2026 07 16 Earnings Isrg Q2 Fy2026

Summary

Intuitive Surgical's Q2 FY2026: total procedures +16%, revenue +19% to $2.89B, non-GAAP EPS +28%, non-GAAP gross margin 70% (68.7% ex a $36M tariff-refund benefit). The load-bearing causal claim is a US demand moderation with a stated mechanism: US Da Vinci procedure growth slowed to 12% (from 14% in Q1), concentrated in deferrable procedures, with management attributing part of it to "changes in patient coverage and premium dynamics" (ACA enrollment/premium shifts) affecting when patients seek care. Second, a GLP-1 second-order effect is now quantified on the call: US Da Vinci bariatric cases declined high-single-digits, "impacted by rising GLP1 usage." Guidance held: FY2026 Da Vinci procedure growth 13.5–15.5% (closer to midpoint); gross-margin range raised to 68–69%. New leg: an FDA 510(k) submission for a next-gen flexible GI endoscope system (non-commercial), extending the platform beyond soft-tissue surgery. Note: Dave Rosa is now CEO (not Gary Guthart).

⚠ partial — honesty flag. This transcript is Benzinga's condensed rendering, not fully verbatim. Only text in explicit quotation marks is management's own words; the connecting prose is the extractor's framing and must never be cited as a verbatim quote. Numbers (procedure growth %, revenue, margins) are as-reported. Treat non-quoted causal phrasings as paraphrase of management's stated position, not verbatim.

Transcript

Operator: Good day and welcome to the Intuitive Surgical Q2 earnings conference call. At this time, all participants are in listen-only mode. After the presentation, there will be a Q&A session.

Dan Connolly (Investor Relations): Good afternoon and welcome to Intuitive Surgical's second quarter 2026 earnings conference call. Joining me are Dave Rosa, our CEO, and Jamie Samath, our CFO. Comments today may contain forward-looking statements subject to risks and uncertainties detailed in our SEC filings.

Dave Rosa (CEO): Good afternoon. Our Q2 performance was solid with total procedures increasing 16%, driven by 15% growth in Da Vinci procedures and 36% growth in Ion procedures. Global installed base of Da Vinci and Ion systems increased by 12% and 21% respectively.

In the US, Da Vinci procedure growth was 12%. Growth moderated from recent trends, predominantly in procedures that can be deferred. Some customers cited "changes in patient coverage and premium dynamics may be affecting when patients seek care."

Outside the US, Da Vinci procedure growth was 20%, with Europe and Asia each up 20%, and rest of world up 22%. China remains challenging with lower tender activity and increased domestic competition.

We placed 468 Da Vinci Systems and 55 Ion Systems in the quarter. We rolled out the first phase of more than 100 planned updates to the Da Vinci V platform, focused on improving telepresence, simulation-based training, and care team workflow.

Regarding our Extended Use program announced in May, we expect to increase uses on EndoWrist instruments in the first half of 2027 to reduce costs in benign procedures.

Da Vinci SP procedures grew 61%, with 38 systems placed globally. Ion procedures increased 36% to 48,000, now exceeding 400,000 cumulatively.

We recently submitted for FDA 510k clearance a foundational non-commercial next-generation flexible robotic endoscope system for use in the gastrointestinal tract.

Jamie Samath (CFO): Q2 marked a strong financial quarter. Revenue rose 19%, non-GAAP operating margin was 42%, and non-GAAP earnings per share increased 28% from the prior year.

Q2 revenue increased 19% to $2.89 billion, with recurring revenue higher by 19% to $2.47 billion, accounting for 85% of total revenue.

US Da Vinci Bariatric cases declined high single digits during the quarter, impacted by rising GLP1 usage. Da Vinci utilization in the US increased 3% in Q2.

Non-GAAP gross margin for the quarter was 70%, up from 67.9% in Q2 of last year. Excluding the $36 million IEIPA tariff refund benefit, Q2 non-GAAP gross margin would have been 68.7%.

We now expect non-GAAP operating expense growth to be between 11% and 13%, with R&D growing faster than SG&A.

We estimate non-cash stock compensation expense between $880 million and $900 million. We forecast other income to total between $315 million and $335 million. We expect our non-GAAP income tax rate to be between 22% and 23%.

We ended the quarter with $8.6 billion in cash and investments, up from $8 billion last quarter. Free cash flow in the first half of 2026 was $1.8 billion, an increase of 71%.

Dan Connolly (Investor Relations): Regarding clinical evidence, a comparative analysis published in November in Surgical Endoscopy compared robotic-assisted and laparoscopic appendectomy across 1,431 patients. Robotic-assisted surgery showed 0% conversion to open versus 3.2% for laparoscopy, and a 66% decreased risk of any complication.

In May at the American Urological Association annual meeting, research presented demonstrated that force feedback was associated with faster return of bowel function after nephrectomy, with 63% of patients achieving return within one day versus 28% without force feedback.

For Da Vinci procedure guidance, we maintain our forecast for full-year 2026 Da Vinci procedure growth to be within 13.5% to 15.5%, with expectation to be closer to the midpoint.

We are updating our non-GAAP gross profit margin estimate to be within 68% and 69% of revenue, up from the previous range of 67.5% to 68.5%.

Q&A

Travis Steed (Bank of America): Thanks for taking the question. How do you know how much of US procedure slowdown is from ACA versus market maturation? Other medtech companies aren't calling it out. And do you expect delayed procedures to return in the second half?

Jamie Samath (CFO): It's a combination. US procedure growth was 12% in Q2 versus 14% in Q1. There's likely some impact from ACA, but also the law of large numbers. Regarding extended use rollout in 2027, think of progressive impact over the year versus a step function.

Robert Marcus (JP Morgan): What are you expecting in guidance for US and OUS regarding the future CapEx cycle?

Jamie Samath (CFO): The US capital environment has been stable. About 70% of systems acquired in the US are under leasing arrangements, providing greater flexibility. Our pipeline has been healthy.

Rick Wise (Stifel): Can you expand on this new GI robot? Why this area, why now? What's the incremental TAM and impact?

Dave Rosa (CEO): GI is a natural extension of our mission to bring better minimally invasive care to more patients. ION demonstrated we can develop platforms beyond core soft tissue surgery. We've spent time with GI physicians understanding where robotic approach could improve outcomes. The 510 submission is for a non-commercial, preliminary system. We'll update progress through regulatory review.

Lawrence Biggleson (Wells Fargo): Is surgical robotics part of China's new centralized VBP program? How might this impact Intuitive?

Dave Rosa (CEO): We believe robotics will be part of it. I wouldn't necessarily compare it to VBP. We'll see how it phases in over the next quarters.

Lawrence Biggleson (Wells Fargo): Follow-up: Regarding instrument security enhancements and encryption technology, what's the tangible benefit? Will this incentivize hospitals to stick with your instruments versus remanufactured ones?

Dave Rosa (CEO): Cybersecurity is front and center for our customers globally. The new encryption technology is part of our continued investment to strengthen product security, quality, and availability.

Ryan Zimmerman (BTIG): Regarding ACA enrollment trends and capital demand—there's a dichotomy between capital demand and procedure growth. Does current capital placement reflect assumptions of increasing demand ahead?

Jamie Samath (CFO): About half of US placements in Q2 were trades, so they don't expand the installed base. System utilization grew 3% in Q2, which is healthy. The US capital environment has been stable.

Ryan Zimmerman (BTIG): On the Da Vinci 5 upgrade cycle—77% of survey respondents are already upgrading or actively pursuing it. How do you think about upgrade ability in existing install base relative to Greenfield placements? What inning are we in?

Jamie Samath (CFO): When we introduced Xi, it took about seven years before peak trade-in volumes from SI to Xi. As with Xi, Da Vinci 5 capability increases over time with software updates.

Matt Taylor (Jefferies): Can you give more color on XIR? How many are you placing? What percentage could XIR represent of future mix?

Dave Rosa (CEO): XIR gives customers access who haven't yet invested in robotics. The installed base is about 130 XIRs after one year, 50 in the US concentrated with 27 ASC placements. About 20 of 27 ASC placements were XIR. We've had interest in 11-12 countries where it's cost-sensitive.

Jamie Samath (CFO): XIR gives us opportunity to access new customers, letting them start a program and see benefits before potentially upgrading to more advanced technology.

Vic Koptra (BMO): Given favorable reimbursement changes in Japan on June 1st, how significant could Japan's contribution become over the next few years?

Dave Rosa (CEO): Inguinal hernia is the largest procedure with newer reimbursement. We'll see how it progresses and keep you updated.

Michael Pollack (Wolfe Research): Regarding extended use impact on INA per procedure in 2027—are you investing away some upside from DA Vinci 5, force feedback, and SP mix? Could INA per case be flat or down year-on-year?

Jamie Samath (CFO): I won't provide quantification until we've completed our analysis. We balance growth and profitability. Where we see opportunities for incremental growth in lower acuity procedures, we pursue those.

Vijay Kumar (Evercore): What is your procedure exposure to healthcare exchanges and Medicaid?

Jamie Samath (CFO): We don't have a precise estimate. A significant portion is private commercial insurance. Medicare is a lower proportion, Medicaid lower yet. We don't have a precise estimate of ACA exposure.

Dan Connolly (Investor Relations): Given that procedure comps get tougher in second half, what should we be cognizant of?

Jamie Samath (CFO): First half, procedure growth was closer to 15%. We're guiding toward midpoint for the rest of the year. Q3 has tougher comps in the US. Additionally, Q3 internationally had some seasonal holiday movements from Q4 to Q3, impacting both quarters.

Operator: This concludes today's Q&A session. Thank you for your questions.

Dan Connolly (Closing Remarks): In closing, we continue to believe there's a substantial opportunity to improve surgery and acute care interventions. Our teams pursue the quintuple aim: better patient outcomes, better patient experiences, better care team experiences, lower costs, and increased access. Value creation flows from respect for and understanding of patient and care team needs. We look forward to speaking with you in three months.