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 reaching $2.80, exceeding expectations by $0.30. However, the stock declined as investors focused on concerns surrounding slowing domestic procedure growth. Medtronic (NYSE:MDT), meanwhile, continued its turnaround efforts with an earnings beat supported by improving growth across several key businesses.
Let’s take a deeper look at which company looks better positioned for growth.
Bull case
Both companies demonstrated encouraging signs during their latest results, although the drivers behind their momentum differ. One of the strongest factors supporting Medtronic’s (NYSE:MDT) turnaround thesis is the company’s return to faster revenue growth in fiscal Q4 and full-year 2026. It reported its highest annual revenue growth in 10 years in its fiscal Q4 and full-year 2026 results, with Q4 revenue reaching $9.8 billion, up 9.9% as reported and 6.6% organic, and FY 26 revenue was $36.4 billion, adjusted revenue of $36.3 billion, up 8.4% as reported and 5.8% organic. The results suggest that Medtronic is making progress in improving execution while building momentum in several growth platforms, including Affera, Symplicity, Hugo, Altaviva, and Stealth AXiS.
Furthermore, Medtronic’s (NYSE:MDT) cardiac segment is emerging as one of the most prominent growth drivers for the company, as the Cardiac Ablation Solutions revenue rose 78% globally, including 124% U.S. growth. Several of the company’s newer product launches are beginning to contribute meaningfully to growth, helping strengthen its competitive position in several high-growth markets. It is also heavily investing in innovation and M&A, along with targeted investments in high-growth segments such as ICE catheter technology.
Intuitive Surgical’s (NASDAQ:ISRG) growth story differs from Medtronic’s (MDT), as the company continues to benefit from its established leadership position in robotic-assisted surgery. The company 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 expanded 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
Despite their positive earnings trends, both companies still face challenges that could determine whether their recent momentum can translate into long-term shareholder value. Investors may want to wait for several more quarters of consistent execution before concluding that Medtronic’s (NYSE:MDT) turnaround is complete. Management has spent several years attempting to accelerate growth, meaning investors may require additional evidence that recent improvements represent a sustainable change rather than a temporary improvement.
It is also significant to note that much of Medtronic’s recent momentum has been concentrated in a handful of high-growth product categories, which raises the question of whether growth can become more broad-based across the company’s portfolio. This concern is further amplified by increasing competition in cardiovascular devices and robotic surgery, particularly from companies such as Intuitive Surgical and Boston Scientific.
Tariffs are another important factor for investors to monitor. Management stated that they affected Medtronic’s (NYSE:MDT) business by $74 million, representing an 80 basis points headwind. They are anticipated to continue affecting gross margins, with fiscal year 2027 embedding an impact of around $250 million with no assumed refunds.
Unlike Medtronic, where investors are focused on execution and turnaround progress, Intuitive Surgical’s main challenge is whether its premium valuation can be justified by continued 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 both companies. Management stated that they affected Medtronic’s (NYSE:MDT) business by $74 million, representing an 80 basis points headwind. They are anticipated to continue affecting gross margins, with fiscal year 2027 embedding an impact of around $250 million with no assumed refunds. Intuitive Surgical (NASDAQ:ISRG) also 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.
What Investors Should Watch Next
For Medtronic (NYSE:MDT), investors will likely focus on whether management can sustain its turnaround momentum. The company expects fiscal 2027 organic revenue growth of 6.75% to 7.25%, including approximately 11.5% to 12% organic growth in Q1. Meeting these expectations will be important in rebuilding investor confidence.
For Intuitive Surgical (NASDAQ:ISRG), investors should continue monitoring da Vinci procedure growth, system placements, and adoption of newer platforms such as da Vinci 5. While demand for robotic-assisted surgery remains strong, sustaining growth expectations will be important given the company’s premium valuation.
Insider Monkey’s hedge fund data shows that there were 103 hedge funds with bullish ISRG positions vs. 60 for MDT. Hedge funds clearly favor ISRG over MDT. Hedge funds prioritize top-line acceleration. ISRG delivers rapid, double-digit growth, whereas MDT expands at a mature, single-digit pace.
While we acknowledge the potential of ISRG to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than ISRG and that has 100x upside potential, check out our report about the cheapest AI stock.
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