Intuitive Surgical, Inc.
Analytical review · Report for the quarter ended June 30, 2026 (Q2 2026)
Bakshi Finance — Family Office | Research Depth: Comprehensive
What this review is based on. The company's quarterly report on Form 10-Q for the quarter ended June 30, 2026, filed July 21, 2026; the earnings releases for Q3 and Q4 2025 and Q1 and Q2 2026; the annual report on Form 10-K for 2025 (February 3, 2026); and current reports from May and July 2026. Share price and market cap as of the October 9, 2026 close. This review replaces the previous version, which was based on the 2025 annual report.
Company Profile
Intuitive Surgical develops, manufactures and markets the da Vinci robotic surgical systems and the Ion system for robotic-assisted lung biopsies. The surgeon sits at a console and controls robotic arms that enter the body through small incisions. The company is based in Sunnyvale, California, and reports a single operating segment.
The business model is built on an installed base. A da Vinci system sells for $0.6 million to $3.1 million, or is placed under a lease. After installation, each procedure generates revenue from consumable instruments and accessories — between $900 and $3,700 per procedure according to the filing — alongside an annual service contract of $95,000 to $225,000. In Q2 2026, 85% of revenue was recurring: instruments and accessories, service and leasing.
At the end of June 2026 the installed base stood at 11,710 da Vinci systems (6,615 in the U.S.) and 1,096 Ion systems. The fifth generation, da Vinci 5, launched in the U.S. in 2024 and numbers 1,710 systems. The CEO is Dave Rosa, and Gary Guthart serves as Executive Chair. In China the company operates through a joint venture with Fosun Pharma.
Financial Performance
In the April–June 2026 quarter revenue rose 19% to $2,892 million. Instruments and accessories revenue rose 18%, systems revenue 19% and service 21%. Operating income rose 31% to $972 million, and net income attributable to shareholders rose 24% to $818 million ($2.29 per diluted share).
What the quarter includes
Three items improved the quarter's results and do not necessarily recur. Tariff refunds of $35.9 million on tariffs paid in prior periods, after the U.S. Supreme Court struck down the tariffs imposed under IEEPA. The refund reduced cost of revenue by about 1.2 percentage points of revenue. Customer buyouts of leased systems totalled $56 million, versus $30 million a year earlier. Excess tax benefits from share-based compensation totalled $17.3 million. Excluding the tariff refund, pre-tax income rose 22.4%, versus 27% as reported.
In the first half of 2026, operating cash flow included $370 million from deferred taxes. According to the filing, this stems from accelerated deduction of previously capitalized research and development expenditures, which reduced actual tax payments. It is a timing shift in cash flow, not a recurring improvement.
| USD millions | Q1-25 | Q2-25 | Q3-25 | Q4-25 | Q1-26 | Q2-26 |
|---|---|---|---|---|---|---|
| Revenue | 2,253 | 2,440 | 2,505 | 2,866 | 2,771 | 2,892 |
| Operating income | 578 | 743 | 760 | 864 | 855 | 972 |
| Operating margin | 25.7% | 30.5% | 30.3% | 30.2% | 30.9% | 33.6% |
| Net income attributable | 698 | 658 | 704 | 795 | 822 | 818 |
| Diluted EPS ($) | 1.92 | 1.81 | 1.95 | 2.21 | 2.28 | 2.29 |
Q3 2025 operating income was derived as the annual figure less the other three quarters.
Balance Sheet & Capital
At June 30, 2026 the company held $8,626 million in cash and investments, mostly U.S. Treasury securities and money market funds, with no financial debt. Total liabilities were $2,579 million, about 12% of total assets, and shareholders' equity was $18,168 million. Cash declined by $409 million since the start of the year, mainly due to share repurchases and a business acquisition.
Share repurchases: in the first half of 2026 the company bought back 3.2 million shares for $1,507 million, at an average price of $475.67; in June alone the average was $401.65. In April 2026 the authorization was raised to $5.0 billion, with about $4.7 billion remaining. Share count fell from 358.4 million to 353.9 million in a year (−1.3%), even though share-based compensation totalled $826 million over 12 months (7.5% of revenue). The company pays no dividend.
Investment: capital expenditures fell from $1,111 million in 2024 to $540 million in 2025 and $216 million in the first half of 2026. In parallel, systems placed under leases are built through inventory and transferred to property, plant and equipment: $809 million in 2025 versus $422 million in 2023. Combining both, total investment fell about 22% from 2024, not by half.
Distributor acquisition: on March 1, 2026 the company acquired its distributors in Italy, Spain and Portugal for $533 million and moved to direct sales in those markets. Goodwill of $218 million was recorded. The company did not disclose the deal's contribution to revenue.
Segments
The company reports one operating segment. The available breakdown is by revenue type and region, alongside operating data: procedures, placements and installed base.
| USD millions | Q2-25 | Q2-26 | Change |
|---|---|---|---|
| U.S. — instruments and accessories | 1,017 | 1,180 | +16% |
| U.S. — systems | 354 | 442 | +25% |
| U.S. — service | 258 | 311 | +20% |
| Outside U.S. — instruments and accessories | 457 | 555 | +21% |
| Outside U.S. — systems | 221 | 243 | +10% |
| Outside U.S. — service | 133 | 162 | +21% |
Procedures: about 889,000 da Vinci procedures were performed in the quarter (+15%): 552,000 in the U.S. (+12%) and 337,000 outside it (+20%). In the U.S., cholecystectomy, hernia repair and appendectomy led; bariatric procedures (about 2% of procedures) declined at a high-single-digit rate. According to the company, the expiration of enhanced ACA premium subsidies had a "modestly" negative impact. Ion performed about 47,900 biopsies (+36%), and according to the company its U.S. penetration of lung biopsies has passed the halfway point.
Placements and installed base: 468 da Vinci systems were placed in the quarter (+18%), 144 of them trade-ins of older systems (31%, versus 21% a year earlier). Net additions to the base were 315 systems, versus 299 a year earlier. 54% of placements were under operating leases. The average selling price of a system rose to $1.59 million ($1.50 million a year earlier).
Competitive Position
The differentiation the company presents is a complete system: robot, instruments, surgeon training, service and connected data. Most installed systems are connected, and the company measures procedure counts through them. The installed base of 11,710 systems, built over more than twenty-five years, is the central asset the model rests on.
Competitors: the filing lists more than ten companies that have introduced or announced robotic systems, including Medtronic, Johnson & Johnson, CMR Surgical, Medicaroid and Karl Storz, as well as Chinese manufacturers. In China, according to the filing, domestic competition, industrial policy and a healthcare governance campaign meant fewer systems were placed in the quarter than the company anticipated. The company has sold 169 systems under the 2023 quota, which allows 559 robots across all manufacturers.
Remanufactured instruments: the quarterly report updated a risk factor: according to the company, certain regulators have cleared remanufacturing of some of its instruments, and third parties offer such instruments, sometimes beyond the labeled number of uses. In parallel, a hospital class action alleging antitrust violations in instrument repair and replacement is pending, with trial set for September 2027. Instruments and accessories are about 60% of revenue.
How to Think About This Company
At Intuitive, the number that drives everything is procedure volume. Instrument, service and usage-based lease revenue all derive from it. Procedure growth is therefore the starting point for reading any report: 19% in Q3 2025, followed by 17%, 16% and 15% in Q2 2026.
Procedures rest on two engines. The first is installed-base growth, about 12% a year. The second is utilization, i.e. procedures per system, which rose 3% in the quarter. Their sum is very close to actual procedure growth. Tracking the two engines separately shows where growth comes from.
A placement is not necessarily an additional system. 31% of the quarter's placements were trade-ins of older systems, mainly upgrades to da Vinci 5. That is why placements rose 18% while net additions to the base rose 5%. The company itself notes a declining number of older systems available for trade-in.
The fifth generation changes the mix. 1,710 da Vinci 5 systems are about 15% of the base. According to the company, the da Vinci 5 and SP mix raised instrument revenue per procedure, and the average selling price rose to $1.59 million. The company does not quantify the gap between generations.
Leasing shifts revenue over time. 54% of the quarter's placements were operating leases, 131 of them usage-based — a payment per procedure. Such revenue is recognized over time and depends on utilization. On the investment side, these systems are built through inventory, so reported capital expenditures do not tell the whole story.
Three kinds of earnings. Reported diluted EPS over the last 12 months was $8.72. Under management's non-GAAP definition, which excludes share-based compensation, $10.24. Excluding one-time tax benefits and the tariff refund, and including share-based compensation, about $8.0 to $8.3. In a multiple calculation, the choice of definition changes the result by tens of percent.
Outside the U.S., three components are blended. In the first half, revenue outside the U.S. rose 28%, and in Q2 it rose 18%. Within the figures: the southern European distributor acquisition, currency effects, and what the company calls "customer buying patterns" in Q1. The split between them is not disclosed.
The cash pile is large, and it returns to shareholders through buybacks. $8.6 billion in cash with no debt, and $3.56 billion of repurchases over 12 months. Interest income on the cash is about 9% of pre-tax income.
The regulatory and commercial environment is moving on several fronts at once. Tariffs (the trade exemption for Mexico, where most instruments are made, remains in place), national pricing for robotic surgery in China, new reimbursements in Japan from April 2026, and clearances for instrument remanufacturing. Each touches a different part of the model.
This framework is intended to structure analysis, not to produce an investment conclusion. It does not participate in the decision — the decision is the reader's.
Risks & Monitoring
Risks arising from the filings
- Procedure deceleration: four quarters of slowing, from 19% to 15%. According to company management, 2026 procedure growth will be 13.5%–15.5%, closer to the midpoint.
- Remanufactured instruments and litigation: an updated risk factor in the quarterly report; an antitrust class action with trial in September 2027; the SIS appeal was argued in June 2026.
- China: domestic competition, quotas, and a national pricing framework for robotic surgery to be implemented in the provinces in upcoming quarters, according to the filing.
- Tariffs and supply chain: tariff costs of $20.8 million in the quarter; tariff refunds depend on an appeal by the U.S. Department of Justice; memory-chip price volatility, according to the filing.
- U.S. healthcare system: financial pressure on hospitals, expiration of insurance subsidies and a decline in bariatric procedures.
- Supplier and manufacturing concentration: most instruments are manufactured in Mexico and most endoscopes in Germany.
Monitoring items for the Q3 report (October 20, 2026)
| # | Item | Latest reading |
|---|---|---|
| 1 | da Vinci procedure growth, U.S. and outside | 15% · 12% · 20% |
| 2 | Annual growth range published by the company | 13.5%–15.5%, closer to the midpoint |
| 3 | Net additions to the installed base and trade-in share | 315 systems · 31% |
| 4 | Company wording on instrument revenue per procedure | Higher, driven by da Vinci 5 and SP |
| 5 | Gross margin excluding tariff refunds | 66.5% |
| 6 | Deferred taxes in operating cash flow | $370 million in the first half |
| 7 | China — placements and national pricing rollout | Placements below company's anticipation |
| 8 | Wording of the remanufactured-instruments risk factor | Updated in Q2 |
Scenario Framework
The scenarios below are descriptive, not predictive. They contain no prices, no probabilities, and do not rank outcomes. Their sole purpose is to organize the conditions that would need to hold for each state to materialize, so that they can be checked against upcoming filings.
Scenarios are descriptive, not predictive.
- If procedure growth stabilizes or rises, mainly outside the U.S. and on the back of new reimbursement in Japan
- If net additions to the installed base rise, not only placements
- If instrument revenue per procedure keeps rising as da Vinci 5 expands
- If the remanufactured-instruments risk does not widen and litigation does not change the instrument model
- If procedure growth moves around the midpoint of the company's published range
- If the installed base keeps growing at a similar pace, with trade-ins remaining a significant share of placements
- If margins hold at their level without further tariff refunds
- If buybacks continue at a similar scale out of cash flow
- If procedure growth falls below the company's published range, mainly in the U.S.
- If instrument revenue per procedure declines due to remanufacturing, pricing or mix
- If national pricing in China reduces activity there
- If new tariffs apply to products that are exempt today
Analytical Lens
The following six questions are identical in every company review we publish. They are deliberately open and do not lead to a single conclusion. Their role is to let the reader examine the company along the same six dimensions as every other company.
Key Observations
1. In the April–June 2026 quarter the company reported revenue of $2,892 million (+19%) and operating income of $972 million (+31%). The quarter included a $35.9 million tariff refund; excluding it, pre-tax income rose 22.4%.
2. da Vinci procedure growth was 15% in the quarter, versus 19% in Q3 2025. According to company management, 2026 growth will be 13.5%–15.5%, closer to the midpoint.
3. 468 da Vinci systems were placed, 144 of them trade-ins of older systems. The installed base grew by 315 systems net, to 11,710 (+12% year over year).
4. The company holds $8.6 billion in cash and investments and has no financial debt. Over the last 12 months it repurchased $3.56 billion of shares, and operating cash flow included $370 million from accelerated tax deductions in the first half of 2026.
Bakshi Finance operates as a Family Office for qualified clients only. Mr. Yaron Bakshi held a licensed investment adviser qualification in Israel during 2008–2023. As of the publication date of this document, the firm does not hold an investment advice, investment marketing or portfolio management licence.
This document is intended for research and professional study purposes only. Nothing herein constitutes a recommendation to buy, sell, hold or carry out any transaction in securities. Nothing herein substitutes for advice that takes into account the data and needs of each person. Every decision is the sole responsibility of the investor.
Past performance is not indicative of future results. Data were drawn from official sources: the quarterly report on Form 10-Q for the quarter ended June 30, 2026 (July 21, 2026), the earnings releases for Q3 and Q4 2025 and Q1 and Q2 2026, the annual report on Form 10-K for 2025 (February 3, 2026), and the company's 2026 filings with the U.S. Securities and Exchange Commission. Share price as of the October 9, 2026 close. Filings published after this date are not included.
Review for qualified clients โ Family Office
The full analytical review of Intuitive Surgical (ISRG) for the quarter ended June 2026 is available to Bakshi Finance premium clients.
The review includes a 10-section analysis, "How to Think About This Company" paragraphs, a structured scenario framework, and a six-dimension Analytical Lens.
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