Core Insights - Intuitive Surgical's stock has surged over 15% following strong Q3 results and positive guidance, reflecting rising demand for robotic-assisted surgical systems [1] Financial Performance - Q3 sales reached $2.5 billion, up from $2.03 billion year-over-year, exceeding estimates of $2.41 billion [2] - Revenue from instruments and accessories grew by 22%, indicating higher procedure volume and increased utilization per system [2] - Earnings per share (EPS) increased by 30% to $2.40, surpassing Q3 EPS expectations of $1.99 by 20% [3][4] Operational Highlights - Intuitive Surgical has exceeded earnings expectations for 11 consecutive quarters, with an average EPS surprise of 16.34% in the last four quarters [3][4] - There was a 20% increase in global surgeries using da Vinci robotic systems, enhancing precision in minimally invasive surgeries [5] - The company placed 427 da Vinci systems in Q3 2025, compared to 379 in the same quarter last year [7] Strategic Outlook - Full-year da Vinci procedure growth expectations have been raised to 17%-17.5% from 15.5%-17% [9] - Pro forma gross margin projections for the full year have been increased to 67%-67.5% from 66%-67% [9] - Total sales are expected to rise by 18% this year and another 12% in fiscal 2026, reaching $11.12 billion [10] Market Position - Intuitive Surgical has expanded its installed base to over 10,000 systems, enhancing recurring revenue from instruments and accessories [12] - The stock currently trades at a premium of 64X forward earnings, with potential for a buy rating if the rally continues [11]

Core Insights - The article highlights the significant role of AI and robotics in advancing the medical field, particularly in drug discovery and surgical applications [1]. Group 1: AI in Medicine - AI is increasingly capable in areas such as drug discovery, indicating a growing trend towards automation and efficiency in pharmaceutical development [1]. Group 2: Robotics in Surgery - Robotics is being applied in surgical procedures, showcasing the potential for enhanced precision and outcomes in medical operations [1].

Summary of the Webinar on the Chinese Medtech Market Industry Overview - The focus of the webinar was on the **Chinese Medtech market**, highlighting its evolution and current dynamics [3][8] - The Chinese healthcare system is transitioning towards **efficiency, cost containment**, and **domestic self-reliance** [3] Key Points and Arguments - **Historical Growth**: The Medtech market in China experienced rapid growth due to healthcare modernization, an aging population, and supportive government policies, including universal insurance coverage and significant public health investments [3][10] - **Recent Challenges**: The market is facing headwinds due to government policies favoring local companies, such as "Buy Local" directives and Volume Based Procurement (VBP), which have reduced prices and disrupted demand for capital equipment [3][4] - **Market Share Dynamics**: Multinational companies (MNCs) are losing market share in hospital-facing Medtech sectors (e.g., imaging, diagnostics) to local competitors, while they remain focused on premium segments where innovation gaps exist [4][41] - **Consumer Medtech Growth**: In contrast, the Consumer Medtech sector, particularly in self-pay markets like dental and ophthalmology, is expected to see high-single to double-digit growth due to low penetration rates and brand loyalty [4][30] Financial Implications - **Sales Exposure**: For many Medtech companies, China now represents a smaller share of total sales. For example, Smith & Nephew's sales from China are projected to drop from 7% in 2019 to approximately 3% in 2025 [5][7] - **Company Exposure Categorization**: - **Risk**: Companies like Philips, Healthineers, and Coloplast face significant risks due to their exposure to the Chinese market - **Neutral**: Companies such as Medtronic and Abbott have a neutral stance - **Opportunity**: Companies like Alcon and Carl Zeiss are seen as having growth opportunities in China [5][7] Market Dynamics - **Healthcare Spending Trends**: China's healthcare spending grew at a **17% CAGR from 2000 to 2015**, followed by an **8% CAGR through 2022** [10] - **Policy Shifts**: Major policy changes since 2015 have aimed to strengthen domestic industry, impacting MNCs' operations [13][14] - **Local Competition**: Local players are rapidly gaining market share, particularly in highly penetrated markets like medical imaging [44][45] Consumer Medtech Insights - **Adoption Rates**: Consumer Medtech markets have lower starting points for adoption, allowing for significant growth potential. For instance, dental implant adoption in China is still below that of developed markets [24][30] - **Self-Pay Market Dynamics**: The self-pay nature of these markets allows for greater price elasticity and brand influence, benefiting international players [25][27] - **Brand Importance**: Brand recognition plays a crucial role in maintaining market share against local competitors, especially in private healthcare settings [27][51] Future Outlook - **Growth Prospects**: The outlook for Consumer Medtech in China remains optimistic over the next 5-10 years, while caution is advised for capital equipment and orthopedics due to increased local competition [41][41] - **Regulatory Impact**: Changes in public health systems can influence private pay markets, as seen with recent VBP programs [39] Conclusion - The Chinese Medtech market is undergoing significant transformation, with both challenges and opportunities for multinational companies. The focus on local competition and policy shifts necessitates a strategic approach for MNCs to navigate this evolving landscape [3][4][41]

Core Insights - Medtronic is positioning its Hugo RAS system to compete with Intuitive Surgical's da Vinci systems in the surgical robotics market [1][3] - The healthcare expenditure in the U.S. is significant, with over $1.6 trillion of the $4.9 trillion spent on hospitals in 2023 [1] Market Dynamics - Hospitals have been investing in da Vinci systems to retain more profit from surgical procedures, leading to a strong demand for Intuitive Surgical's machines [2] - Intuitive Surgical reported 10,763 da Vinci systems installed as of September 30, 2025, with a 19% year-over-year increase in procedures performed using these systems [6] - Intuitive Surgical's third-quarter sales surged 23% year-over-year to an annualized $10 billion, primarily driven by sales of instruments and accessories [7] Medtronic's Performance - Medtronic's Hugo system sales are not transparently reported, as they are included in broader categories, making it difficult to assess market performance [8][10] - In Medtronic's fiscal first quarter ending July 25, 2025, surgical and endoscopy sales rose 4.4%, while cranial and spinal technologies revenue increased by 5.5%, with annualized sales reaching $11.3 billion [9] Competitive Landscape - Medtronic's Hugo system has shown promising results in clinical trials for urologic procedures, demonstrating fewer complications compared to traditional surgeries [12] - A meta-analysis indicated that postoperative outcomes for prostatectomies were statistically similar between da Vinci and Hugo systems, suggesting no clear advantage for either system [13] - Intuitive Surgical's established presence and trained surgical teams in hospitals present a significant barrier for Medtronic's Hugo system to gain market share [14][15] Strategic Advantages - Medtronic benefits from economies of scale and a large global salesforce, which could support steady profit growth in the long term [15]

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Market Overview - The earnings season has caused significant market fluctuations, with strong reports from major banks leading to a market surge, followed by a decline after Netflix's earnings miss and Tesla's electric vehicle numbers [1] - A report indicating the White House's consideration of export restrictions to China further increased market uncertainty, contributing to a drop in indices [2] Company Performance - Tesla's stock increased by 8.7% year-to-date but fell 0.8% at market close ahead of Q3 earnings, ultimately dropping 3.8% after hours [3] - Intuitive Surgical's stock rose by 13.8% due to its second consecutive positive earnings report [3] - Tesla reported a profitable quarter with total revenue of $28.1 billion, a 12% year-over-year increase, but its operating margins decreased to 5.8% due to a 40% year-over-year decline in operating income to $1.6 billion [10] Stock Movements - The S&P 500 index slipped 0.5%, primarily due to the significant gain in Intuitive Surgical's stock, while the Nasdaq Composite fell 0.9% ahead of Tesla's earnings release [7] - The Dow Jones Industrial Average decreased by 0.8%, with notable declines in stocks such as Apple, Goldman Sachs, Amazon, and Salesforce [7] - The small-cap Russell 2000 index suffered a more substantial decline, closing down 1.5% [7] Upcoming Earnings Reports - Anticipated earnings reports from companies such as Intel, Honeywell, T-Mobile, and Blackstone are expected tomorrow [4]

Core Insights - Netflix's third-quarter earnings fell short of expectations, primarily due to a one-time tax charge exceeding $600 million related to its operations in Brazil, leading to a 10.1% drop in its shares [5][8] - Intuitive Surgical experienced a significant increase in its stock price by 13.9% after reporting better-than-expected quarterly results, driven by a rise in procedures using its robotic surgical systems [7][8] - Major U.S. equity indexes declined, with the S&P 500 down 0.5%, the Dow down 0.7%, and the Nasdaq down 0.9%, influenced by the underperformance of tech stocks and anticipation of Tesla's earnings report [3][7] Company-Specific Summaries - **Netflix (NFLX)**: Reported lower-than-expected net income for Q3, impacted by a substantial tax expense related to Brazil, resulting in a significant share price decline [5][8] - **Intuitive Surgical (ISRG)**: Achieved strong quarterly sales and profit figures, leading to a notable increase in stock price, and raised its full-year growth forecast for procedures [7][8] - **Lennox International (LII)**: Experienced a 10.2% drop in shares due to disappointing quarterly sales, attributed to a challenging macroeconomic environment and regulatory changes [4] - **Coinbase Global (COIN)**: Shares fell 5.4% as major cryptocurrencies declined, with Bitcoin dropping below $110,000 [6] - **Avery Dennison (AVY)**: Reported better-than-expected results, leading to a 9.5% increase in shares, supported by improved pricing and a partnership with Walmart [9] - **Boston Scientific (BSX)**: Shares rose 4% after surpassing sales and profit estimates, benefiting from strong sales of its medical devices [10]

PART I. FINANCIAL INFORMATION This part presents Intuitive Surgical's unaudited condensed consolidated financial statements and notes for Q3 2025 and FY 2024 [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section details Intuitive Surgical's unaudited condensed consolidated financial statements and related notes for Q3 2025 and FY 2024 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section details the company's financial position, including assets, liabilities, and equity, for Q3 2025 and FY 2024 Condensed Consolidated Balance Sheets (in millions) | Metric | September 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------------- | :------------------ | | **ASSETS** | | | | Total current assets | $8,525.3 | $7,111.0 | | Property, plant, and equipment, net | $5,150.9 | $4,646.6 | | Long-term investments | $3,523.7 | $4,819.1 | | Total assets | $19,351.8 | $18,743.2 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Total current liabilities | $1,803.2 | $1,745.3 | | Total liabilities | $2,309.7 | $2,213.6 | | Total stockholders' equity | $17,042.1 | $16,529.6 | | Total liabilities and stockholders' equity | $19,351.8 | $18,743.2 | - Total assets increased by **$608.6 million (3.2%)** from December 31, 2024, to September 30, 2025, primarily driven by increases in current assets and property, plant, and equipment, net[8](index=8&type=chunk) - Total stockholders' equity increased by **$512.5 million (3.1%)** from December 31, 2024, to September 30, 2025[8](index=8&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents comprehensive income, including revenue, gross profit, and net income, for Q3 and YTD 2025 and 2024 Condensed Consolidated Statements of Comprehensive Income (in millions, except per share amounts) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenue | $2,505.1 | $2,038.1 | $7,198.5 | $5,938.6 | | Gross profit | $1,662.4 | $1,373.9 | $4,738.0 | $3,992.0 | | Income from operations | $759.7 | $577.3 | $2,081.2 | $1,614.0 | | Net income attributable to Intuitive Surgical, Inc. | $704.4 | $565.1 | $2,061.2 | $1,636.9 | | Diluted EPS | $1.95 | $1.56 | $5.67 | $4.53 | - Total revenue increased by **23%** for the three months ended September 30, 2025, and by **21%** for the nine months ended September 30, 2025, compared to the respective prior year periods[10](index=10&type=chunk) - Net income attributable to Intuitive Surgical, Inc. increased by **24.6%** for the three months ended September 30, 2025, and by **25.9%** for the nine months ended September 30, 2025, year-over-year[10](index=10&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the company's cash flows from operating, investing, and financing activities for Q3 and YTD 2025 and 2024 Condensed Consolidated Statements of Cash Flows (in millions) | Metric | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $2,138.0 | $1,592.4 | | Net cash provided by (used in) investing activities | $875.2 | $(2,008.6) | | Net cash provided by (used in) financing activities | $(2,226.6) | $101.5 | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $787.1 | $(323.8) | | Cash, cash equivalents, and restricted cash, end of period | $2,849.5 | $2,446.3 | - Net cash provided by operating activities increased by **$545.6 million (34.3%)** for the nine months ended September 30, 2025, compared to the same period in 2024[13](index=13&type=chunk) - Investing activities shifted from a net cash outflow of **$2,008.6 million** in 2024 to a net cash inflow of **$875.2 million** in 2025, primarily due to changes in investment purchases and maturities[13](index=13&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes supporting the condensed consolidated financial statements, covering accounting policies and financial items [NOTE 1. DESCRIPTION OF THE BUSINESS](index=7&type=section&id=NOTE%201.%20DESCRIPTION%20OF%20THE%20BUSINESS) This note describes Intuitive Surgical's core business, focusing on da Vinci surgical systems and Ion endoluminal systems - Intuitive Surgical, Inc. develops, manufactures, and markets da Vinci surgical systems and the Ion endoluminal system, aiming to improve minimally invasive care[17](index=17&type=chunk) - The da Vinci system supports a wide range of surgical procedures across general surgery, urologic, gynecologic, cardiothoracic, and head and neck specialties[17](index=17&type=chunk) - The Ion endoluminal system is a robotic-assisted, catheter-based platform primarily for minimally invasive lung biopsies[17](index=17&type=chunk) [NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=7&type=section&id=NOTE%202.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note details significant accounting policies, GAAP compliance, and future accounting standard adoptions - The financial statements are prepared in accordance with GAAP and SEC rules for interim reporting, consistent with the 2024 annual report[18](index=18&type=chunk)[19](index=19&type=chunk) - Future results and liquidity face risks from macroeconomic and geopolitical factors, including tariffs, inflation, interest rates, conflicts, and supply chain challenges[21](index=21&type=chunk)[22](index=22&type=chunk) - The Company plans to adopt ASU 2023-09 (Income Tax Disclosures) in Q4 2025, not expecting a material impact, and is evaluating ASU 2024-03 (Expense Disaggregation) and ASU 2025-06 (Internal-Use Software)[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) [NOTE 3. FINANCIAL INSTRUMENTS](index=8&type=section&id=NOTE%203.%20FINANCIAL%20INSTRUMENTS) This note details financial instruments, including cash, debt securities, and derivative instruments for hedging Cash and Available-for-Sale Debt Securities (in millions) as of September 30, 2025 | Category | Amortized Cost | Fair Value | | :------------------------ | :------------- | :--------- | | Cash | $572.7 | $572.7 | | Money market funds | $1,861.2 | $1,861.2 | | U.S. treasuries | $5,510.1 | $5,544.2 | | Corporate debt securities | $89.2 | $87.9 | | U.S. government agencies | $362.9 | $365.1 | | Municipal securities | $1.4 | $1.4 | | Total | $8,397.5 | $8,432.5 | - The Company's total assets measured at fair value were **$8,432.5 million** as of September 30, 2025, with unrealized gains of **$39.5 million** and unrealized losses of **$4.4 million**[30](index=30&type=chunk) - The Company uses foreign currency derivatives as cash flow hedges for forecasted revenue and expense transactions, and other derivatives to hedge intercompany balances and monetary assets/liabilities[41](index=41&type=chunk)[42](index=42&type=chunk)[44](index=44&type=chunk) [NOTE 4. BALANCE SHEET DETAILS AND OTHER FINANCIAL INFORMATION](index=11&type=section&id=NOTE%204.%20BALANCE%20SHEET%20DETAILS%20AND%20OTHER%20FINANCIAL%20INFORMATION) This note provides additional details on selected balance sheet accounts, including inventory and cash balances Selected Balance Sheet Details (in millions) | Account | September 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------------- | :------------------ | | Accounts receivable, net | $1,259.7 | $1,225.4 | | Inventory | $1,781.9 | $1,487.2 | | Prepaids and other current assets | $574.9 | $385.1 | | Other accrued liabilities – short-term | $565.4 | $547.5 | | Other long-term liabilities | $506.5 | $468.3 | - Inventory increased by **$294.7 million (19.8%)** from December 31, 2024, to September 30, 2025, reflecting business growth and supply chain risk mitigation[46](index=46&type=chunk)[255](index=255&type=chunk) Total Cash, Cash Equivalents, and Restricted Cash (in millions) | Account | September 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------------- | :------------------ | | Cash and cash equivalents | $2,806.6 | $2,027.4 | | Restricted cash within other current assets | $27.9 | $20.0 | | Restricted cash within other assets | $15.0 | $15.0 | | Total cash, cash equivalents, and restricted cash | $2,849.5 | $2,062.4 | [NOTE 5. REVENUE](index=13&type=section&id=NOTE%205.%20REVENUE) This note disaggregates total revenue by geography and type, detailing contributions from instruments, accessories, systems, and services Revenue Disaggregated by Geography and Type (in millions) | Category | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | **U.S. Revenue** | | | | | | Instruments and accessories | $1,062.0 | $904.8 | $3,043.1 | $2,618.6 | | Systems | $397.5 | $265.4 | $1,087.4 | $702.2 | | Service | $258.1 | $209.2 | $754.7 | $616.3 | | Total U.S. revenue | $1,717.6 | $1,379.4 | $4,885.2 | $3,937.1 | | **OUS Revenue** | | | | | | Instruments and accessories | $456.8 | $359.4 | $1,317.5 | $1,048.9 | | Systems | $192.9 | $179.6 | $600.4 | $609.2 | | Service | $137.8 | $119.7 | $395.4 | $343.4 | | Total OUS revenue | $787.5 | $658.7 | $2,313.3 | $2,001.5 | | **Total Revenue** | | | | | | Instruments and accessories | $1,518.8 | $1,264.2 | $4,360.6 | $3,667.5 | | Systems | $590.4 | $445.0 | $1,687.8 | $1,311.4 | | Service | $395.9 | $328.9 | $1,150.1 | $959.7 | | Total revenue | $2,505.1 | $2,038.1 | $7,198.5 | $5,938.6 | - Total revenue increased by **23%** for the three months and **21%** for the nine months ended September 30, 2025, driven by growth across all categories[50](index=50&type=chunk) - Remaining performance obligations totaled **$2.88 billion** as of September 30, 2025, with approximately **44%** expected to be recognized in the next **12 months**[51](index=51&type=chunk) [NOTE 6. LEASES](index=14&type=section&id=NOTE%206.%20LEASES) This note provides information on lease arrangements, including net investment in sales-type leases and credit risk management Net Investment in Sales-Type Leases (in millions) | Metric | September 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------------- | :------------------ | | Gross lease receivables | $345.2 | $393.4 | | Unearned income | $(14.8) | $(13.9) | | Allowance for credit loss | $(2.6) | $(2.6) | | Net investment in sales-type leases | $327.8 | $376.9 | - Sales-type leases generally range from **24 to 84 months** and are collateralized by a security interest in the underlying assets[60](index=60&type=chunk) - The Company manages credit risk for sales-type leases by assessing customer factors like size, profitability, liquidity, debt ratios, payment history, and external credit scores[61](index=61&type=chunk) [NOTE 7. GOODWILL AND INTANGIBLE ASSETS](index=15&type=section&id=NOTE%207.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) This note details goodwill and intangible assets, including carrying amounts and recent acquisition agreements - Intuitive Surgical announced a definitive agreement to acquire da Vinci and Ion distribution businesses in Italy, Spain, Portugal, Malta, and San Marino for approximately **EUR 290 million** upfront, with closing expected in H1 2026[63](index=63&type=chunk) Goodwill Carrying Amount (in millions) | Metric | Amount | | :-------------------------- | :----- | | Balance as of December 31, 2024 | $347.5 | | Translation and other | $0.6 | | Balance as of September 30, 2025 | $348.1 | Intangible Assets (in millions) as of September 30, 2025 | Category | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | | :-------------------------- | :-------------------- | :----------------------- | :------------------ | | Patents and developed technology | $204.5 | $(192.1) | $12.4 | | Customer relationships | $28.5 | $(26.4) | $2.1 | | Total intangible assets | $233.0 | $(218.5) | $14.5 | [NOTE 8. CONTINGENCIES](index=16&type=section&id=NOTE%208.%20CONTINGENCIES) This note outlines legal proceedings and contingencies, including product liability, patent, and commercial litigation - The Company is involved in various legal proceedings, including product liability lawsuits alleging defects in the da Vinci system and inadequate training, with several cases scheduled for trial in the next **12 months**[68](index=68&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk) - In patent litigation, the Court of Appeals affirmed the district court's judgment, and the Company does not believe any losses from this matter would be material[74](index=74&type=chunk) - The Company faces commercial litigation, including antitrust claims related to EndoWrist service and repair, with a class action certified in March 2025, but the Company is unable to estimate potential losses[75](index=75&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk) [NOTE 9. STOCKHOLDERS' EQUITY](index=18&type=section&id=NOTE%209.%20STOCKHOLDERS%27%20EQUITY) This note details changes in stockholders' equity, including common stock issuance, repurchases, and share-based compensation impacts Changes in Stockholders' Equity (in millions) for Nine Months Ended September 30, 2025 | Metric | Common Stock (Shares) | Common Stock (Amount) | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Intuitive Surgical, Inc. Stockholders' Equity | | :------------------------------------------ | :-------------------- | :-------------------- | :------------------------- | :---------------- | :-------------------------------------------- | :------------------------------------------ | | Beginning balance (Dec 31, 2024) | 356.6 | $0.4 | $9,681.3 | $6,803.3 | $(51.3) | $16,433.7 | | Issuance of common stock | 3.4 | — | $273.7 | — | — | $273.7 | | Shares withheld for equity awards | (0.7) | — | $(8.7) | $(397.3) | — | $(406.0) | | Share-based compensation expense | — | — | $589.9 | — | — | $589.9 | | Repurchase and retirement of common stock | (4.4) | — | $(57.4) | $(2,043.2) | — | $(2,100.6) | | Net income attributable to Intuitive Surgical, Inc. | — | — | — | $2,061.2 | — | $2,061.2 | | Other comprehensive income | — | — | — | — | $77.8 | $77.8 | | Ending balance (Sep 30, 2025) | 354.9 | $0.4 | $10,478.8 | $6,424.0 | $26.5 | $16,929.7 | - The Board authorized an additional **$4.0 billion** for the common stock repurchase program in May 2025, with approximately **$1.9 billion** remaining as of September 30, 2025[82](index=82&type=chunk) Stock Repurchase Activity (in millions, except per share amounts) | Metric | Three Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2025 | | :---------------------- | :------------------------------ | :----------------------------- | | Shares repurchased | 4.0 | 4.4 | | Average price per share | $479.60 | $482.66 | | Value of shares repurchased | $1,919.6 | $2,100.6 | [NOTE 10. SHARE-BASED COMPENSATION](index=21&type=section&id=NOTE%2010.%20SHARE-BASED%20COMPENSATION) This note details share-based compensation expense, including its impact on cost of revenue, SG&A, and R&D - Shareholders approved an increase of **5 million** shares for the 2010 Incentive Award Plan in May 2025, reserving approximately **22.1 million** shares for future issuance as of September 30, 2025[86](index=86&type=chunk) Share-Based Compensation Expense (in millions) | Category | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total cost of revenue | $40.3 | $32.8 | $117.6 | $93.7 | | Selling, general, and administrative | $88.1 | $77.6 | $256.7 | $225.4 | | Research and development | $77.6 | $65.4 | $221.3 | $188.7 | | Share-based compensation expense before income taxes | $206.0 | $175.8 | $595.6 | $507.8 | | Income tax benefit | $42.5 | $36.9 | $118.8 | $105.4 | | Share-based compensation expense after income taxes | $163.5 | $138.9 | $476.8 | $402.4 | - Share-based compensation expense before income taxes increased by **17.2%** for the three months and **17.3%** for the nine months ended September 30, 2025, year-over-year[95](index=95&type=chunk) [NOTE 11. INCOME TAXES](index=23&type=section&id=NOTE%2011.%20INCOME%20TAXES) This note presents income tax expense and effective tax rates, discussing factors influencing tax provisions and future regulatory impacts Income Tax Expense and Effective Tax Rate | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | | Income tax expense | $146.0 | $100.4 | $278.7 | $214.5 | | Effective tax rate | 17.1% | 15.0% | 11.8% | 11.5% | - The effective tax rate for Q3 2025 was **17.1%** (vs. **15.0%** in Q3 2024) and for YTD 2025 was **11.8%** (vs. **11.5%** in YTD 2024), primarily due to lower tax benefits from employee equity plans and federal R&D credits[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk)[244](index=244&type=chunk) - The recently enacted OBBB Act and OECD Pillar Two rules are not expected to have a material impact on the Company's 2025 annual effective tax rate or tax provision for the reported periods[100](index=100&type=chunk)[246](index=246&type=chunk)[247](index=247&type=chunk) [NOTE 12. NET INCOME PER SHARE](index=24&type=section&id=NOTE%2012.%20NET%20INCOME%20PER%20SHARE) This note details basic and diluted net income per share calculation, including weighted-average shares and anti-dilutive awards Net Income Per Share Attributable to Intuitive Surgical, Inc. (in millions, except per share amounts) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income attributable to Intuitive Surgical, Inc. | $704.4 | $565.1 | $2,061.2 | $1,636.9 | | Weighted-average shares outstanding used in basic calculation | 356.6 | 355.8 | 357.5 | 354.8 | | Weighted-average shares outstanding used in diluted calculation | 361.8 | 362.7 | 363.5 | 361.4 | | Basic EPS | $1.98 | $1.59 | $5.77 | $4.61 | | Diluted EPS | $1.95 | $1.56 | $5.67 | $4.53 | - Diluted EPS increased by **25%** to **$1.95** for the three months ended September 30, 2025, and by **25.2%** to **$5.67** for the nine months ended September 30, 2025, year-over-year[103](index=103&type=chunk) - Approximately **1.8 million** (Q3 2025) and **1.3 million** (YTD 2025) share-based compensation awards were anti-dilutive and excluded from diluted EPS calculation[103](index=103&type=chunk) [NOTE 13. SEGMENT INFORMATION](index=24&type=section&id=NOTE%2013.%20SEGMENT%20INFORMATION) This note provides information on the single reportable segment, including revenue by geography and management's performance assessment - Intuitive operates as a single reportable segment, focusing on advancing minimally invasive care through a comprehensive ecosystem of robotic-assisted systems, instruments, accessories, learning, and services[104](index=104&type=chunk) - U.S. revenue accounted for **69%** and **68%** of total revenue for the three and nine months ended September 30, 2025, respectively, with OUS revenue expected to grow faster long-term[104](index=104&type=chunk)[205](index=205&type=chunk) - The CEO, as CODM, uses long-range plans, product development roadmaps, and financial models to allocate resources and assess business performance, focusing on income from operations and net income[105](index=105&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses Intuitive Surgical's financial condition and results of operations for Q3 and YTD 2025 [Overview](index=27&type=section&id=Overview) This section overviews Intuitive's mission, strategic aims, and recent product developments, including the da Vinci 5 surgical system - Intuitive's mission is to advance minimally invasive care through a comprehensive ecosystem of robotic-assisted systems (da Vinci, Ion), instruments, accessories, learning, and support services[111](index=111&type=chunk) - The Company aligns its strategy with the Quintuple Aim: better patient outcomes, improved patient experiences, enhanced care team experiences, lower total cost of care, and expanded access to high-quality minimally invasive care[112](index=112&type=chunk) - The da Vinci 5 surgical system, the fifth-generation multi-port robotic system, received FDA clearance in March 2024 and OUS regulatory clearances in South Korea (Oct 2024), Japan (June 2025), and European certification (July 2025)[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) [Trade and Tariffs Update](index=29&type=section&id=Trade%20and%20Tariffs%20Update) This section discusses the impact of new U.S. tariffs and reciprocal measures on cost of revenues and supply chain - New U.S. tariffs on imports from Mexico, Germany, and China, along with reciprocal measures, are increasing the Company's cost of raw materials and finished goods[126](index=126&type=chunk)[127](index=127&type=chunk) - Tariffs and other trade measures increased cost of revenues by approximately **$22 million** for Q3 2025 and **$37 million** for YTD 2025, with expected continued increases into Q4 2025[129](index=129&type=chunk) - Restrictions on rare earth elements and critical minerals from China could potentially restrict access to components, materially impacting business[128](index=128&type=chunk) [Macroeconomic Environment](index=29&type=section&id=Macroeconomic%20Environment) This section addresses macroeconomic and geopolitical factors, including tariffs, supply chain challenges, inflation, and their potential impact on operations - Macroeconomic and geopolitical factors, including tariffs, supply chain challenges, inflation, elevated interest rates, and conflicts (Russia-Ukraine, Middle East), pose material adverse risks to operations and liquidity[130](index=130&type=chunk) - Isolated supply stresses for specific component materials and operational challenges at subcontract suppliers were experienced in Q3 2025, but did not have a material impact[131](index=131&type=chunk) - Hospitals continue to face staffing shortages, cost pressures, and financial liquidity concerns due to macroeconomic factors, which could negatively impact da Vinci procedures or system placements[133](index=133&type=chunk) [Remanufactured Instruments](index=30&type=section&id=Remanufactured%20Instruments) This section discusses third-party remanufactured instruments and their potential impact on revenue and reputation - Third parties offer remanufactured instruments for da Vinci Si, X, and Xi systems, with FDA 510(k) clearance for certain instruments[134](index=134&type=chunk) - While not materially impacting revenues to date, broader uptake or product malfunctions could lead to reduced revenue and negative publicity[134](index=134&type=chunk) [Business Model](index=30&type=section&id=Business%20Model) This section details Intuitive's business model, including revenue generation from system sales, leases, instruments, accessories, and services [Overview](index=30&type=section&id=Business%20Model%20Overview) This section outlines Intuitive's revenue streams from system sales, leases, instruments, accessories, and services, including pricing details - Revenue is generated from upfront sales/sales-type leases of da Vinci and Ion systems, and recurring revenue from fixed-payment or usage-based operating leases, instruments, accessories, and services[136](index=136&type=chunk)[138](index=138&type=chunk) - Da Vinci systems sell for **$0.7 million** to **$3.1 million**, with instruments/accessories generating **$1,000-$3,600** per procedure, and annual service contracts ranging from **$100,000-$225,000**[137](index=137&type=chunk) - Ion endoluminal systems sell for **$500,000** to **$815,000**, with annual service fees between **$55,000** and **$80,000**[138](index=138&type=chunk) [Recurring Revenue](index=30&type=section&id=Recurring%20Revenue) This section highlights recurring revenue growth from instruments, accessories, service, and operating leases, driven by procedure adoption - Recurring revenue, comprising instruments, accessories, service, and operating lease revenue, increased to **$7.04 billion (84% of total revenue)** in 2024 from **$5.94 billion (83%)** in 2023[140](index=140&type=chunk) - Instruments and accessories revenue grew faster than systems revenue, reaching **$5.08 billion** in 2024, primarily due to continued procedure adoption[141](index=141&type=chunk) - Service revenue increased to **$1.31 billion** in 2024, driven by a **15%** growth in the installed base of da Vinci surgical systems to approximately **9,902**[142](index=142&type=chunk) [Intuitive System Leasing](index=31&type=section&id=Intuitive%20System%20Leasing) This section describes Intuitive's system leasing arrangements, including sales-type, fixed-payment operating, and usage-based operating leases - Intuitive offers sales-type, fixed-payment operating, and usage-based operating lease arrangements for da Vinci and Ion systems to provide customer flexibility[145](index=145&type=chunk) System Placements under Leasing Arrangements (Units) | System Type | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :------------------------------------------ | :---------------------- | :---------------------- | :---------------------- | | Da Vinci Total operating lease placements | 776 | 659 | 492 | | Da Vinci Sales-type lease placements | 88 | 45 | 99 | | Ion Total operating lease placements | 153 | 117 | 101 | | Ion Sales-type lease placements | 4 | 5 | 11 | - Operating lease revenue grew to **$654 million** in 2024, with variable lease revenue from usage-based arrangements accounting for **$338 million**[146](index=146&type=chunk) [Systems Revenue](index=32&type=section&id=Systems%20Revenue) This section analyzes factors influencing systems revenue, such as procedure growth, regulatory constraints, seasonality, and product mix - Systems revenue is influenced by procedure growth, regulatory constraints, seasonality (higher in Q4, lower in Q1), operating lease proportion, Lease Buyouts, product mix, ASPs, and trade-in activities[153](index=153&type=chunk) - Systems revenue increased by **17%** to **$1.97 billion** in 2024, after remaining flat in 2023 and declining **1%** in 2022[153](index=153&type=chunk) - The phased launch of the da Vinci 5 surgical system includes specified-price trade-in rights in certain arrangements, impacting systems revenue[153](index=153&type=chunk) [Procedure Mix / Products](index=33&type=section&id=Procedure%20Mix%20%2F%20Products) This section describes primary surgical procedures for da Vinci systems and different system models targeting various clinical needs - Da Vinci systems are primarily used for soft tissue surgery in general, gynecologic, urologic, cardiothoracic, and head and neck procedures, ranging from complex cancer surgeries to less complex benign conditions[154](index=154&type=chunk) - The da Vinci 5 and da Vinci Xi systems with advanced instruments target complex procedures, while the da Vinci X system is for price-sensitive markets, and da Vinci SP accesses narrow workspaces[154](index=154&type=chunk) - Target procedures include hernia repair, colorectal, cholecystectomy, bariatric, prostatectomy, partial nephrectomy, hysterectomy, sacrocolpopexy, lung resection, and transoral surgery[176](index=176&type=chunk) [Procedure and Placement Seasonality](index=33&type=section&id=Procedure%20and%20Placement%20Seasonality) This section explains seasonality of da Vinci procedures and system placements, influenced by benign conditions and hospital budgeting cycles - Over half of da Vinci procedures in 2024 were for benign conditions (hernia repairs, hysterectomies, cholecystectomies), which are more seasonal than cancer operations[155](index=155&type=chunk) - U.S. procedures for benign conditions typically see higher volume in Q4 (deductibles met) and lower in Q1 (deductibles reset)[155](index=155&type=chunk) - Da Vinci system placements historically are heavier in Q4 and lighter in Q1 due to hospital budgeting cycles[156](index=156&type=chunk) [Distribution Channels](index=33&type=section&id=Distribution%20Channels) This section outlines distribution strategy, utilizing direct sales organizations and distributors across various global markets - The Company uses direct sales organizations in the U.S., Europe (excluding certain countries), China (via joint ventures), Japan, South Korea, India, Taiwan, and Canada[157](index=157&type=chunk) - Distributors are also utilized for some government customers in the U.S., China, and Japan, and for the remainder of OUS markets[157](index=157&type=chunk) [Regulatory Activities](index=33&type=section&id=Regulatory%20Activities) This section details extensive international regulations and standards governing products, including compliance and approval processes [Overview](index=33&type=section&id=Regulatory%20Activities%20Overview) This section overviews the regulatory landscape, emphasizing compliance with international standards for product safety and efficacy - Products must comply with extensive international regulations and standards covering safety, efficacy, design, manufacturing, and post-market requirements[158](index=158&type=chunk)[159](index=159&type=chunk) - Compliance includes establishment registration, quality system audits, device listing, and medical device reporting[159](index=159&type=chunk) - Timelines for new product introductions and indications are expected to be extended due to increasingly stringent regulations in the U.S. and Europe[160](index=160&type=chunk) [Clearances, Approvals, and Certifications](index=34&type=section&id=Clearances%2C%20Approvals%2C%20and%20Certifications) This section lists recent regulatory clearances, approvals, and certifications for da Vinci 5 and Ion systems in key global markets - The da Vinci 5 surgical system received European certification in July 2025, regulatory clearance in Japan in June 2025, and South Korea in October 2024[163](index=163&type=chunk) - The Ion endoluminal system received FDA software advancements clearance in October 2025, European certification for extended catheter uses in February 2025, and NMPA regulatory clearance in China in March 2024[171](index=171&type=chunk) - China's 2023 Quota allows for **559** new surgical robots, with Intuitive placing **146** da Vinci systems under this quota as of September 30, 2025; however, provincial limits on robotic surgery charges could impact revenue[167](index=167&type=chunk)[168](index=168&type=chunk) [Field Actions, Recalls, and Corrections](index=35&type=section&id=Field%20Actions%2C%20Recalls%2C%20and%20Corrections) This section discusses regulatory obligations for correcting or removing devices posing health risks and their potential business impacts - Medical device companies have regulatory obligations to correct or remove devices posing health risks, encompassing repairs, replacements, inspections, relabeling, and new instructions[170](index=170&type=chunk) - Field actions require stringent documentation, reporting, and monitoring worldwide, with notifications submitted to appropriate regulatory agencies[170](index=170&type=chunk)[173](index=173&type=chunk) - Such actions can adversely affect business through reputational damage, delayed customer decisions, reduced system use, decreased revenue, and increased expenses[174](index=174&type=chunk) [Procedures](index=36&type=section&id=Procedures) This section overviews da Vinci and Ion procedure volumes and growth trends across surgical specialties and geographies [Da Vinci Procedures](index=36&type=section&id=Da%20Vinci%20Procedures) This section details da Vinci procedure growth and mix across surgical specialties in U.S. and OUS markets - Da Vinci procedures are modeled on patient value (efficacy/invasiveness) and are growing in general, gynecologic, urologic, cardiothoracic, and head and neck surgeries[175](index=175&type=chunk)[176](index=176&type=chunk) - Approximately **2,683,000** da Vinci procedures were performed in 2024, a **17.4%** increase from **2,286,000** in 2023[177](index=177&type=chunk) - U.S. da Vinci procedures grew to **1,757,000** in 2024 (**14.7%** YoY), with general surgery being the largest and fastest-growing specialty. OUS procedures grew to **926,000** in 2024 (**22.8%** YoY), with urology as the largest specialty[178](index=178&type=chunk)[179](index=179&type=chunk) [Ion Procedures](index=37&type=section&id=Ion%20Procedures) This section highlights significant growth in Ion endoluminal system biopsy procedures, driven by an expanding installed base - Ion endoluminal system biopsy procedures grew to approximately **95,500** in 2024, an increase of **77.5%** from **53,800** in 2023[181](index=181&type=chunk) - This growth is attributed to a larger installed base of approximately **805** systems in 2024, a **51%** increase from 2023[181](index=181&type=chunk) - The vast majority of Ion biopsy procedures in 2024, 2023, and 2022 were performed in the U.S[181](index=181&type=chunk) [Recent Business Events and Trends](index=38&type=section&id=Recent%20Business%20Events%20and%20Trends) This section covers recent business events and trends, including da Vinci and Ion procedure growth, system demand, and new product introductions [Da Vinci Procedures](index=38&type=section&id=Recent%20Business%20Events%20and%20Trends%20Da%20Vinci%20Procedures) This section details recent da Vinci procedure growth trends in Q3 and YTD 2025, highlighting key specialties and regions - Total da Vinci procedures grew by **19%** in Q3 2025 (vs. **18%** in Q3 2024) and **18%** in YTD 2025 (vs. **17%** in YTD 2024), driven by general surgery, OUS urology, and U.S. gynecology[182](index=182&type=chunk) - U.S. da Vinci procedures grew **16%** in Q3 2025, primarily from cholecystectomy, hernia repair, and appendectomy, while bariatric procedures declined in high-single digits[183](index=183&type=chunk) - OUS da Vinci procedures grew **24%** in Q3 2025, with strong adoption in Asian and European markets, particularly India, South Korea, and Brazil, and a recovery in South Korea post-doctor strikes[184](index=184&type=chunk) [Ion Procedures](index=38&type=section&id=Recent%20Business%20Events%20and%20Trends%20Ion%20Procedures) This section reports Ion procedure growth in Q3 and YTD 2025, driven by an expanding installed base and modality conversion - Total Ion procedures grew by **52%** in Q3 2025 (vs. **73%** in Q3 2024) and **54%** in YTD 2025 (vs. **81%** in YTD 2024)[185](index=185&type=chunk) - Growth was largely due to a larger installed base of Ion systems and conversion from other lung biopsy modalities[185](index=185&type=chunk) [System Demand](index=38&type=section&id=System%20Demand) This section analyzes da Vinci and Ion system placements, discussing demand factors including procedure growth and supply chain risks - **427** da Vinci systems were placed in Q3 2025 (up from **379** in Q3 2024), including **240** da Vinci 5 systems (up from **110** in Q3 2024), driven by procedure growth and demand for the new da Vinci 5[186](index=186&type=chunk) - **50** Ion systems were placed in Q3 2025 (down from **58** in Q3 2024), as U.S. customers shift focus from capacity to utilization[187](index=187&type=chunk) - Future system placements are impacted by supply chain risks, economic/geopolitical factors, tariffs, interest rates, hospital staffing, competition (especially in China), and regulatory clearances[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) [Recent Product Introductions](index=39&type=section&id=Recent%20Product%20Introductions) This section highlights recent product introductions, including da Vinci 5 and new instruments with enhanced features - Da Vinci 5 features force feedback, new surgeon controllers, enhanced 3D display, and over **10,000** times the computing power of da Vinci Xi, integrating with digital experiences like My Intuitive app and SimNow[193](index=193&type=chunk) - The E-200 generator provides advanced electrosurgical energy for cutting, coagulation, and vessel sealing, integrated with da Vinci 5 and compatible with da Vinci X/Xi systems[194](index=194&type=chunk) - New staplers (SureForm 30 Curved-Tip, SP SureForm 45) and the Vessel Sealer Curved instrument offer enhanced visualization, access, and precision with SmartFire technology for consistent staple lines and efficient tissue interaction[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) [Third Quarter 2025 Operational and Financial Highlights](index=41&type=section&id=Third%20Quarter%202025%20Operational%20and%20Financial%20Highlights) This section summarizes key operational and financial highlights for Q3 2025, including revenue, procedure growth, system placements, and profitability Q3 2025 Operational and Financial Highlights (in millions, except percentages) | Metric | Q3 2025 | Q3 2024 | YoY Change | | :------------------------------------------ | :------ | :------ | :--------- | | Total revenue | $2,505.1 | $2,038.1 | +23% | | Da Vinci procedures | 797,000 | 670,000 | +19% | | Ion procedures | 37,900 | 24,900 | +52% | | Instruments and accessories revenue | $1,518.8 | $1,264.2 | +20% | | Systems revenue | $590 | $445 | +33% | | Da Vinci system placements | 427 | 379 | +12.7% | | Da Vinci 5 system placements | 240 | 110 | +118.2% | | Da Vinci installed base | 10,763 | 9,539 | +13% | | Ion system placements | 50 | 58 | -13.8% | | Ion installed base | 954 | 736 | +30% | | Gross profit margin | 66.4% | 67.4% | -1.0 pp | | Operating income | $760 | $577 | +32% | | Cash, cash equivalents, and investments | $8,430 | $8,830 (Dec 31, 2024) | -4.5% | | Shares repurchased | 4.0 | — | N/A | | Value of shares repurchased | $1,920 | — | N/A | - Total revenue increased by **23%** to **$2.51 billion**, driven by **20%** higher instruments and accessories revenue and **33%** higher systems revenue[200](index=200&type=chunk) - Operating income increased by **32%** to **$760 million**, despite a **1.0 percentage point** decrease in gross profit margin to **66.4%**[200](index=200&type=chunk) [Results of Operations](index=42&type=section&id=Results%20of%20Operations) This section analyzes results of operations, covering total revenue, product revenue, service revenue, and expenses [Total Revenue](index=42&type=section&id=Total%20Revenue) This section analyzes total revenue growth by geography and type, highlighting contributions from instruments, accessories, systems, and services Total Revenue (in millions, except percentages) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenue | $2,505.1 | $2,038.1 | $7,198.5 | $5,938.6 | | YoY Growth | +23% | | +21% | | | U.S. Revenue | $1,717.6 | $1,379.4 | $4,885.2 | $3,937.1 | | OUS Revenue | $787.5 | $658.7 | $2,313.3 | $2,001.5 | | % of Revenue – U.S. | 69% | 68% | 68% | 66% | | % of Revenue – OUS | 31% | 32% | 32% | 34% | - Total revenue increased by **23%** in Q3 2025 and **21%** in YTD 2025, driven by higher instruments and accessories, systems, and service revenue[202](index=202&type=chunk)[203](index=203&type=chunk) - Foreign currency fluctuations had a favorable impact on OUS total revenue of **$3 million** in Q3 2025 and **$9 million** in YTD 2025[204](index=204&type=chunk) [Product Revenue](index=44&type=section&id=Product%20Revenue) This section details product revenue from instruments, accessories, and systems, driven by procedure volume and system placements Product Revenue (in millions) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Instruments and accessories | $1,518.8 | $1,264.2 | $4,360.6 | $3,667.5 | | Systems | $590.4 | $445.0 | $1,687.8 | $1,311.4 | | Total product revenue | $2,109.2 | $1,709.2 | $6,048.4 | $4,978.9 | - Instruments and accessories revenue increased by **20%** in Q3 2025 and **19%** in YTD 2025, driven by **19%** higher da Vinci procedure volume and **52-54%** higher Ion procedure volume[208](index=208&type=chunk)[216](index=216&type=chunk) - Systems revenue increased by **33%** in Q3 2025 and **29%** in YTD 2025, due to increased da Vinci system placements (**427** in Q3 2025 vs. **379** in Q3 2024), higher operating lease revenue, and higher ASPs from da Vinci 5 placements[209](index=209&type=chunk)[210](index=210&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) [Service Revenue](index=47&type=section&id=Service%20Revenue) This section analyzes service revenue growth, driven by an expanding installed base and favorable product mix - Service revenue increased by **20%** to **$396 million** for Q3 2025 and to **$1.15 billion** for YTD 2025, compared to the respective prior year periods[223](index=223&type=chunk)[224](index=224&type=chunk) - The increase was primarily driven by a larger installed base of systems generating service revenue and a favorable product mix, including da Vinci 5 system placements[223](index=223&type=chunk)[224](index=224&type=chunk) [Gross Profit](index=47&type=section&id=Gross%20Profit) This section examines gross profit and margins for product and service revenue, discussing influencing cost factors Gross Profit (in millions, except percentages) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Product gross profit | $1,409.8 | $1,153.8 | $3,992.1 | $3,329.7 | | Product gross profit margin | 66.8% | 67.5% | 66.0% | 66.9% | | Service gross profit | $252.6 | $220.1 | $745.9 | $662.3 | | Service gross profit margin | 63.8% | 66.9% | 64.9% | 69.0% | | Total gross profit | $1,662.4 | $1,373.9 | $4,738.0 | $3,992.0 | | Total gross profit margin | 66% | 67% | 65% | 67% | - Product gross profit margin decreased to **66.8%** in Q3 2025 (from **67.5%**) and **66.0%** in YTD 2025 (from **66.9%**), primarily due to tariffs and higher costs from the da Vinci 5 launch and expanded manufacturing capacity[225](index=225&type=chunk)[226](index=226&type=chunk) - Service gross profit margin decreased to **63.8%** in Q3 2025 (from **66.9%**) and **64.9%** in YTD 2025 (from **69.0%**), mainly due to higher costs associated with the da Vinci 5 launch, unfavorable repair mix, and tariffs[229](index=229&type=chunk)[231](index=231&type=chunk) [Selling, General, and Administrative Expenses](index=48&type=section&id=Selling%2C%20General%2C%20and%20Administrative%20Expenses) This section analyzes SG&A expense increase, driven by higher headcount, personnel costs, and litigation charges Selling, General, and Administrative Expenses (in millions) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Selling, general, and administrative | $573.3 | $510.6 | $1,697.9 | $1,527.4 | | % of Total Revenue | 23% | 25% | 24% | 26% | - SG&A expenses increased by **12%** in Q3 2025 and **11%** in YTD 2025, driven by higher headcount, personnel-related expenses (including variable and share-based compensation), and increased litigation charges[234](index=234&type=chunk)[235](index=235&type=chunk) - Share-based compensation expense within SG&A was **$88.1 million** in Q3 2025 and **$256.7 million** in YTD 2025[236](index=236&type=chunk) [Research and Development Expenses](index=48&type=section&id=Research%20and%20Development%20Expenses) This section details R&D expense increase, primarily due to higher headcount, personnel costs, and product development initiatives Research and Development Expenses (in millions) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Research and development | $329.4 | $286.0 | $958.9 | $850.6 | | % of Total Revenue | 13% | 14% | 13% | 14% | - R&D expenses increased by **15%** in Q3 2025 and **13%** in YTD 2025, primarily due to higher headcount, personnel-related expenses (including share-based compensation), and other project costs for product development initiatives[238](index=238&type=chunk) - The Company expects R&D expenses to continue increasing due to substantial investments in a broad set of product development initiatives[240](index=240&type=chunk) [Interest and Other Income, Net](index=49&type=section&id=Interest%20and%20Other%20Income%2C%20Net) This section analyzes interest and other income, net, driven by strategic investments and higher interest income, offset by foreign exchange losses Interest and Other Income, Net (in millions) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Interest and other income, net | $95.5 | $93.7 | $274.6 | $250.0 | | % of Total Revenue | 4% | 5% | 4% | 4% | - Interest and other income, net, increased by **2%** in Q3 2025 and **10%** in YTD 2025, driven by unrealized gains on strategic investments (Q3) and higher interest income from increased cash/investment balances and rates[241](index=241&type=chunk)[242](index=242&type=chunk) - These increases were partially offset by foreign exchange losses (net of hedging) in both periods and unrealized losses on strategic investments (YTD)[241](index=241&type=chunk)[242](index=242&type=chunk) [Income Tax Expense](index=49&type=section&id=Income%20Tax%20Expense) This section details income tax expense and effective tax rates, explaining impact of employee equity plans and R&D credits Income Tax Expense (in millions, except percentages) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Income tax expense | $146.0 | $100.4 | $278.7 | $214.5 | | Effective tax rate | 17.1% | 15.0% | 11.8% | 11.5% | | Excess tax benefits from employee equity plans | $24.2 | $42.2 | $202.5 | $189.0 | | Reduction in effective tax rate from excess tax benefits | 2.8 pp | 6.3 pp | 8.6 pp | 10.1 pp | - The higher effective tax rate in 2025 was primarily due to a lower tax rate benefit from excess tax benefits and lower federal R&D credit benefits, partially offset by lower U.S. taxes on foreign earnings[244](index=244&type=chunk) - The OBBB Act and OECD Pillar Two rules are not expected to materially impact the 2025 annual effective tax rate or current tax provision[246](index=246&type=chunk)[247](index=247&type=chunk) [Liquidity and Capital Resources](index=50&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses liquidity and capital resources, including cash sources, uses, and future funding expectations [Sources and Uses of Cash and Cash Equivalents](index=50&type=section&id=Sources%20and%20Uses%20of%20Cash%20and%20Cash%20Equivalents) This section details the changes in cash, cash equivalents, and investments, highlighting the impact of stock repurchases and operating activities - Cash, cash equivalents, and investments decreased by **$0.40 billion** to **$8.43 billion** as of September 30, 2025, from **$8.83 billion** as of December 31, 2024[250](index=250&type=chunk) - The decrease was primarily due to cash used for common stock repurchases, capital expenditures, and taxes paid on equity awards, partially offset by cash from operating activities and employee stock plans[250](index=250&type=chunk) - The Company expects to fund future growth through cash provided by operations and believes current liquidity is sufficient for the foreseeable future, despite potential macroeconomic headwinds[251](index=251&type=chunk) [Condensed Consolidated Cash Flow Data](index=50&type=section&id=Condensed%20Consolidated%20Cash%20Flow%20Data) This section presents condensed consolidated cash flow data, showing net cash from operating, investing, and financing activities Condensed Consolidated Cash Flow Data (in millions) | Metric | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $2,138.0 | $1,592.4 | | Net cash provided by (used in) investing activities | $875.2 | $(2,008.6) | | Net cash provided by (used in) financing activities | $(2,226.6) | $101.5 | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $787.1 | $(323.8) | - Net cash provided by operating activities increased by **$545.6 million (34.3%)** year-over-year[253](index=253&type=chunk) - Net cash used in financing activities was **$2,226.6 million** in YTD 2025, a significant shift from net cash provided of **$101.5 million** in YTD 2024, primarily due to stock repurchases[253](index=253&type=chunk)[257](index=257&type=chunk) [Operating Activities](index=50&type=section&id=Operating%20Activities) This section analyzes net cash from operating activities, detailing non-cash charges and changes in operating assets and liabilities - Net cash provided by operating activities (**$2.14 billion**) exceeded net income (**$2.08 billion**) for YTD 2025, largely due to **$1.08 billion** in non-cash charges (share-based compensation, depreciation)[254](index=254&type=chunk)[255](index=255&type=chunk) - Changes in operating assets and liabilities used **$1.02 billion** in cash, primarily due to increased inventory (**$810 million**) for business growth and supply chain mitigation, and higher prepaids/other assets (**$249 million**) for tax payments and leases[255](index=255&type=chunk) - These outflows were partially offset by increases in accounts payable (**$97 million**) and deferred revenue (**$48 million**)[255](index=255&type=chunk) [Investing Activities](index=50&type=section&id=Investing%20Activities) This section details net cash from investing activities, primarily from investment maturities and sales, offset by capital expenditures - Net cash provided by investing activities for YTD 2025 was **$875.2 million**, primarily from **$1.25 billion** in net proceeds from maturities and sales of investments[254](index=254&type=chunk) - This was partially offset by **$377 million** paid for the acquisition of property, plant, and equipment[254](index=254&type=chunk) - The investment portfolio predominantly consists of high-quality, fixed-income securities[254](index=254&type=chunk)[256](index=256&type=chunk) [Financing Activities](index=51&type=section&id=Financing%20Activities) This section analyzes net cash used in financing activities, primarily due to stock repurchases and taxes on equity awards - Net cash used in financing activities for YTD 2025 was **$2.23 billion**, primarily due to **$2.09 billion** for common stock repurchases (**4.4 million** shares)[257](index=257&type=chunk) - Additionally, **$406 million** was used for taxes paid on behalf of employees for net share settlements of equity awards[257](index=257&type=chunk) - These uses were partially offset by **$274 million** in cash proceeds from stock option exercises and employee stock purchases[257](index=257&type=chunk) [Capital Expenditures](index=51&type=section&id=Capital%20Expenditures) This section outlines expected capital investments for 2025, focusing on expanding manufacturing, commercial capabilities, and supply chain integration - The Company expects capital investments to range between **$625 million** and **$675 million** in 2025, primarily for facilities to expand manufacturing and commercial capabilities[258](index=258&type=chunk) - Investments also include vertical integration of key technologies to develop a more robust supply chain and enhance product quality, availability, and cost[258](index=258&type=chunk) - These capital investments are intended to be funded with cash generated from operations[258](index=258&type=chunk) [Critical Accounting Estimates](index=51&type=section&id=Critical%20Accounting%20Estimates) This section discusses critical accounting estimates and judgments, noting no material changes - The preparation of financial statements requires estimates and judgments affecting reported amounts of assets, liabilities, revenues, and expenses[259](index=259&type=chunk) - Estimates are based on historical experience and reasonable assumptions, with actual results potentially differing under various conditions[259](index=259&type=chunk) - There have been no new or material changes to critical accounting estimates discussed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[259](index=259&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section reports no material changes to market risk during the nine months ended September 30, 2025, compared to the 2024 Annual Report - No material changes in market risk occurred during the nine months ended September 30, 2025, compared to the disclosures in the Annual Report on Form 10-K for 2024[261](index=261&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms effectiveness of disclosure controls and reports no material changes to internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=52&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms management's conclusion that disclosure controls and procedures were effective as of September 30, 2025 - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2025[263](index=263&type=chunk) [Changes in Internal Control over Financial Reporting](index=52&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports no material changes to internal control over financial reporting during Q3 2025 - No changes in internal control over financial reporting occurred during the quarter ended September 30, 2025, that materially affected or are reasonably likely to materially affect it[264](index=264&type=chunk) PART II. OTHER INFORMATION This part provides additional information, including legal proceedings, risk factors, equity sales, and other disclosures [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference legal proceedings information from Note 8 of the Condensed Consolidated Financial Statements - Information on legal proceedings is incorporated by reference from Note 8 of the Condensed Consolidated Financial Statements[265](index=265&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) This section advises considering risk factors from the 2024 Annual Report on Form 10-K, as they may materially affect the business - Readers should consider risk factors from the 2024 Annual Report on Form 10-K, as additional unknown or immaterial risks may also adversely affect the business[266](index=266&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports no unregistered equity sales and details common stock repurchase activity for Q3 2025 [Issuer Purchases of Equity Securities](index=53&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) This section details common stock repurchase activity for Q3 2025, including shares repurchased and remaining authorization - No unregistered sales of equity securities occurred during the reporting period[267](index=267&type=chunk) Stock Repurchase Activity for Q3 2025 | Fiscal Period | Total Number of Shares Repurchased | Average Price Paid Per Share | Approximate Dollar Amount of Shares That May Yet be Purchased Under the Program | | :-------------------------- | :------------------------------- | :--------------------------- | :-------------------------------------------------------------------------- | | July 1 to July 31, 2025 | 985,341 | $499.13 | $3.3 billion | | August 1 to August 31, 2025 | 2,019,119 | $478.18 | $2.4 billion | | September 1 to September 30, 2025 | 998,096 | $463.21 | $1.9 billion | | Total during quarter ended September 30, 2025 | 4,002,556 | $479.60 | | - The Board increased the authorized amount under the Repurchase Program to **$4.0 billion** in May 2025, with approximately **$1.9 billion** remaining as of September 30, 2025[268](index=268&type=chunk) [Item 3. Defaults Upon Senior Securities](index=53&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[269](index=269&type=chunk) [Item 4. Mine Safety Disclosures](index=53&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section reports mine safety disclosures are not applicable - Mine safety disclosures are not applicable[270](index=270&type=chunk) [Item 5. Other Information](index=53&type=section&id=Item%205.%20Other%20Information) This section details Rule 10b5-1 trading plans adopted by two of the Company's officers [Rule 10b5-1 Plans](index=53&type=section&id=Rule%2010b5-1%20Plans) This section details Rule 10b5-1 trading plans adopted by the Chief Medical Officer and Chief Manufacturing and Supply Chain Officer - Chief Medical Officer, Myriam J. Curet, adopted a Rule 10b5-1 trading plan on July 29, 2025, for the potential sale of up to **24,003** shares, including **9,131** stock options, until July 29, 2026[271](index=271&type=chunk) - Chief Manufacturing and Supply Chain Officer, Mark P. Brosius, adopted a Rule 10b5-1 trading plan on September 12, 2025, for the potential sale of up to **19,730** shares, including **9,000** stock options, until February 14, 2027[272](index=272&type=chunk) [Item 6. Exhibits](index=54&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including organizational documents, certifications, and XBRL data files - The report includes certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[273](index=273&type=chunk) - Interactive Data Files in Inline XBRL format are filed as exhibits, including the instance document, schema, calculation, definition, label, and presentation linkbases[273](index=273&type=chunk) [Signature](index=55&type=section&id=Signature) This section contains the signature of Intuitive Surgical, Inc. by its Executive Vice President and CFO, Jamie E. Samath, dated October 22, 2025 - The report is signed by Jamie E. Samath, Executive Vice President and Chief Financial Officer of Intuitive Surgical, Inc., on October 22, 2025[277](index=277&type=chunk)

Economic Impact - The US government shutdown is in its fourth week, affecting market sentiment and delaying key economic reports, including unemployment claims and the September payroll report [1] - Bloomberg Economics estimates that 640,000 federal workers will be furloughed, potentially increasing jobless claims and raising the unemployment rate to 4.7% [1] Mortgage Market - US MBA mortgage applications decreased by 0.3% for the week ending October 17, with the purchase mortgage sub-index down 5.2% and refinancing up 4.0% [2] - The average 30-year fixed mortgage rate fell by 5 basis points to 6.37% from 6.42% [2] Trade Relations - Markets are focused on US-China trade talks, with President Trump threatening to increase tariffs on Chinese goods if no deal is reached by November 1 [3] - The Trump administration is considering broad export restrictions to China in response to China's rare earth export restrictions [4] Stock Market Performance - Stock indexes closed lower, with the S&P 500 down 0.53%, Dow Jones down 0.71%, and Nasdaq down 0.99% [6] - Chipmakers faced significant losses after Texas Instruments forecasted lower-than-expected Q4 revenue, while Netflix dropped over 9% after reporting weaker Q3 EPS [5][6] Earnings Season - The Q3 earnings season shows rising expectations, with 85% of S&P 500 companies that reported so far beating forecasts, indicating the best quarter since 2021 [7] - Q3 profits are expected to rise by 7.2% year-over-year, the smallest increase in two years, while sales growth is projected to slow to 5.9% year-over-year [7] Interest Rates - Markets are pricing in a 97% chance of a 25 basis point rate cut at the next FOMC meeting on October 28-29 [8] - The yield on 10-year T-notes fell by 1.4 basis points to 3.949%, supported by strong demand for a recent Treasury auction [9] Corporate Movements - Texas Instruments and other chipmakers saw declines due to lower revenue forecasts, while Intuitive Surgical rose over 13% after increasing its growth forecast [5][16] - Netflix's Q3 EPS of $5.87 was below the consensus of $6.94, leading to a significant drop in its stock price [15] - Energy producers rallied as WTI crude oil prices rose over 2%, benefiting companies like Halliburton and Marathon Petroleum [18]

Core Thesis - Intuitive Surgical, Inc. (ISRG) is viewed positively due to its strong market position in minimally invasive robotic surgery, characterized by high switching costs and a recurring revenue model from consumables [2][4][5] Company Overview - Intuitive Surgical is a pioneer in robotic surgery, with a business model that creates significant customer stickiness due to the time-consuming and costly training required for surgeons [2] - The company operates on a razor-and-blades model, generating high-margin recurring revenue from consumables used in surgeries, independent of new robot sales [2] Market Performance - Global demand for robotic surgery is robust across various specialties, including urology, gynecology, thoracic, cardiac, and general surgery, supporting sustained growth [3] - Intuitive Surgical has consistently achieved over 20% growth in system sales and nearly 20% growth in consumables revenue, demonstrating strong performance over its two-decade operation [3] Investment Opportunity - Recent share price weakness, trading around $430, is attributed to concerns over potential tariffs and competitive pressures, but this is seen as a temporary headwind [3][4] - The current market conditions present an attractive entry point for long-term investors, given the company's durable competitive advantages and global growth opportunities [4] - The combination of high switching costs, recurring revenue, and a growing market positions Intuitive Surgical as a compelling investment with limited downside and strong earnings growth potential [4] Hedge Fund Interest - As of the end of the second quarter, 107 hedge fund portfolios held ISRG, a slight increase from 106 in the previous quarter, indicating ongoing interest in the stock [6]