Intuitive Surgical (NASDAQ:ISRG) beat both top- and bottom-line consensus estimates in its fiscal Q2 2026 results, with revenue for the quarter growing 19% to $2.89 billion and adjusted EPS of $2.80 exceeding expectations by $0.30. Despite that, the stock plunged due to mounting concerns about slowing domestic procedure growth.
Worldwide procedures, da Vinci and Ion combined, grew around 16% compared to the prior year period, with Da Vinci procedures growing approximately 15% and Ion procedures growing approximately 36%. These trends disappointed investors accustomed to the company’s historically strong procedure growth rates.
Looking beyond the initial market reaction, is Intuitive Surgical (NASDAQ:ISRG) still worth its premium valuation?
Bull Case
UBS believes that the recent share selloff for Intuitive Surgical (NASDAQ:ISRG) is overdone, and the firm’s work on automation suggests a “potentially dramatic acceleration” in penetration on procedures being brought to a faster and cheaper point than laparoscopy today. It thus upgraded the stock to Buy from Neutral, but brought the price target down to $500 from $550. Despite the price target downgrade, UBS sees an estimate and re-rating opportunity for Intuitive Surgical (NASDAQ:ISRG), and considers it to be “one of the cleanest growth stories in MedTech.”
While analyst sentiment remains mixed, Intuitive Surgical (NASDAQ:ISRG) continues to exhibit strong profitability margins, supported by the non-GAAP gross profit margin reaching 70.0% in the quarter and the non-GAAP operating margin expanding by 330 basis points year-over-year to 42.1%. The gross margin expanding to a healthy 70.0% non-GAAP is a point of optimism for investors, as are strong recurring streams that make up around 85% of the total sales. Adoption of the company’s newest da Vinci 5 surgical platform continues to accelerate, suggesting hospitals remain willing to invest despite broader macroeconomic uncertainty. The company reported strong system placements of 468 da Vinci units in fiscal Q2, reflecting an 18% year-over-year growth.
Furthermore, Intuitive Surgical’s (NASDAQ:ISRG) business model remains one of its biggest competitive advantages. Approximately 85% of total revenue came from recurring sources during the quarter, providing investors with significant revenue visibility as the installed base continues to grow. Several prominent institutional investors hold stakes in Intuitive Surgical (NASDAQ:ISRG), including Assenagon Asset Management S.a., Swedbank Ab, and Rathbone Brothers Plc.
Bear Case
The primary reason Intuitive Surgical (NASDAQ:ISRG) disappointed investors despite strong quarterly results was concern over procedure growth. Management did not raise its procedure growth guidance, keeping it intact and expecting 2026 da Vinci procedure growth of 13.5% to 15.5%, with results closer to the midpoint. Intuitive Surgical’s premium valuation may also leave little room for execution missteps or slower-than-expected growth.
The impact of tariffs remains another important area of investor focus for Intuitive Surgical (NASDAQ:ISRG). The company expects the current tariffs to remain in place through the end of the year, and remains uncertain about the execution of additional tariffs, as that would cause a material change in its financial results for the year, including a change in expected non-GAAP gross profit margin. The ultimate effect of tariffs is made further uncertain by factors such as the nature, scope, and amount of the tariffs and the proportion of components procured and finished goods manufactured outside of the United States.
In addition, competition within robotic-assisted surgery is gradually increasing, which could place greater pressure on pricing and market share over the long term.
What Investors Should Watch Next
Investors should continue monitoring the pace of da Vinci procedure growth and whether the company can sustain strong system placements across hospitals and international markets. While demand for robotic-assisted surgery remains robust, future growth will depend on Intuitive Surgical’s (NASDAQ:ISRG) ability to expand its installed base and drive recurring revenue from instruments, accessories, and services.
Another important factor to monitor is the adoption of the company’s next-generation technologies, including da Vinci 5. Continued adoption could provide an additional catalyst for procedure growth and strengthen the company’s competitive position in robotic surgery. Intuitive Surgical’s (NASDAQ:ISRG) latest results suggest that demand for robotic-assisted surgery remains resilient. The key question for investors is whether the company can continue translating its technological leadership and expanding installed base into sustainable earnings growth while navigating tariff-related cost pressures.
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