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IS

INTUITIVE SURGICAL INC (ISRG)·Q3 2025 Earnings Summary

Executive Summary

  • Clean beat and raise: Revenue grew 23% to $2.51B and non-GAAP EPS rose 30% to $2.40, both above S&P consensus; management raised FY25 procedure growth and gross margin guidance, citing Da Vinci 5 adoption, strong utilization, and Ion momentum . Revenue consensus $2.41B* vs actual $2.51B; EPS consensus $1.99* vs $2.40 (ex-tax benefits EPS would have been ~$2.28) .
  • Mix and scale drove upside while tariffs and facility costs constrained GM: pro forma GM was 68% (down ~110 bps y/y), pressured by ~90 bps from tariffs and higher service/facility costs; operating discipline kept pro forma operating margin at 39% .
  • Capital remains robust: 427 Da Vinci systems placed (240 Da Vinci 5), installed base up 13% to 10,763; leasing 54% of placements; strong U.S. upgrade cycle; OUS paced by measured launches and macro constraints .
  • Key catalysts: broader Da Vinci 5 feature rollouts (Force Gauge, In-Console Video Replay, Network CCM), Ion AI-powered navigation and tomosynthesis integration, and raised FY25 guidance (procedures, GM, lower tax rate) .

What Went Well and What Went Wrong

  • What Went Well

    • Broad-based procedure strength: total procedures +20% y/y (Da Vinci +19%, Ion +52%) with rising utilization (Da Vinci multiport +4%, SP +35%, Ion +14%) .
    • Capital momentum and upgrades: 427 systems placed (240 Da Vinci 5); U.S. upgrades and trade-ins accelerating, refurb Xi portfolio emerging; ASP for purchased systems up to $1.6M .
    • Guidance raised: FY25 Da Vinci procedure growth to 17–17.5% (from 15.5–17%) and pro forma GM to 67–67.5% (from 66–67%) on cost leverage and lower-than-expected tariff impact .

  • What Went Wrong

    • Margin pressure: pro forma GM 68% vs 69.1% last year on tariffs (~90 bps), higher facility costs, and higher service costs tied to Da Vinci 5 and Ion mix .
    • Bariatrics headwind continues: U.S. bariatric procedures down high-single digits; surgeons not yet predicting recovery given GLP-1 dynamics .
    • China/Japan headwinds: China tender pace slow, competitive pricing; Japan capital budgets constrained; OUS growth benefited ~1 pt from holiday timing shift .

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Billions)$2.04 $2.44 $2.51
GAAP Diluted EPS ($)$1.56 $1.81 $1.95
Non-GAAP Diluted EPS ($)$1.84 $2.19 $2.40
Pro Forma MarginsQ3 2024Q2 2025Q3 2025
Gross Margin %69.1% 67.9% 68.0%
Operating Margin %—39% 39%
Revenue Breakdown ($USD Billions)Q3 2024Q2 2025Q3 2025
Instruments & Accessories$1.264 $1.474 $1.519
Systems$0.445 $0.575 $0.590
Services$0.329 $0.391 $0.396
Total Revenue$2.038 $2.440 $2.505
KPIsQ3 2024Q2 2025Q3 2025
Da Vinci Systems Placed379 395 427
Da Vinci 5 Systems Placed110 180 240
Ion Systems Placed58 54 50
Da Vinci Installed Base (period-end)9,539 10,488 10,763
Ion Installed Base (period-end)736 905 954
Leasing Mix of Da Vinci Placements58% 49% 54%
Recurring Revenue Mix—85% 85%

Estimate comparison (Q3 2025):

  • Revenue: $2.51B vs $2.41B consensus* → Beat (+$0.09B, ~+3.8%)* .
  • Non-GAAP EPS: $2.40 vs $1.99 consensus* → Beat (+$0.41, ~+20.7%)*; EPS included ~$0.12 per share tax benefits; ex-these, EPS would’ve been ~$2.28 .

Note: Asterisked values are S&P Global consensus/derived comparisons. Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious Guidance (Q2)Current Guidance (Q3)Change
Da Vinci Procedure GrowthFY 202515.5%–17% 17%–17.5% Raised
Pro Forma Gross Margin %FY 202566%–67% (incl. ~100 bps tariffs) 67%–67.5% (incl. ~70 bps tariffs) Raised; tariff impact lower
Pro Forma OpEx GrowthFY 202510%–14% 11%–13% Narrowed/maintained mid
Other IncomeFY 2025$370M–$390M $350M–$360M Lowered
Capital ExpendituresFY 2025$650M–$725M $625M–$675M Narrowed/lower
Non‑cash SBC ExpenseFY 2025$770M–$790M $785M–$795M Slightly higher midpoint
Pro Forma Tax RateFY 202522%–23% 21%–22% Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Da Vinci 5 adoption & utilizationQ1: 147 DV5 placements; early adoption . Q2: Broad U.S. launch; 180 DV5; DV5 utilization surpassed Xi; upgrades/trade-ins rising .240 DV5 in Q3; ~67k DV5 procedures; utilization data validate design intent; upgraded ASPs and dual consoles; remote updates via Network CCM .Accelerating adoption and utilization
Digital/AI featuresQ2: Case Insights/force feedback studies; telepresence demo .New DV5 software: Force Gauge, In-Console Video Replay, Network CCM; Ion AI navigation and tomosynthesis integration .Expanding capabilities; enabling efficiency
Tariffs & marginsQ2: FY25 GM guide lifted to 66–67%; ~100 bps tariff impact; GM 67.9% .FY25 GM lifted to 67–67.5%; tariff impact now ~70 bps; Q3 GM 68% .Less severe tariff drag than feared
Regional dynamicsQ2: U.S. strong; China competitive; Japan/Europe capex constrained .U.S. upgrades drive placements; OUS measured DV5 launch; OUS growth +25% (holiday timing +~1 pt) .U.S. strength; OUS mixed
Bariatrics/GLP‑1Q2: INA/procedure supported by DV5/insufflator; bariatrics down .U.S. bariatrics down HSD; surgeons not calling bottom .Ongoing headwind
SP platformQ2: SP procedures +88%; stapler roll-out .SP procedures +91%; early U.S. use of SP stapler in colorectal/thoracic .Building utilization & indications
Ion platformQ2: +52% procedures; 905 installed base .+52% procedures to just under 38k; AI software clearance; integrated tomosynthesis .Strong growth; feature expansion

Management Commentary

  • “We’re pleased with our strong results this quarter, underscored by continued growth in customer use and adoption of our Ion and da Vinci platforms, including da Vinci 5.” — CEO Dave Rosa .
  • “Pro forma gross margin for the quarter was 68%, down from 69.1% in Q3 of last year [due to] a 90 basis point impact from tariffs, higher facility costs, a greater mix of lower margin Da Vinci 5 and Ion revenue, and higher service costs related to Da Vinci 5, partially offset by cost reductions.” — CFO Jamie Samath .
  • “Refurbished Xi is an important part of our portfolio… We’ve sold 20 refurbished Xi systems so far.” — Management on capital segmentation and access .
  • “We now have the integrated hub hardware… collecting video data and getting it processed… leading to augmented dexterity or intraoperative guidance.” — On DV5 digital foundation .

Q&A Highlights

  • Utilization & upgrades: U.S. Da Vinci utilization up as DV5 mix rises; upgrades allow redeployment of Xi to ASCs and secondary sites; DV5 instrument inventories largely interchangeable with Xi, aiding fleet flexibility .
  • Margins outlook: Q3 pro forma GM 68%; 2026 color deferred to January; going direct in Italy/Spain/Portugal expected slightly accretive to pro forma EPS upon transition .
  • Bariatrics & China: Bariatric procedures remain down HSD; surgeons not predicting inflection; China tenders slow, competitive, with price pressure on capital and INA .
  • Ion and ASCs: Capital is the greater ASC constraint; refurbished Xi should help; current Ion pricing not a primary impediment; sterilization not a barrier in ASCs per field experience .

Estimates Context

  • Q3 2025 vs S&P Global consensus: Revenue $2.51B vs $2.41B estimate* (beat); non-GAAP EPS $2.40 vs $1.99 estimate* (beat). Excluding ~$0.12 tax benefit, EPS ~$2.28 .
  • Implications: Street likely to lift FY EPS and revenue on stronger DV5 uptake, higher gross margin guide, and raised procedure growth; monitor tariff trajectory and OUS capital pacing .
    Note: Asterisked values are S&P Global consensus. Values retrieved from S&P Global.

Key Takeaways for Investors

  • DV5 upgrade cycle is translating into both capital strength (427 systems; rising trade-ins) and higher utilization; recurring revenue remains 85% of total, supporting durability .
  • Margin setup improved: FY25 GM guide raised (67–67.5%) with lower tariff burden and cost reductions; pro forma operating margin steady at 39% despite mixed product mix .
  • Procedure growth re-accelerating (guidance raised to 17–17.5%) with benign general surgery and OUS growth; bariatrics is a contained but persistent drag (<~3% of Da Vinci procedures) .
  • Ion remains a second growth engine (+52% procedures) with AI navigation/tomosynthesis broadening addressable settings; watch for 2026 broader launch impacts .
  • Capital segmentation (DV5 at flagships, Xi redeployed/refurbished to ASCs/secondary sites) can expand access and throughput without overspending; leasing mix at 54% .
  • Near-term focus: monitor OUS capital constraints (Japan/UK/China), DV5 feature cadence (remote updates, force/insights), and potential 2026 tax and go-direct shifts on EPS .

Additional Documented Items (Q3 2025 press releases)

  • Da Vinci 5 software: Force Gauge, In-Console Video Replay, and Network CCM enable real-time insights and remote updates .
  • Ion software: AI-powered navigation addressing CT-to-body divergence and integrated tomosynthesis to expand advanced imaging access; broader U.S. launch planned for 2026 .