Intuitive Surgical (ISRG) shares declined approximately 12% in premarket trading on Friday, as the company's outlook for procedure growth in 2026 fell short of investor expectations, overshadowing a solid second-quarter earnings and revenue beat.
The robotic surgery leader reported adjusted earnings of $2.80 per share for the quarter, comfortably exceeding the consensus estimate of $2.51. Revenue rose 19% year over year to $2.89 billion, also topping Wall Street's forecast of $2.82 billion. However, management's projection that da Vinci procedure growth for 2026 will range between 13.5% and 15.5%—with growth expected near the midpoint of 14.5%—triggered a sharp sell-off.
Strong Quarter Overshadowed by Conservative Outlook
The company continued to benefit from the growing adoption of its robotic-assisted surgery platforms. Worldwide procedures using the da Vinci and Ion systems increased by about 16% during the quarter. Da Vinci procedures rose approximately 15%, while procedures using the Ion endoluminal system surged 36%.
Intuitive placed 468 da Vinci surgical systems in the quarter, compared with 395 in the same period last year, including 246 installations of its latest da Vinci 5 platform. The installed base expanded to 11,710 da Vinci systems globally, up 12% year over year, while Ion systems grew 21% to 1,096 units.
Revenue from instruments and accessories—the company's largest and most recurring revenue stream—climbed 18% to $1.73 billion. Systems revenue increased to $685 million from $575 million a year ago. The company also benefited from a one-time tariff-related refund of $28 million after tax, or $0.08 per share.
Management expects adjusted gross margins of 68% to 69% of revenue for 2026, an improvement from its earlier guidance of 67.5% to 68.5%, though the forecast includes an estimated one percentage point impact from tariffs. The company also projected adjusted operating expense growth of 11% to 13%.
However, market attention centered on the procedure growth outlook, which many investors viewed as conservative given the company's premium valuation and long history of double-digit expansion. The results also come shortly after hospital operator HCA Healthcare warned about softer surgical procedure demand and a rise in uninsured patients following the expiration of pandemic-era Affordable Care Act subsidies.
Analysts Remain Optimistic Despite Concerns
ISRG shares have declined about 29% this year, reflecting concerns over slowing growth, increasing competition, and premium valuations. TD Cowen recently lowered its price target on the stock to $520 from $585 while maintaining a Buy rating, citing competitive pressures, remanufactured surgical instruments, international market challenges, and valuation concerns. Even after the reduction, the revised target implies roughly 29% upside from Thursday's closing price.
Stifel has maintained a more optimistic stance, reiterating its Buy rating and $670 price target following a survey of 100 robotic surgeons across multiple specialties. The survey suggested surgeons continue to view Intuitive's technology leadership favorably despite the emergence of new competitors. According to Stifel, recently announced upgrades to the da Vinci 5 platform further strengthen the company's competitive position.
The U.S. robotic surgery market is entering its first significant competitive phase in more than two decades after Intuitive largely dominated the segment. Some market commentators believe the recent sell-off has made the stock more attractive. The Motley Fool's James Halley noted that Intuitive's forward price-to-earnings multiple has fallen to around 36 times, well below its five-year average of more than 58 times. "This compression offers a much more attractive entry point into a company where more than 80% of revenue is highly durable and recurring, from instruments, accessories, and services," Halley said.
Wall Street remains broadly positive on the company despite the recent weakness. According to analyst estimates, the average price target has moderated from $556.89 to $521.37, with forecasts ranging from $366 to $750 per share. Based on Wednesday's closing price, the consensus target still implies approximately 30% upside. Among 35 analysts covering the stock, 24 recommend buying Intuitive Surgical, while 10 rate it a Hold and only one recommends selling, indicating that most analysts continue to view the current weakness as a short-term setback rather than a deterioration in the company's long-term growth prospects.
For broader market context, see our coverage of Dow Futures Rise 130 Points as Markets Weigh Earnings, Chip Weakness, and Key Data and GE Aerospace Drops 4% Post-Earnings: Strong Results vs. High Valuation.
This article is for informational purposes only and does not constitute financial advice.
