Intuitive Surgical: The End of Easy Money?

 

Intuitive Surgical continues to see increasing amounts of operations performed by its robots, although the stock market is placing a lower premium on each new procedure. The da Vinci 5 is expected to sustain the company's lucrative annuity. To judge its success, investors should look at the revenue generated per operation rather than the robot that enabled it.

The da Vinci 5 robot represents a fresh start. Approved by the US FDA in March 2024, it restores the sense of touch to surgeons, integrates artificial intelligence, and operates with computing power far beyond that of the da Vinci Xi. However, Intuitive is no newcomer. The first da Vinci was released in 1999, and the machine has dominated the most profitable operating rooms for thirty years, from prostatectomies to general surgery. Over 11,100 systems are now installed worldwide. However, since January, the stock has lost a quarter of its value. While operations continue to climb, doubts are emerging about their remaining value.

The robot is a one-time sale, whereas the clamps, arms, and accessories are replaced for every operation. The more operations that are performed, the more Intuitive collects. In 2025, this recurring portion represents 84% of revenue, up from 77% in 2020. For years, this equation was sufficient. It becomes less certain as Ottava and Hugo enter the fray as competitors.

More Procedures, Same Annuity

2025 was an excellent year. Revenue rose 21% to $10.1bn. The operating margin was 29%, while net cash approached $9bn. The da Vinci 5 is finding buyers, with over 1,200 units installed compared to 362 a year earlier, and its use was expanded to cardiac surgery in January 2026.

Limited-use instruments are invoiced between $800 and $3,600 per procedure, in addition to annual service fees. With operations growing from 1.2m to 3.1m over five years and an installed base exceeding 11,000 robots, recurring revenue increases annually. This explains its 29% margin.

Even so, the stock has dropped 27% from its $566 peak in January, wiping out $53bn in market capitalization.

The Bet on New Procedures

A hospital rarely replaces a robot before 7 to 10 years. It does so when the old model begins to become obsolete. The da Vinci 5 must therefore keep these clients with Intuitive, and so far, it is succeeding in so doing. Since January 2026, it has also gained ground in cardiac surgery. International markets are taking over in terms of volume, with 23% growth in 2025 compared to 15% in the US. The Ion, released in 2019 for lung biopsies, saw its procedures jump 51% in 2025, and the SP is gaining ground in colorectal and thoracic surgery.

However, these new operations must be as profitable as the old ones. Without that, there is no reason for the 29% margin to continue.

A More Exposed Annuity

Medtronic is already marketing its Hugo system, while Johnson & Johnson is finalizing Ottava. Several Chinese players, led by Shanghai MicroPort MedBot, are pushing their equipment to public hospitals. Operating rooms already equipped with da Vinci systems will not switch, as surgeons are already trained on them. However, for new tenders, especially in China, buyers now have a choice.

Another sensitive point: a majority of instruments and accessories are produced at Intuitive's factories in Mexicali, Mexico. These products have so far escaped US customs duties thanks to the USMCA, the trade agreement between the United States, Mexico, and Canada. However, the dependence remains visible. A tightening of tariffs would weigh on gross profit, which would be difficult to offset without raising prices.

Finally, there is the pharmaceutical factor. In the US, bariatric operations using the da Vinci declined in 2024, as anti-obesity drugs like Ozempic led some patients to postpone or avoid surgery. While the segment remains secondary, other treatments could face a similar fate.

At $417, Intuitive is still trading at 45.7x 2026 earnings and 26.8x its EBITDA, compared to 72x and 45x respectively a year ago. Johnson & Johnson, which is specifically preparing Ottava, is valued at half that price, with a dividend to boot, within a group where robotics is just one business among many. Intuitive's management nonetheless repurchased $2.3bn of its shares in 2025, at an average price of around $479. Today, the stock is worth less than the average price paid by the group.

The da Vinci 5 and international expansion have the potential to drive the future, but they must all maintain their margins. For now, Intuitive remains a premier medtech firm, but it is priced as if its annuity were guaranteed.

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