Intuitive Surgical’s Second Quarter Hits A Nerve

Intuitive Surgical’s latest quarter beat expectations, but the market still found a sore spot to poke at. The robotic-surgery pioneer reported second-quarter revenue of $2.89 billion, up 19% from a year earlier. Adjusted net income increased 25% to $1 billion, or $2.80 per share, topping the $2.51 analysts expected. That figure included an eight-cent boost from refunds of tariffs paid in prior periods. Shares closed down 14.1% Friday at $345.42, their biggest one-day decline since April 2022, as investors zeroed in on one troubling symptom.

The underlying business still had plenty of pulse. Worldwide procedures using Intuitive’s da Vinci and Ion systems grew about 16%, with da Vinci up 15% and Ion up 36%. The company placed 468 da Vinci systems, up from 395 a year earlier, including 246 of its newer da Vinci 5 systems, up from 180. Its installed da Vinci base grew 12% to 11,710 systems, helping instruments and accessories revenue climb 18% to $1.73 billion and systems revenue increase to $685 million from $575 million.

The main concern was U.S. da Vinci procedure growth, which slowed to 12% from 14% in the first quarter even as international growth remained around 20%. Management said some patients appeared to be delaying elective procedures after losing ACA coverage or facing higher premiums, while weight-loss drugs continued to pressure bariatric surgery. Intuitive maintained its worldwide da Vinci procedure-growth outlook of 13.5% to 15.5% and said results are likely to land near the midpoint, disappointing shareholders who had hoped another earnings beat would bring a guidance increase.

That reaction seemed a bit harsh. Intuitive raised its adjusted gross-margin outlook to 68% to 69% from 67.5% to 68.5% and narrowed expected operating-expense growth to 11% to 13% from 11% to 14%. The company also ended the quarter with $8.63 billion in cash and investments after repurchasing $380 million of stock. But even after Friday’s plunge, investors are still paying about 42 times trailing earnings for the stock. That does not leave much room for slower U.S. procedure growth or an outlook that stays put. Intuitive passed the quarterly checkup, but Wall Street still prescribed a 14% dose of reality.

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