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IS

INTUITIVE SURGICAL INC (ISRG)·Q2 2025 Earnings Summary

Executive Summary

  • ISRG delivered a clean beat: revenue $2.44B (+21% YoY) vs S&P Global consensus $2.35B*, and non-GAAP EPS $2.19 vs $1.92*; drivers were 17% da Vinci procedure growth, stronger purchase mix, higher average system ASPs on da Vinci 5, and fixed-cost leverage .
  • Mix and macro: proforma gross margin was 67.9% (vs 70% LY) on higher facilities depreciation, greater da Vinci 5/Ion mix, higher service costs, and ~60 bps tariff impact in Q2; management now sees full‑year tariff impact ≈100 bps (+/‑20 bps), down from last quarter’s estimate given reduced U.S.–China bilateral rates .
  • Guidance tightened higher: 2025 da Vinci procedure growth to 15.5%-17% (from 15%-17%); non-GAAP gross margin to 66%-67% (from 65%-66.5%); OpEx growth unchanged at 10%-14% .
  • Catalysts: accelerating da Vinci 5 adoption (180 placements in Q2; utilization now surpassing Xi), CE Mark and Japan clearance for da Vinci 5, and early data/telepresence capabilities underpin narrative; supply of force‑feedback instruments remains constrained until Q1 next year, tempering near‑term INA uplift .

What Went Well and What Went Wrong

  • What Went Well

    • Broad-based topline strength: revenue +21% YoY to $2.44B with 17% da Vinci procedure growth and 16% increase in system placements (395 vs 341) .
    • Capital and pricing: average system ASP $1.5M, higher mix of purchased vs leased systems (49% leasing, down from 54% LY), and increased da Vinci 5 mix supporting systems revenue +28% YoY .
    • Strategic/regulatory milestones: EU MDR certification (CE mark) and Japan regulatory clearance for da Vinci 5; management pleased with adoption and plans measured international launches .
    • Quote: “We’re pleased with our solid performance... continued customer adoption of our newer and existing platforms, including da Vinci 5.” — CEO Dave Rosa .

  • What Went Wrong

    • Margin pressure YoY: proforma gross margin 67.9% vs 70% LY on depreciation from new capacity, higher da Vinci 5/Ion mix and service costs, plus tariffs (~60 bps in Q2) .
    • International capital headwinds: placements down in Japan and flat in Europe/China amid government budget constraints; measured da Vinci 5 rollout OUS expected .
    • Supply constraints: force‑feedback instruments capacity constrained through Q1 next year, limiting near‑term INA per procedure uplift .

Financial Results

Overall P&L trend (oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$2,413.5 $2,253.4 $2,440.0
GAAP Diluted EPS ($)$1.88 $1.92 $1.81
Non‑GAAP Diluted EPS ($)$2.21 $1.81 $2.19

Q2 2025 Actuals vs S&P Global Consensus

MetricConsensus*ActualSurprise
Revenue ($USD Millions)2,352.8*2,440.0 +87.2
Primary EPS ($)1.92*2.19 +0.27
  • Margins and operating leverage: proforma gross margin 67.9% (Q2 2024: 70%), proforma operating margin ~39%; margin dynamics driven by depreciation from new capacity, product/service mix, and tariffs .

Segment revenue (oldest → newest)

Segment ($USD Millions)Q2 2024Q1 2025Q2 2025
Instruments & Accessories1,244.4 1,367.7 1,474.1
Systems448.2 522.7 574.7
Services317.3 363.0 391.2
Total Revenue2,009.9 2,253.4 2,440.0

Key KPIs (oldest → newest)

KPIQ2 2024Q1 2025Q2 2025
da Vinci procedure growth (YoY)—~17% ~17%
System placements (units)341 367 395
da Vinci 5 placements (units)70 147 180
Installed base (units)9,203 (6/30/24) 10,189 (3/31/25) 10,488 (6/30/25)
Lease mix (operating leases / usage‑based)175 / 92 198 / 107 193 / 124
INA per procedure (approx)——~$1,800
Ion procedures (quarter)——~35,000
Ion installed base (units)——905
Utilization YoY (MP / SP / Ion)——+2% / +30% / +8%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
da Vinci procedure growthFY 202515%–17% (Apr) 15.5%–17% (Jul) Raised (tightened higher)
Non‑GAAP gross marginFY 202565%–66.5%; tariffs est. 1.7% ±30 bps 66%–67%; tariffs est. ~1.0% ±20 bps Raised
Non‑GAAP OpEx growthFY 202510%–14% 10%–14% Maintained
Other incomeFY 2025—$370M–$390M New
CapexFY 2025—$650M–$725M New
Proforma tax rateFY 202522%–23% (implied from commentary) 22%–23% Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
AI/technology & digital insightsLimited in 8‑Ks; focus on platform adoption (DV5) Case Insights and force feedback data emerging; telepresence demo; 10,000x compute on DV5 enables new insights Building evidence, early traction
Supply chain & tariffs2025 guide initially excluded new tariffs (Jan) ; Apr guide included 1.7% tariff impact Q2 est. ~1.0% FY impact, ~60 bps in Q2; uncertainty persists; new Bulgaria facility opened Tariff impact lower than feared; capacity expanding
Product performance (da Vinci 5)174 placements in Q4’24; 147 in Q1’25 180 placements; utilization now surpassing Xi; measured EU/Japan rollout Acceleration in adoption/usage
Regional dynamics—U.S. strong; OUS 23% procedure growth; India/Korea/distributors robust; capital headwinds in Japan/Europe; China slightly above global avg Mixed: strong usage; OUS capital constrained
Regulatory/legal—CE Mark (EU MDR) and Japan clearance for DV5; EU force‑feedback clearance pending beyond next year Positive milestones, staged features
R&D execution—Vessel Sealer Curved 510(k); SP stapler measured rollout; telepresence suite demo Portfolio expanding pragmatically
Macro/payers—Medicaid coverage uncertainty could pressure hospital budgets; ISRG positioning to be part of the solution Watchful; value narrative emphasized
ASC strategy—Use trade‑ins to seed ASCs with Xi/X while DV5 sits in main ORs; focus on outpatient efficiency Emerging channel strategy

Management Commentary

  • Strategy and momentum: “Our core businesses have momentum… focusing on the full launch of da Vinci 5… adoption for focused procedures by country… building industrial scale… excellence and availability of our digital tools.” — Management remarks .
  • Capital and margins: “Revenue growth was 21%... purchase mix... leverage of fixed costs… Proforma operating margin was 39%.” — CFO .
  • Tariffs and manufacturing: “Proforma gross margin… down from 70% in Q2 last year… impact of ~60 bps from tariffs… new 187,000 sq ft manufacturing facility in Bulgaria.” — CFO .
  • Force feedback & insights: Early surgeon data shows OPIs/forces correlate with outcomes and LOS; capacity for force‑feedback instruments constrained through Q1 next year .
  • Value proposition vs third‑party remanufacturers: Emphasis on safety, reliability, supply continuity, and innovation (extended uses, force feedback) to defend INA economics .

Q&A Highlights

  • Margin sustainability: Q2 operating margin benefited from purchase mix and modest OpEx underspend; not a “new normal,” but mix and OpEx discipline supported upside .
  • Remanufactured instruments: Hospitals weigh safety/performance/reliability/continuity vs price; ISRG to continue innovating and lowering costs to protect value .
  • Capital environment: U.S. strong with DV5 broad launch; OUS challenged (Japan down YoY; Europe/China flat) due to budgets/trade; localized leasing models and DV5 early adopters expected to help .
  • Force feedback & INA: Supply constrained through Q1 next year; early INA uplift from DV5 (force feedback + insufflator tube sets) was a smaller contributor in Q2 .
  • DV5 productivity: Early signs DV5 utilization surpassing Xi; building robust evidence; efficiency features aim to add another daily case per room over time .
  • OUS DV5 rollout & features: Measured ramp; some EU customers may wait for force‑feedback clearance beyond next year; roadmap includes added features, mostly not separately priced .
  • Capital deployment: Opportunistic buybacks amid volatility; priorities remain organic investment, tuck‑ins, and shareholder returns .

Estimates Context

  • Q2 2025 results vs consensus: Revenue $2.44B vs $2.35B*; non‑GAAP EPS $2.19 vs $1.92*; EPS +14% surprise and revenue +3.7% surprise, likely prompting upward revisions to FY margin and procedure assumptions given raised gross margin and tightened procedure growth outlook .
  • Trend vs prior quarters: ISRG also beat in Q1 2025 and Q4 2024 (non‑GAAP EPS $1.81 vs $1.73*; $2.21 vs $1.79*) and revenue ($2.25B vs $2.19B*; $2.41B vs $2.24B*) .

Note: *Values retrieved from S&P Global.

Key Takeaways for Investors

  • Beat-and-raise quarter: Clear revenue/EPS beat and higher gross margin/procedure growth guidance tighten the full‑year setup positively .
  • DV5 adoption inflecting: 180 placements and higher utilization vs Xi point to an upgrade cycle with pricing power and procedure/INA tailwinds as force‑feedback supply normalizes in 2026 .
  • Margin arc: Near‑term proforma gross margin is structurally lower YoY on mix/dep’n/tariffs, but tariff headwind outlook improved and fixed‑cost leverage helped Q2; monitor mix and service costs .
  • OUS watch‑items: Budget constraints in Japan/Europe and measured DV5 rollout temper OUS capital growth; distributors/India/Korea remain bright spots .
  • Product catalysts: CE mark/Japan clearance, Vessel Sealer Curved, SP stapler rollout, and digital/telepresence suite broaden the narrative beyond multiport .
  • Execution signals: Manufacturing expansion (Bulgaria) and localized leasing models support scale and access; strong cash position ($9.53B) provides flexibility for investment and buybacks .
  • Risk checks: Medicaid coverage uncertainty in U.S., evolving tariff regimes, and third‑party remanufacturers are key external variables; ISRG is positioning with hospital analytics and innovation .

Appendix: Additional Data and Disclosures

  • Q2 2025 revenue composition: INA $1,474.1M (+18% YoY), Systems $574.7M, Services $391.2M .
  • Q2 2025 GAAP to non‑GAAP bridge: Non‑GAAP net income $797.9M vs GAAP $658.4M; excludes SBC, LTIP, amortization, litigation charges, strategic investment impacts, and tax adjustments .
  • Cash & investments: $9.53B at quarter end; +$431M QoQ; stock repurchases $181M; capex $155M in Q2 .