Intuitive Surgical stock sinks despite earnings beat on 2026 procedure growth outlook

Shares of Intuitive Surgical tumbled about 12% in premarket trading on Friday after the robotic surgery company issued a full-year procedure growth outlook that fell short of investor expectations, overshadowing stronger-than-expected second-quarter earnings and revenue.

The maker of the da Vinci robotic surgery platform reported adjusted earnings of $2.80 per share for the quarter, comfortably ahead of analysts' estimates of $2.51.

Revenue rose 19% year over year to $2.89 billion, beating Wall Street expectations of $2.82 billion.

Despite the earnings beat, investors focused on management's projection that da Vinci procedure growth for 2026 will range between 13.5% and 15.5%, with growth expected to be near the midpoint of 14.5%.

Strong quarter overshadowed by conservative procedure growth outlook

The company continued to benefit from the growing adoption of its robotic-assisted surgery platforms.

Worldwide procedures performed using the company's 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 during the quarter, compared with 395 in the same period last year.

The figure included 246 installations of its latest da Vinci 5 platform.

The company's installed base also continued to expand.

As of June 30, Intuitive had 11,710 da Vinci systems installed globally, up 12% from a year earlier.

The installed base for Ion systems grew 21% to 1,096 units.

Revenue from instruments and accessories, which represents the company's largest and most recurring business, 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 worth $28 million after tax, equivalent to $0.08 per share.

Management expects adjusted gross margins of between 68% and 69% of revenue for 2026, an improvement from its earlier guidance of 67.5% to 68.5%.

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.

The brokerage cited competitive pressures, remanufactured surgical instruments, international market challenges, and valuation concerns as factors weighing on sentiment.

Even after lowering its target, TD Cowen's revised valuation still implies roughly 29% upside from Thursday's closing price.

Stifel has maintained a more optimistic stance.

The brokerage reiterated 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 favourably despite the emergence of new competitors in robotic surgery.

According to Stifel, recently announced upgrades to the da Vinci 5 platform further strengthen the company's competitive position.

The US robotic surgery market is entering its first significant competitive phase in more than two decades after Intuitive largely dominated the segment.

Valuation debate continues

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.