Intuitive Surgical

IThe business

Think of a very expensive printer and its ink. A hospital pays $0.6M to $3.1M for a da Vinci, or leases it. It then pays $95,000 to $225,000 a year for service. And on every case it pays $900 to $3,700 for instruments that stop working after a set number of uses. ³ Almost everything interesting about Intuitive follows from those three lines.

Most of the money arrives after the robot is installed. In the last twelve months 84% of revenue was recurring.

Revenue over the twelve months to September was $11.6B C (calculated). Instruments and accessories brought in $6.9B, or 59%. Service brought in $1.8B. Systems brought in $2.9B, and $1.0B of that was operating lease revenue, which the company counts as recurring because it comes in as machines are used or as monthly payments. ²³⁹ Add those and recurring revenue was $9.7B C (calculated).

The procedure is the unit

About 906,000 da Vinci procedures were done last quarter, up 14%: 559,000 in the US, up 10%, and 347,000 elsewhere, up 20%. ³ Ion, the thin robotic catheter used to biopsy the lung, did 49,700 more, up 31%. ³ In 2016 the count for da Vinci was 753,000 for the whole year. ²² This year’s guide implies about 3.6M C (calculated). ⁴²

More than half of da Vinci procedures are for benign conditions, mostly gallbladders, hernias and hysterectomies. ³ That matters for three reasons. Benign cases are more seasonal. They can be put off. And laparoscopy, the older keyhole method, is good and cheap at many of them, so the case for a robot has to be made on economics as much as on outcomes.

Three platforms and a ladder of prices

Multiport da Vinci is the core. The fifth generation, da Vinci 5, was cleared in March 2024 and more than 2,000 are now installed. ³⁵ Fourth-generation designs did not retire. The company places the XiR at about $1.2M and the X at about $0.5M, against about $1.6M for the average purchased system. ⁵ SP goes through one incision and has 487 systems in 27 countries, with procedures up 55%. ⁵ Ion has 1,152 systems. ⁴ In the US its share of lung biopsy has passed the halfway mark, and customers there are moving from adding machines to using them more. ³

Leasing has changed the shape of the business. In the third quarter 53% of placements were operating leases, and 160 of those 291 were usage-based, meaning the hospital pays as it operates. ³ In 2016 only 62 systems of 537 went out that way. ²¹²² A lease lowers the bar for a hospital and raises the bar for Intuitive, which now carries the machine on its own balance sheet. I come back to this under the numbers. The cost shows up in inventory, not in capital spending, and it is easy to miss.

Geography is still lopsided. The US has 6,807 of the 12,094 systems. ³ Nearly 4,000 customers outside the US run a da Vinci program, and benign procedures outside the US grew 41% last quarter, up from 34% in the first quarter, from a base of just over a quarter of international volume. ⁵ In March the company paid $533M to take over distribution in Italy, Spain and Portugal. ³¹⁴ China went the other way: the company placed 2 systems there in the second quarter, and a national framework now caps what hospitals can charge for robotic cases. ⁶³

IIThe moat

The patents are not the main thing. Intuitive owned more than 5,600 of them at the end of 2025, and the company itself says they have finite terms. ² The early da Vinci patents ran out years ago. CMR, Medtronic and a dozen others could build a robot, and did. ² What they could not copy quickly was everything around the robot.

Changing robots means retraining surgeons, nurses, residents and sterile processing, and starting five years of outcome data again.

Four things keep a customer. First, people. More than 18,000 surgeons have used da Vinci 5 alone since launch, and residents are trained on the platform they will ask for when they are hired. ⁵ Second, evidence: more than 48,000 peer-reviewed publications, and management says large hospital systems now track robot against laparoscopy on live dashboards of their own. ⁵ Third, the working fleet. The vast majority of systems are connected, and Intuitive counts the procedures from the machines’ own logs, so it sees what happens in a way no rival can yet. ³ Fourth, cost. Years of scale let it place an X at about $0.5M while the company as a whole earns a gross margin of 67%, which leaves a new entrant little room to undercut it on the machine. ⁵³

The part that is being tested

The instrument is where the money is, and the instrument has a usage limit. An EndoWrist stops working after a set number of uses. A hospital that wants to cut cost has an obvious thought: repair it, reset it, reuse it. Third parties built businesses on that thought, and the company’s own filings say regulators have cleared remanufacturing of certain instruments. ³² The 10-K says these offerings have not had a material effect on revenue to date. ² Intuitive’s position has long been that safety and quality come first. For five years the courts have been asked who is right.

I want to be careful here. In March 2024 a court found for the plaintiffs on market power in an instrument aftermarket, and in July 2024 the same court vacated that part on reconsideration. ³ So no court stands today on a finding that Intuitive is a monopolist in that market. Management calls the settlement a no-fault agreement that gives a clear framework for working with customers on instruments and service. ⁵ What I cannot tell you is how much that framework opens the door to remanufactured instruments, because the terms are not in the filings. The $450M is about 0.3% of the market value C (calculated). The relief could matter more than the money.

Then, on its own, the company chose to lower the same price. From the first half of 2027 it extends the uses of a subset of core instruments and adds volume pricing, and China’s price cut starts next month. Together these take 3% to 5% off da Vinci instrument revenue per procedure once done, holding mix constant. ³⁵ A business cutting price by choice while it is winning has noticed something. Either hospitals were getting close to a limit on cost, or management would rather lower the price than leave the gap for someone else.

Does the robot earn it?

The strongest honest test is the benign case, where most of the growth has to come from. The benign COMPARE study, published in September 2026 with Intuitive researchers among the collaborators, pooled 366 studies. Against laparoscopy, da Vinci had 54% lower odds of conversion to open surgery and shorter stays. Thirty-day complications, readmissions and mortality were comparable, and operating time was about 24 minutes longer. ⁵ So the robot’s edge over a good laparoscopist is real and narrow, and the pool mixes randomized trials with observational work. Against open surgery the edge is wide. That is why the economics of the benign case matter so much, and why the price cuts are aimed there.

IIIThe competitive advantage

For twenty-five years Intuitive’s main rival was the surgeon’s own hands. That is still true in volume terms. The competition that changed this year is the other kind.

Three things are worth saying. The incumbents arrive with something Intuitive lacks: a procurement relationship across the whole hospital. J&J can sit down with a chief financial officer and discuss sutures, staplers and a robot in a single contract. Stryker already calls on operating rooms, and the surgery center is where Intuitive has only just begun. Intuitive’s chief executive argues that a cart-based design remains the best balance and that the company tested modular designs and passed. ⁵ That is a fair view from the side with the most at stake.

Next, the place to look for damage is not the core. JPMorgan’s analyst reported in August that surgeon checks still showed no share loss in urology. That is secondhand and early. ³² Cancer surgery with a surgeon who has done a thousand da Vinci cases will not move soon. The exposed work is the low-acuity benign case in a surgery center, where a hospital’s cost per case decides. That is where Intuitive placed 45 systems in two quarters, more than in the prior three years or so, and where a little under 10% of US soft tissue surgery happens. ⁵⁶ Its share of that opportunity is still in the first quartile on management’s own count. ⁵

Last, price. The cuts are, in part, a preemptive answer. Da Vinci instrument revenue per procedure was about $1,860 last quarter, against about $1,800 a year ago. ⁵ The first extended-use program in 2020 was estimated at 7%, and the company says volume responded. ⁵ I believe that. I can also see that total instrument revenue per da Vinci procedure, on my own simple division, has gone from about $1,850 in 2016 to about $1,910 in 2025, so nine years of richer products moved it about 3% C (calculated). ²²² Pricing power here has been modest for a decade. The profits grew with volume.

What is working now

Last quarter’s numbers do not look like a company losing ground. Placements rose 28% to 546. Net placements, those that add to the fleet, rose 40%. ⁵ In the US, 335 systems went out, up 27%. Trade-ins were 150, and utilization rose 2%. ³⁵ In Europe placements went from 63 to 115. ³ India passed 200,000 cumulative procedures, and Japan added seven reimbursed procedures from June, with procedure growth picking up. ⁵³

But one number is moving the wrong way, and it is the most important one on the page. US procedure growth was 16% a year ago, 14% in the first quarter, 12% in the second and 10% in the third. ³⁷⁸ Wells Fargo’s analyst pointed out on the call that this was the lowest since COVID. ⁵ Management gives reasons: a hard comparison, people losing ACA subsidies, a drop in bariatric cases from GLP-1 use, and, as the CFO said in July, the size of the base. ⁵⁶ All of those can be true. I can’t separate them, and neither can they: the CFO said there was no precise estimate of the procedure mix under ACA plans. ⁶

IVManagement

Dave Rosa became chief executive on 1 July 2025 after nearly thirty years at the company. Gary Guthart, chief executive since 2010, moved to executive chair. ¹¹ Jamie Samath is the finance chief. Taylor Patton, who ran the Ion business, took over commercial on 1 July 2026. ¹⁵ This is an insider’s handover, and it looks calm. Rosa’s first big strategic decision is the price cut, so the next two years will tell us about his judgment.

How they are really paid

Follow that through. Two thirds of the performance stock pays on the count of procedures. Not revenue, not cash. ¹¹ A price cut that lowers revenue per case and raises the number of cases helps the metric. I think the cut is a sensible decision for owners over a long horizon, and I also note that the people deciding are paid more for it, not less. The count targets are not disclosed, so nobody outside can tell how hard they are. ¹¹

The committee replaced relative share return with relative operating margin in 2025, after hearing from shareholders. ¹¹ That moves pay away from the stock’s own result. The margin measure and the bonus measure both add back stock pay and litigation charges. ¹¹ So the $450M settlement does not touch the bonus, and $835M a year of stock pay is treated as if it were not a cost C (calculated). The 2026 bonus also shifts weight from a formula, operating income, to company goals set inside and not published, from 50% to 65%. ¹¹ I find that the weakest part of the design. The say-on-pay vote passed with about 94% C (calculated). ¹²

How much of their own money is in

Rosa held 228,802 shares directly at the end of 2025 and 247,803 after a July 2026 vesting, about $107M at the price C (calculated). ¹¹¹³ The guideline asks six times salary, or about $5.6M, so he clears it nineteen times C (calculated). ¹¹ Guthart and his family trusts had about 1.27M shares at year end, about $548M C (calculated). ¹¹ In the Form 4s I read this year he sold 57,395 shares for $27.6M. In January he exercised options at $174 and sold near $530 the same day. A notice of intended sale filed in late October names 27,139 shares for his family trust, and the 20,095 he sold at $452 that month are already in the total. ¹³ Rosa and Samath show no sales. None of the three bought in the open market, at $332 in July or since. ¹³¹ I read that as neutral. Stock awards are how they are paid, so they have little reason to add.

What they did with capital over a full cycle

The record is mostly good, with one soft spot. There is no debt. It held $9.0B of cash and investments at the end of 2025, more than it needed. ² The operating lease business is funded from that balance sheet. The company paid for the 2026 distribution deal in cash. ³ It spent about $2.2B of capital in 2023 and 2024 on factories and buildings ahead of need, and that bill has since dropped to $492M in the last twelve months. ²³⁹

Repurchases are the soft spot. Since 2016 it has spent $12.5B on them C (calculated). ²³³ Over those years it expensed $5.0B of stock pay C (calculated). Diluted shares went from 354M in 2016 to 363M in 2025 and 352M last quarter C (calculated). ²³⁴ Until this year most of the repurchasing kept the count steady. Price paid has also been uneven: $233.70 in 2022, $477.84 in 2025, and $2.9B in the third quarter alone at $377. ¹⁸²³ That last one looks well timed, since it came just after the price fell 14% in a day in July. ¹ It also took cash down by a quarter in nine months. $1.8B of authorization is left, and none was used in September. ³

VFinancials

The ten-year record is excellent. Revenue grew from $2.7B to $10.1B, or 15.7% a year, and the last twelve months reached $11.6B C (calculated). ²²²³ The only down year was 2020, when revenue fell 3% and procedures still rose 1%. ¹⁹ That year says a lot about how resilient the demand is.

What an owner really takes out

Three earnings numbers are in circulation. They are far apart, and the choice matters. The company’s headline, non-GAAP net income, was $3.87B over the twelve months C (calculated). ⁴¹⁰⁹ It leaves out $835M of stock pay, which is a real cost that shareholders pay in dilution or in repurchases. GAAP net income was $2.96B C (calculated), but that took a $450M one-time charge, and it includes tax benefits on employee stock and a tariff refund. ⁴³

My number is about $3.08B. An owner can take out that much a year after stock pay and the capital to stand still.

I get there like this E (estimate). Take operating income of $3,284M and put back $463M of litigation and $10M of small items, net. Take out $64M of one-time tariff refunds. That leaves $3,693M, or 31.9% of revenue, after stock pay. Tax it at 22%. That gives $2,881M. Add $195M of interest after tax on the cash that remains. I treat depreciation of $727M as the stand-still capital, since a fleet of leased robots wears out like any other asset, and on my reading what it takes to replace them each year is close to that. So $3.08B is 4% above reported net income and 21% below non-GAAP net income. At the market value of $150.9B it is a yield of 2.0% C (calculated). ²³⁹

Free cash flow after stock pay was $2.76B C (calculated), and it is a different thing: that is what actually came out this year, while still paying for growth. It is flattered by $632M of rising other liabilities in nine months, mostly the unpaid settlement, and by a deferred tax benefit of $316M. ³ The cash for the settlement still has to leave. I take $347M after tax off net cash.

The hidden capital

This is the point most summaries skip. Capital spending looks low now, $492M in twelve months. But leased robots do not go through that line. They leave inventory for property, plant and equipment, and the cost sits in operating cash flow as a rise in inventory. Those transfers were $809M in 2025 and $671M in nine months of this year. ²³ From 2021 to 2025, all the net capital taken up by the business, meaning capital spending above depreciation plus working capital, came to $5.5B against $5.7B of added revenue, or 96 cents on the dollar C (calculated). ¹⁸² Take out the extra factory spending of 2023 and 2024 and it is still 77 cents; in 2025 alone it was 70 C (calculated). A business with 67% gross margins and no debt can feel asset-light. This one is getting heavier as leasing grows. I use 70 cents in my base case.

Inventory is $2.1B, about 29 weeks of last quarter’s cost of revenue C (calculated). It is up 3.5 times since 2020 while revenue rose 2.7 times C (calculated). ³¹⁹ Remaining performance obligations are $3.8B, about half due within twelve months, mostly service. ³ There is no debt on the balance sheet. Cash and investments were $6.8B at September. ⁴ Tariffs cost 0.9% of revenue this year. ⁴ A significant majority of instruments come from Mexicali under the trade pact, and a new plant in Penang, Malaysia, is due in 2028. ³⁵ Gross margin guidance for the year is 68.7% to 69.3%, non-GAAP. ⁴

On margin, the CFO’s words are the thing to remember. He said the range he expects for non-GAAP operating margin is 35% to 40%, that this quarter’s 41% to 42% gives room, and that the lean is to invest. ⁵ So I don’t extrapolate this year’s margin. Over the last twelve months his measure ran about eight points above mine, mostly stock pay C (calculated). Take that away and his range is 27% to 32% after stock pay, against my normalized 31.9%.

VIValuation

What would ruin it

Before any numbers, I ask how this goes badly wrong. I see three ways, and I take them in the order I fear them.

One: the instrument stops being a toll. Two: robots become ordinary at the low end. Three: nobody loses money on the business, but an owner loses it on the price.

First, instruments. They are 59% of revenue and the reason for the margin. Each 1% off instrument revenue, with no change in cost, costs $69M a year before tax, $54M after, or about 1.7% of owner cash C (calculated). The announced 3% to 5% is about 7% of owner cash at the midpoint if nothing offsets it C (calculated). That is survivable, and management expects to offset it. Now imagine a court-approved route for remanufactured instruments, plus a J&J contract that bundles a robot with staplers. A 15% fall in instrument revenue per case would take about a quarter of owner cash C (calculated). This is the path that hurts a great business, and it goes through a rule and a contract, with no need for a better robot.

Second, the low end. If Ottava, Hugo and Versius make a benign robotic case ordinary, then hospitals will shop it on price. Intuitive keeps its cancer work and loses growth in what was to be the next 5M procedures. My bear case is this one: procedure growth of 10% falling to 3.5%, instrument revenue per case down 9% by 2031, margin after stock pay of 28%. The business is still fine in that world. It earns more than it does today. It’s worth $136 a share.

Third, the price itself. This is the likeliest of the three. A business can do everything right and an owner can still earn less than a Treasury if the starting multiple falls. At $432.01 the price is 40 times trailing non-GAAP earnings and 52 times GAAP C (calculated). ¹⁴¹⁰ It has already moved from $610 in January 2025 to $332 in July 2026 and partway back. ¹ Nothing about the company changed by half in that time.

What the price implies

Market value at $432.01 is $150.9B on 349.2M diluted shares C (calculated). Net of $6.3B of cash, after the settlement and the joint venture’s minority stake, the business is priced at $144.5B, or 50 times what it earned to stand still after tax C (calculated). ¹³ To earn my 10.0%, owner cash of about $2.9B before interest needs to grow 14.5% a year for fifteen years, then 3.5% for ever E (estimate).

The price asks for the last decade’s pace for fifteen more years, from a base about four times bigger, at lower instrument prices.

The discount rate

I use 10.0%. The capital asset pricing model gives 10.2%: the 10-year Treasury at 4.94%, plus a beta of 1.25 from 120 months of returns against SPY, times Damodaran’s 4.20% implied premium C (calculated). ³⁴³³³⁵ I round to the nearest half point, as I do elsewhere. The 60-month beta of 1.43 gives 11.0% C (calculated). Damodaran struck that premium against a 5.29% Treasury yield on 1 October, so with his yield the same beta gives 10.5%; the 36-month beta of 1.02 gives 9.2% C (calculated). I took the ten-year window because it covers the 2020 shock, as on my Mastercard page. ³⁷ This rate is higher than the 9.0% I use for Visa and Mastercard, and that may be harsh. Demand held up in 2020 and there is no debt. But the stock has swung more than theirs, and half of its value here sits past year fifteen. At 9.0% my base is $263 E (estimate).

No cell reaches the price. The highest, at 8.5% and 4.0%, is $310, 28% below it C (calculated).

What I cannot judge

Four things, and I would rather say so than give a false figure.

• How many procedures there are to win. The company counts what it can reach, and said in October that it will update the long-term soft tissue estimate in January. ⁵ My base has 9.6M procedures in 2036 and 12.8M in 2041, about 3.5 times today. My bull has 16.5M. I can’t tell you which is right, and it accounts for more than half of the $100 a share between my base and my bull E (estimate).
• How strong the response to price cuts is. Management says the 2020 program showed elasticity and that it won’t show up at once. ⁵ A 4% cut that adds three points of growth a year for a decade is a superb trade. One that adds nothing is a straight loss. The filings don’t let me measure it.
• What the settlement’s injunctive relief allows. The filing says ’mutually agreed’ and stops there. ³ The terms may appear when the court papers do.
• What software and AI do to surgery. Telesurgery clearances are expected in the first half of 2028, and management says AI-controlled motion is early. ⁵ This could raise the value of the platform or, in other hands, lower the skill needed to use a rival. I give it no separate value in any case.

Three cases

I value fifteen years of cash, 2027 to 2041, at 1 January 2027, then a growing perpetuity. Each year builds up from procedures, instrument revenue per procedure, the installed base, service and lease revenue per system, and upfront system revenue. I take operating margin after stock pay, tax at 22%, and capital at a set number of cents per added dollar of revenue. Interest is left out because I add the cash at face value.

Are these fair? Base revenue is about $12.1B in 2026, up 20%, then about $13.5B in 2027, up 11% E (estimate). That is slower than this year, for two reasons. Procedures slow, and systems revenue stops running ahead of them as the upgrade wave settles. Over the last nine years revenue grew 15.7% a year and procedures 17.2%, so revenue lagging procedures is the historical pattern C (calculated). The base capital figure matches 2025 and is below the five-year record of 96 cents, so if anything it is generous. My base margin, about 42% before stock pay, sits above the CFO’s range of 35% to 40%. So the base leans toward the company on capital and margin. On growth it asks for a slowdown that has already started.

Is the base too harsh? A little on growth, not on margin, and not on the rate. On growth, revenue rises 11% in 2027 and 10.5% a year to 2031 E (estimate). That is about half of this year’s 20% and below the 15.2% a year of 2021 to 2025, while procedures are guided up 14% to 15% this year C (calculated). On margin, my 34% after stock pay is 42% before it, above the top of the CFO’s 35% to 40%, so it is not harsh. On the rate, 10.0% sits between 9.2% and 10.5% from the same inputs. To see how much it matters, I gave the base the guide’s pace, 14.5% procedure growth in 2027 easing to 8% by 2036. That is worth $237, or $284 at 9.0% E (estimate). Adding a 36% margin, flat revenue per case and 65 cents of capital makes it $259 at 10.0%, $310 at 9.0% and $344 at 8.5% E (estimate). Two small cautious choices, a low fourth-quarter revenue guess and a final year that still funds 5% growth, together add about $4 and I left them out. So if I am too harsh, it is by $17 to $90 a share. It is not $212. The gap to the price is the 15 years of mid-teens growth the price needs.

What closes the gap

The biggest lever is the number of procedures. Instruments, which get most of the debate, move the value by much less than I expected: flat revenue per case instead of a small fall adds only $3 E (estimate). The price is mostly about the length of the runway and the rate an owner accepts.

How the odds shrink

The bull case needs several things to go right at once. These are my judgments.

That comes to about 2% E (estimate). The four are linked, since strong demand helps all of them, so the true figure is higher. If I raise each to 75%, it is still 32% C (calculated). And after all that, the bull is worth $320 at my rate. The simple version of the argument for the price is that Intuitive keeps growing at mid-teens for a very long time. That one sentence carries most of the weight, and the record gives it some support.

The next best use of the dollar

The closest business on this site is Mastercard: a toll on activity that keeps rising. Mastercard’s toll needs almost no capital from it. Intuitive’s needs 70 cents of each added revenue dollar, and it is under a live antitrust question that is closer to the core of the model. On my numbers the same dollar in Mastercard earns about 1.4 points a year more, with a lower hurdle. Intuitive may grow longer, and that is the case for paying more. Still, the difference is not in Intuitive’s favor at this price.

Quality and price

These are two questions. On quality, I think this is one of the best businesses I have looked at: a real product, a long lead, high returns, no debt, and customers who keep using it more. On price, this looks like the case where a very good business costs more than it can reasonably return. Paying for it here means earning less than the 10.0% I ask for even if nearly everything goes well.

The margin of safety

I take 30% off base, which gives $154 E (estimate). I use 30% because three of the four large inputs here can’t be known, the instrument rules are in flux, and half the value is beyond year fifteen. $154 is 13% above my bear C (calculated), so even there the bear leaves little cushion. The stock last closed at that level in April 2020 C (calculated). ¹ I don’t expect it to return there. If the market is right, it is because the years past 2041 are worth more than a 3.5% perpetuity implies, or because a business like this deserves a lower rate than the model gives. Someone who accepts 8.5% a year and expects my bull case would see the price as fair, and I want to say so plainly.

Where this could be in 5 and 10 years

Value in year 5 or year 10 is what my model says the owner cash after that date is worth then, per today’s 349.2 million diluted shares. I count each model year as 12 months from now. It leaves out today’s net cash of about $18 a share C (calculated).

For the base to stay at five years, procedures have to reach about 6.2 million in 2031, from about 3.6 million this year, with growth easing from 12.5% to 10.5%. Operating margin has to rise to 34%. Every added dollar of revenue needs 70 cents of new capital. By year 10 the base needs 12.8 million procedures and about $29.6 billion of revenue E (estimate). Base value rises about 5% a year, not 10%, because $124 a share of owner cash leaves on the way.

The bear and bull differ on four numbers. In the bear, procedures grow 10% easing to 4%, margin stops at 28%, instrument revenue per case falls 1% to 3% a year early on, and 90 cents of capital goes in per dollar of new revenue. The bull has 15% easing to 9%, margin of 37.5%, rising revenue per case, and 55 cents of capital. By 2036 that is 8.8 million procedures against 16.5 million.

The most likely way the base is wrong is instrument revenue per case. I have it slipping 1.0% in 2027 and 1.5% in 2028, then flat. If cuts keep coming each year, the base moves toward the bear. The 10% rate matters too: at 9% the base is worth $263 today E (estimate).

A reader’s guide. These are estimates of value, not forecasts of the share price. The market price can sit above or below value for years. Because $432.01 starts above all three values, even the bull returns less than the 10% rate I use.

VIIThe case for the price

What most people miss

Three things cut in the company’s favor. The 3% to 5% is measured with mix held constant, and it leaves out what is rising: SP instruments earn well above multiport, force feedback was in only about 8% of da Vinci 5 cases, and integrated insufflation adds about $100 on the 85% of da Vinci 5 cases that use it. ⁵ Those are why the company’s own figure rose to about $1,860 while the cuts were announced. Next, the upgrade cycle is young. When Xi replaced Si, trade-ins took about seven years to peak, and da Vinci 5 was cleared in 2024. ⁶ Third, the lower rungs of the ladder are filling in. X and XiR were 102 of 546 placements last quarter, at prices a da Vinci 5 could never reach, and the 10-K’s lease accounting already counts on demand for refurbished systems. ⁵²

The bull case

Management’s case is simple. Only part of the addressable procedures are done on a robot today. Benign surgery abroad and surgery centers at home are early. Lowering cost there will expand the market, as it did in 2020. Da Vinci 5 runs at higher utilization than Xi and is over a quarter of US procedures, up from 13%. ⁵

Outside views are mostly secondhand. Oppenheimer put a $500 target on it in August, and Citigroup and Baird each cut their targets to $500 in July, as reported by The Motley Fool. ³⁰ JPMorgan’s Robbie Marcus said in August that surgeon checks showed no share loss in urology, according to TIKR. ³² ARK held 70,375 shares at 30 June, a small position, and reportedly added on 21 October. ²⁷³¹ Baillie Gifford held 2.5M shares at 30 June. Polen cut to 447,944 from 606,826 in the same quarter. ²⁸²⁹ A holding is a fact, not a stated view, so I add nothing to those beyond the numbers.

Against reality

Worldwide procedures are growing 14% to 15% this year. ⁴ So the bull’s 15% is close for now. The gap is in time. It needs that rate to fade only to 10% by 2035, and US growth has fallen six points in a year. If Intuitive keeps 15% through 2028, keeps instrument revenue per case from falling, gets to 37.5% after stock pay and cuts capital to 55 cents, then $432 is possible at an 8.5% return. Today’s readings: 14%, 10% in the US, a planned price cut, 31.9%, and 70 cents. Non-GAAP margin of 42% looks close to the 45% that implies, but the CFO has said he plans to spend the room. ⁵

What a 10x would take. Ten times the price is $4,320, a market value of $1.5T C (calculated). At 30 times owner earnings that needs $50B of owner earnings, and at 40 times, $38B. At my base margin after tax, that means $142B to $190B of revenue, against $11.6B today C (calculated). By 2036 that is 29% to 32% a year for ten years, about twice the 15.7% of the last nine years C (calculated). At today’s revenue per procedure it would take 43M to 57M procedures, against 3.5M C (calculated). Even my bull has 11.9M. It’s rare for a company of this size. NVIDIA did it, from about $145B at the end of 2019 to well past ten times, on a new category of demand. ⁴⁰⁴¹³⁹ I have not counted every case, so I give no rate. For scale, Intuitive’s own last ten years took the price from $74.68 to $432.01, about 5.8 times, from a market value near $26B. ¹²³ For Intuitive, a 10x from here is close to impossible on anything I can see.

Where I come down

The evidence on the mix offsets and on the upgrade cycle moved me: without them my instrument line would be lower. The argument about elasticity did not, because nobody can show it yet. What would raise my values is two or three quarters of US growth at 12% or more alongside the price cuts, since that would show the cuts work. That would move my base, though not to the price.

VIIIRisks, and what would change my view

In the order I weigh them.

1. Instrument rules. The settlement’s terms, the remanded SIS case and the Restore appeal could widen third-party remanufacturing. The company says it can’t estimate a loss in those cases. ³
2. Bundled competition. J&J and Medtronic can price a robot inside a far larger contract, and Stryker’s option on CMR adds a third. Each needs more clearances first. ²⁴²⁵²⁶
3. US procedure growth. It has slowed in each quarter this year. ACA enrollment, Medicaid eligibility and 340B are the near-term pressures management names. ⁵ Hospital capital may follow if bad debt rises. It has not so far. ⁶
4. GLP-1 drugs. US bariatric cases fell high single digits in the second quarter. ⁶ It is one category. The question is whether the same drugs cut other surgery over time.
5. China. Price cuts from November, few placements and local rivals. ⁵³ The company says the market remains challenging. It could get worse, and the procedure base there is at risk.
6. Tariffs and supply. Tariffs cost 0.9% of revenue, and memory chips and freight are rising. ⁴⁵ Mexicali makes most instruments, so a change to the USMCA would matter. ³
7. Product safety and recalls. Product liability suits are pending, and a serious field action could stop systems. ³
8. The leasing book. Some leases can be canceled or returned without penalty, and leases make it easier for a rival to win a customer later. ²
9. Management’s first test. A new chief executive, a new commercial head, and pay that rewards count over price.
10. Valuation. The stock lost 46% from January 2025 to July 2026 while procedures grew. ¹³ It can do so again.

If the settlement leaves usage limits intact and US growth recovers, I would move the base up, perhaps by a fifth. If the terms open up remanufacturing, or a large system moves a block of benign work to a rival, I would move toward the bear. And if the price came to the mid-$200s with the business unchanged, this page would read very differently.