Intuitive Surgical, Inc. (ISRG) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary indicates positive developments: increased guidance for da Vinci procedures and gross profit margins, a strategic focus on expanding minimally invasive cardiac procedures, and leveraging advanced imaging and ASC opportunities. Despite competitive pressures in China, the company is adapting well, with promising SP system growth and new digital offerings. While management avoided specific 2026 projections, the overall sentiment remains optimistic, supported by procedure growth and strategic initiatives. The absence of market cap data limits precise prediction, but the positive guidance and strategic direction suggest a positive stock reaction.
Key Financial Performance
Revenue Revenue grew 21% year-over-year to $10.1 billion. The growth was driven by increased adoption of da Vinci 5, higher utilization across platforms, and procedure growth.
Operating Margins Operating margins were 37%, reflecting deliberate investments in R&D and manufacturing scale, impacts of tariffs, and newer platform mix. Cost efficiency initiatives partially offset these pressures.
Free Cash Flow Free cash flow increased to $2.5 billion, up from $1.3 billion in 2024, driven by increased profitability and lower capital expenditures.
Pro Forma EPS Pro forma EPS increased 22%, marking the third consecutive year of pro forma EPS growth above 20%. This was due to strong financial performance.
Procedure Growth Total procedures grew 19% year-over-year. Da Vinci procedures increased 18%, with multiport procedures growing 17%, single-port procedures growing 87%, and Ion procedures growing 51%. Growth was driven by global expansion and adoption.
System Placements 1,721 da Vinci systems were placed in 2025, including 870 da Vinci 5 systems, 107 SP systems, and 195 Ion systems. Demand for da Vinci 5 strengthened due to broader availability and increased capabilities.
Recurring Revenue Recurring revenue grew 20% to $2.3 billion in Q4, accounting for 81% of total revenue. This was driven by increased procedure adoption and system utilization.
Gross Margin Pro forma gross margin for Q4 was 67.8%, down from 69.5% last year. The decline was due to tariffs, higher facility costs, and a greater mix of lower-margin products, partially offset by cost reductions.
Net Income Pro forma net income for Q4 was $914 million, compared with $805 million last year. This reflects strong financial performance and global expansion.
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Operating Highlights
da Vinci 5: Full launch with regional clearances and follow-on feature releases. Procedures increased 18% globally, with single-port procedures growing 87%. FDA clearance for several cardiac procedures using non-Force Feedback instruments. Surgeons highlight benefits like greater autonomy and enhanced efficiency.
Ion platform: Procedures grew 51% to over 144,000. Focus on growing utilization and expanding capabilities like ROSE and endobronchial ultrasound integration.
Single-port platform: Procedures grew 87%, driven by growth in Korea, U.S., Europe, Japan, and Taiwan. Received 510(k) clearance for additional indications like nipple-sparing mastectomy and hernia repair.
International expansion: da Vinci procedures increased 23% internationally, with growth rates of 21% in Europe, 24% in Asia, and 27% in other markets. Procedures outside the U.S. accounted for 35% of global procedures.
ASC market: Efforts to expand footprint in ambulatory surgery centers (ASCs) using XiR system and economic programs. Focused on higher-volume ASCs affiliated with existing customers.
Manufacturing optimization: Scaled manufacturing for da Vinci 5, enabling broader availability and capability through software and product releases.
Digital tools: My Intuitive+ digital subscription package adoption increased, offering simulation, telecollaboration, and case insights. Surgeons value real-time case observation and mentoring.
Global platform expansion: Focus on expanding platforms, digital feature releases, and ecosystem enhancements.
Innovation in disease states: Advancing innovation to reach more patients in current and new disease states.
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Risk or Challenges
Tariffs Impact: Tariffs impacted operating margins by approximately 95 basis points in Q4 and are expected to have a 1.2% impact on net revenue in 2026, creating financial pressure.
Regulatory and Competitive Challenges in China: Robotic competition in China intensified, with provincial tenders favoring local suppliers and lower pricing, impacting win ratios and market share.
Capital Challenges in Japan and Europe: Government budget constraints in Japan and parts of Europe, including the U.K., are affecting capital placements and could impact procedure growth.
Economic Pressures in Europe: Macroeconomic impacts and shifting governmental priorities in Europe are creating capital pressures, potentially affecting growth.
Supply Chain and Manufacturing Optimization: Efforts to scale manufacturing and optimize product quality are ongoing, but challenges in achieving industrial scale and cost efficiency remain.
Adoption and Training for New Technologies: Measured rollouts for new technologies like Force Feedback instruments and single-port staplers require significant training and education efforts, which could delay adoption.
ASC Market Expansion: Efforts to expand into ambulatory surgery centers (ASCs) are in early stages and face challenges related to volume and procedure mix suitability.
Currency and Pricing Pressures: Currency fluctuations and pricing pressures, particularly in international markets, could impact revenue and profitability.
Obesity Management Pharmaceuticals: New pharmaceutical products for obesity management could impact procedure volumes, particularly in bariatric surgery.
Tariff and Cost Pressures on Gross Margins: Higher costs associated with newer products, tariffs, and facility expansions are expected to pressure gross margins in 2026.
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Guidance & Outlook
da Vinci procedure growth: For 2026, the company anticipates full-year da Vinci procedure growth within a range of 13% to 15%. Primary growth drivers include general surgery in the U.S. and procedures outside of urology internationally. Factors considered include potential impacts of ACA premium subsidies, Medicaid funding changes, macroeconomic pressures in Europe, competitive intensity in China, and capital challenges in Japan.
Gross profit margin: In 2026, the company expects pro forma gross profit margin to be within the range of 67% to 68% of net revenue. Factors include impacts from tariffs, faster growth of newer products like da Vinci 5 and Ion, incremental depreciation from facility expansion, and higher system upgrades, partially offset by cost reductions.
Operating expenses: Pro forma operating expenses are expected to grow within a range of 11% to 15% in 2026, driven by higher spending on early-stage R&D programs and incremental expenses from distributor acquisitions.
Income tax rate: The company estimates the 2026 pro forma income tax rate to be within a range of 22% to 23% of pretax income.
Capital expenditures: The company expects capital expenditures to return to more normalized levels in 2026, but no specific guidance is provided.
Ion platform: In 2026, the company remains focused on growing utilization of existing domestic Ion systems and ensuring excellent early results in international markets. Efforts include expanding capabilities such as ROSE technology and endobronchial ultrasound integration.
Single-port platform: The company plans a measured rollout of new indications, including nipple-sparing mastectomy, in 2026 and beyond. The single-port stapler will move into broad launch to support deeper penetration in thoracic and colorectal procedures. Additional regulatory submissions are planned for 2026.
da Vinci 5 platform: In 2026, da Vinci 5 capabilities will continue to grow with the introduction of additional products and features. The company will also focus on the measured rollout of Force Feedback instruments for cardiac procedures.
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Shareholder Return Plan
Dividend Program: No mention of a dividend program was made in the transcript.
Share Repurchase Program: In 2025, the company repurchased $2.3 billion of its stock at an average price of $478 per share.
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Key Q&A
Q:What is the significance of the FDA approval for cardiac non-Force Feedback instruments?
A:The FDA approval for cardiac non-Force Feedback instruments is foundational for supporting cardiac surgery programs. The company is working on clearances for the platform in various geographies, including the U.S. and Europe. They are also developing Force Feedback instruments, cardiac-specific instrumentation, and training pathways to enhance minimally invasive cardiac robotic surgery. The opportunity for robotic cardiac procedures is estimated at 160,000 per year globally, with potential for expansion as more geographies are added.
Q:How does the company plan to incorporate advanced imaging features into the robotic ecosystem?
A:The company is working on advanced imaging capabilities, including new molecules for fluorescence imaging and hyperspectral imaging for tissue oxygenation. These features require new software and hardware tuning and aim to provide more information to surgeons, potentially improving outcomes in areas like prostate cancer and ureteral injuries. These imaging capabilities will also generate new revenue streams.
Q:What is the company's strategy for expanding its footprint in Ambulatory Surgery Centers (ASCs)?
A:The company aims to address ASC needs by providing repeatable, high-quality clinical outcomes, reliable technology systems, and economic structures suitable for ASC reimbursement levels. They are leveraging their XiR systems and broader ecosystem to serve ASC needs, focusing on lower-acuity procedures like cholecystectomy, hernia repairs, and benign gynecological surgeries. Although ASC procedures currently represent a small proportion of U.S. procedures, they are growing at an accretive rate.
Q:What are the expectations for utilization and system ASPs in 2026?
A:The company expects a higher mix of da Vinci 5 systems in 2026, reflecting new geographic clearances. They also anticipate a higher mix of XiR systems, which have lower ASPs compared to Xi systems. Utilization growth has been healthy at 4% in recent quarters, but the company is not ready to predict 2026 utilization levels. The refurbished Xi systems may put downward pressure on ASPs, but the overall mix dynamics will offset these effects.
Q:What are the gross margin and OpEx assumptions for 2026?
A:Gross margin dynamics include higher trade-ins, a higher mix of da Vinci 5 systems not yet at target product costs, and incremental tariff impacts. The company has also been implementing product cost reduction efforts. OpEx growth is expected to be in the 11%-15% range, reflecting the impact of going direct in Italy, Spain, and Portugal, and is mostly related to the procedure range.
Q:How is the company addressing pricing competition in China?
A:The company is competing with local robotic companies in China, which often have architectures similar to Xi. Despite increasing pricing competition, the company is leveraging its locally manufactured Xi systems, strong team, and broader ecosystem to compete effectively. They aim to maintain a healthy price point while competing on price where necessary.
Q:What is the company's strategy for SP systems and associated procedures?
A:The company is encouraged by the response to SP technology and procedure growth rates. They plan to expand the platform internationally and add clearances for additional instruments like vessel sealers and staplers. Recent clearances for colorectal, thoracic, and nipple-sparing mastectomy procedures in the U.S. are also expected to drive growth.
Q:What factors contributed to the increase in procedures in direct line of sight from 7 million in 2024 to 9 million in 2026?
A:The increase is primarily due to strengthening clinical validation and supportive economics for benign procedures, additional procedure clearances, and demographic impacts from an aging population. These factors are consistent with prior increases.
Q:What is the significance of the digital subscription package (MIA+) introduced with da Vinci 5?
A:The MIA+ package includes Telepresence, integrated skill simulation, and case insights. Initially offered with a 1-year free use period, customers will have the option to renew for a fee starting in mid-2026. The package aims to enhance surgeon and customer experience, with features like case insights synergizing with Force Feedback technology.
Q:What is the company's approach to new form factors and cost competition for lower-acuity cases?
A:The company focuses on solving specific customer problems, such as achieving great clinical outcomes and reliability in ASC settings. They believe their existing ecosystem, including refurbished systems, is well-suited for both complex and lower-acuity procedures. They are open to optimizing through new platform development but have confidence in their current portfolio.
Q:Review of Unclear Management Responses
A:Management avoided providing specific predictions for 2026 utilization levels and system ASPs, citing offsetting mix dynamics and not guiding capital. They also did not provide detailed updates on early January trends or specific impacts of macro pressures on hospital purchasing and Medicaid cuts. Additionally, they refrained from commenting on potential future developments for new form factors or platform optimizations.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ASC
ASCs
FDA clearance
Feedback instrument
Force Feedback
IDN
Intuitive Foundation
Ion platform
Ion procedure
Italy Spain
Japan Taiwan
Surgeons
UK
VP
XiR system
access surgery
adoption system
capability software
clearance indication
console system
contribution
decision
donation Intuitive
education
efficiency
hernia repair
margin basis
mentoring
mix system
platform procedure
port
procedure Ion
procedure hour
robot
surgery center
surgery specialty
tax reserve
update
ISRG Transcript
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Positive1-22
The earnings call reflects positive financial performance with increased net income, EPS, and deposit growth. The guidance adjustments for da Vinci procedures and gross profit margin are optimistic, and the Q&A indicates rational market competition. Despite some concerns about special mention loans, the overall sentiment is positive, with management providing clear responses. The positive factors outweigh negatives, suggesting a likely stock price increase within 2% to 8% over the next two weeks.
Intuitive Surgical, Inc. (ISRG) Q4 2025 Earnings Call Transcript
Positive1-22
The earnings call summary indicates positive developments: increased guidance for da Vinci procedures and gross profit margins, a strategic focus on expanding minimally invasive cardiac procedures, and leveraging advanced imaging and ASC opportunities. Despite competitive pressures in China, the company is adapting well, with promising SP system growth and new digital offerings. While management avoided specific 2026 projections, the overall sentiment remains optimistic, supported by procedure growth and strategic initiatives. The absence of market cap data limits precise prediction, but the positive guidance and strategic direction suggest a positive stock reaction.
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Neutral1-14
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Positive10-21
The earnings call highlights strong growth in procedure volumes and successful adoption of the da Vinci 5 system, indicating positive market reception. Despite challenges in the bariatric and China markets, guidance updates reflect strategic adaptability. The Q&A section provides additional insights into growth areas like alternative care sites and new platforms, supporting a positive outlook. However, management's lack of clarity on certain issues tempers the sentiment slightly. Overall, the combination of strong financial performance, strategic initiatives, and positive guidance adjustments suggests a positive stock price movement.
ISRG Report
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