual use in clinics, privacy of data, and whether Butterfly can deliver enough modules at scale.

Competition in the broader ultrasound market also remains formidable. Big names like GE HealthCare, Philips, and Siemens Healthineers dominate the wider ultrasound market. Butterfly is aiming to differentiate by focusing on handhelds, software, AI, and chip licensing, instead of just traditional ultrasound systems.

What Wall Street Currently Thinks

Despite the cautionary notes around valuation and profitability, at least one prominent rating service currently holds a favorable view of the stock. The stock currently carries a Zacks Rank #2, which corresponds to a Buy rating. However, that same analysis noted that the consensus EPS estimate for the company’s upcoming quarter has remained unchanged over the last 30 days, and a stock’s price usually doesn’t keep moving higher in the absence of any trend in earnings estimate revisions — suggesting investors should watch closely whether analyst earnings expectations begin shifting in response to the Midjourney news, or whether Thursday’s rally proves to be a more speculative, momentum-driven move.

The Bottom Line

There is no simple answer to whether Butterfly Network is a buy or a sell heading into the rest of 2026. The bull case rests on genuine technological differentiation, a expanding licensing relationship with a high-profile AI company, improving revenue growth, and strong gross margins. The bear case rests on persistent unprofitability, a rich valuation relative to current sales, notable insider selling, and a long list of unresolved execution risks tied to the Midjourney scanner specifically — regulatory approval, manufacturing scale, and real-world clinical adoption among them.

As with any investment decision, particularly one involving a stock that just posted a single-day gain of nearly 56% on a still-unproven partnership, it’s worth doing your own research, weighing your personal risk tolerance and time horizon, and consulting a qualified financial advisor before making a decision. This overview is intended to lay out the facts and competing perspectives currently circulating among analysts, not to tell you what to do with your money.