Why was gross margin guidance raised despite macro concerns, and what is the impact of oil and memory prices?

CFO Jamie Samath explained that the impact of oil and memory prices on Q1 gross margin was relatively small and baked into the guidance. He attributed the Q1 strength to significant leverage from 23% revenue growth and product cost reductions, noting that the macro impact is being watched carefully but is currently small relative to product costs. “The macro is having an impact. And obviously, we're watching it carefully and you also have to watch the potential supply constraints. But the macro is baked in and relatively small, just given the components of our product costs.”

Can you size the appendectomy opportunity in the U.S. and the incremental opportunity from new procedures in Japan?

Jamie Samath stated the U.S. appendectomy TAM is about 300,000 per year but the robotic portion is too early to size, noting emerging evidence of improved clinical outcomes with da Vinci. Daniel Connally detailed 7 new reimbursed procedures in Japan, with bilateral inguinal hernia repair being the largest at $1,500 per procedure, but cautioned it's too early to size the incremental opportunity and that impact will be modest and take time. “The largest of those is bilateral inguinal hernia repair. Reimbursement there is roughly $1,500 per procedure. I think in aggregate, it's too early for us to size the incremental procedure opportunity in Japan.”

Please elaborate on 'innovation-led revenue growth' and its implications for the delta between revenue and procedure growth.

Jamie Samath explained that innovation-led revenue growth involves deploying R&D to differentiated areas like da Vinci 5 and SP I&A, creating value that allows for accretive pricing and incremental revenue. He noted that this is balanced with cost reductions in cost-sensitive markets, resulting in a mix dynamic. He did not provide specific guidance on the future delta but emphasized the critical role of innovation. “Where you can be differentiated and make a resale difference for customers, then -- and create value for them, then you get to sharing that value in the form of on the Intuitive side, accretive pricing or incremental pricing.”

ISRG

Intuitive Surgical (ISRG) Q1 FY26 earnings call: guidance and Q&A

Q: How does Intuitive envision its digital and AI roadmap, and what is the timing for technologies like ROSE and EBUS?

CEO Dave Rosa detailed a layered AI strategy focused on high-quality data, insights, and consumable delivery to customers, including AI-enabled anatomy identification and future automation. He highlighted the differentiation from Intuitive's installed base and unique data sets. CFO Jamie Samath added that ROSE and EBUS are short-term integrations, not expected this year, but will offer significant differentiated value. “Our advantage, we believe, lies is in the unique data sets that are available to us today through something like Force Feedback and will be increasingly available to us as we add capability to da Vinci 5.”

Earnings call· Mar 2026 (Q1 FY26)· Health Care· Apr 21, 2026

Source: earnings call transcript

Executive summary

Intuitive Surgical Q1 FY26 — Strong Procedure and Revenue Growth Driven by da Vinci 5 and SP

Intuitive Surgical delivered a solid first quarter, marked by robust procedure and revenue growth, fueled by the expanding adoption of its da Vinci 5 and SP platforms. The company is strategically investing in digital innovation and market access efforts globally, navigating persistent headwinds in key international markets like China and Japan, and adapting to evolving procedure trends in the U.S. The focus remains on advancing the Quintuple Aim through product differentiation and ecosystem enhancements.

Highlights

Total procedure growth of 17% year-over-year, with da Vinci procedures up 16% to 847,000 and Ion procedures up 39% to 43,000.
Revenue increased 23% to $2.77 billion, with recurring revenue also up 23% to $2.4 billion, accounting for 86% of total revenue.
Non-GAAP operating margin was strong at 39%, reflecting significant fixed cost leverage.
U.S. da Vinci utilization increased 4%, driven by da Vinci 5 systems showing approximately 11% higher utilization than Xi.
SP platform momentum continued with procedure growth of 68% year-over-year, driven by expansion in Korea and the U.S.

Concerns

China market remains challenging with low tender activity, domestic competition, and policy-driven pricing pressure.
Japan's procedure growth was below historical levels due to fewer system placements in 2025, despite recent policy developments.
U.S. da Vinci bariatrics procedures declined approximately 10%, impacted by the growth in GLP-1 usage.
A cyber incident resulted in unauthorized access to some customer and employee data, though it did not disrupt business or significantly impact Q1 financials.
Higher input costs for oil and memory prices are expected to have a greater unfavorable impact on gross margin in the remainder of the year.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year 2026 da Vinci procedure growth	13.5% to 15.5% high materiality	FY26	High
Full-year 2026 non-GAAP gross profit margin	67.5% to 68.5% high materiality	FY26	High
Full-year 2026 non-GAAP operating expense growth	11% and 14% medium materiality	FY26	High
Full-year 2026 noncash stock compensation expense	$890 million and $920 million low materiality	FY26	High
Full-year 2026 other income	$315 million and $335 million low materiality	FY26	High
Full-year 2026 non-GAAP income tax rate	22% and 23% low materiality	FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
U.S. da Vinci Procedures Led by strength in general surgery, supported by a 31% increase in after-hours procedures and higher overall utilization.	—	14%	—	—
OUS da Vinci Procedures Led by continued strength in general surgery and gynecology, with lower growth relative to prior quarters due to challenges in China and Japan. Percentage of total da Vinci volume: 38%	—	19%	—	—
U.S. Total Procedures Reflecting 14% growth in da Vinci procedures and 37% growth in Ion procedures.	—	15%	—	—
OUS Total Procedures Driven by 19% da Vinci procedure growth, with strong results in India, Canada, U.K., Korea, Taiwan, Italy, and Germany.	—	20%	—	—
U.S. Cholecystectomy and Appendectomy Procedures Combined growth, driven in part by continued expansion of da Vinci use during after-hours and weekends.	—	31%	—	—
U.S. Total Gynecology Procedures Investments in clinical support for surgeons performing benign gynecology procedures drove growth.	—	10%	—	—
U.S. Non-Hysterectomy Benign Procedures Includes sacrocolpopexy, endometriosis, oophorectomy, and myomectomy.	—	19%	—	—
U.S. Bariatrics Procedures Impacted by the growth in use of GLP-1s.	—	-10%	—	—
Europe System Placements Compared to 88 systems last year, with relative strength primarily driven by the U.K. (34 systems). Systems placed: 117	—	33%	—	—
Asia System Placements Compared to 52 systems last year, including 13 in Japan and 4 in China. Systems placed: 62	—	19%	—	—
Rest of World System Placements Compared to 23 systems last year. Systems placed: 26	—	13%	—	—

ISRG operating KPIs by quarter

ISRG operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Mar 2025 Q1 FY25	Jun 2025 Q2 FY25	Sep 2025 Q3 FY25	Dec 2025 Q4 FY25	This call Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Installed base da Vinci	—	—	<10.8K For our da Vinci business, procedures grew 19%, the installed base of da Vinci systems increased by 13% to almost 10,800 systems and average system utilization increased by 4%. Source: earnings call transcript	11.1K+ For our da Vinci business, procedures grew 17%, the installed base of da Vinci systems increased by 12% to just over 11,100 systems and average system utilization increased by 4%. Source: earnings call transcript	—	—	—
Installed base da Vinci 5	—	689 Following our progression into US broad launch of da Vinci 5 during Q2, we placed 180 da Vinci 5 systems, bringing the installed base to 689 systems. Source: earnings call transcript	929 The installed base of da Vinci 5 is now 929 systems. Source: earnings call transcript	—	<1,500 The installed base of da Vinci 5 is now almost 1,500 systems used by almost 13,000 surgeons since launch. Source: earnings call transcript	1,700+ The installed base of da Vinci 5 is just over 1,700 systems used by over 15,000 surgeons since launch. Source: earnings call transcript	—
Installed base Ion	—	905 7 of these systems were placed in markets outside the US The installed base of Ion systems expanded to 905 systems and average system utilization increased 8% from the year ago period. Source: earnings call transcript	~950 We continue to see robust growth for our Ion platform with procedures increasing 52%, the installed base up by 30% to approximately 950 systems and average system utilization increasing by 14%. Source: earnings call transcript	<1,000 For our Ion platform, we continue to see robust clinical growth with procedures increasing 44%, the installed base up by 24% to just under 1,000 systems and average system utilization increasing by 11%. Source: earnings call transcript	—	—	—
Procedures Ion	~31K Procedures grew 58% to approximately 31,000 in the quarter. Source: earnings call transcript	~35K We performed approximately 35,000 Ion procedures in Q2, a 52% increase over the prior year. Source: earnings call transcript	—	—	43K In Q1, da Vinci procedures grew 16% to 847,000, and Ion procedures increased 39% to 43,000. Source: earnings call transcript	48K Ion procedures increased 36% to 48,000 and now exceed 400,000 cumulatively. Source: earnings call transcript	+11.6%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline	Details
Force Feedback Instruments	expansion	March 2026
Single-Port Stapler	launch	Q1 2026 (U.S. broad launch), Q2 2026 (Korea and Europe measured launch)

Deals & partnerships

Distribution business in Italy, Spain, and Portugal acquisition

Acquisition of the distribution business in Italy, Spain, and Portugal, which added 230 employees during the quarter.

Risks & headwinds

Challenges in China market Ongoing, clarity on new policies not expected until 2027.

Procedure growth below corporate average, reflecting lower tenders, competitive and pricing pressures.

Mitigation:Continued investments to improve procedure growth, establish favorable patient charge codes, and support market access activities; active engagement with policymakers.

Challenges in Japan market Short term (2026)

Procedure growth below corporate average, reflecting lower capital placements over the last several quarters.

Mitigation:Encouraged by recent policy developments (incremental reimbursement for high-volume programs, new procedure reimbursements effective June 2026), but remain cautious given financial position of public hospitals.

Impact of GLP-1s on U.S. bariatrics procedures Q1 2026 and ongoing

da Vinci bariatrics procedures in the U.S. declined approximately 10%.

Potential impact of changes to ACA premium subsidies Ongoing

No significant impact on procedure volumes in Q1, but remain cautious.

Capital pressure in parts of Europe Ongoing

Related to macroeconomic impact and shifting governmental priorities.

Higher input costs Remainder of FY26

Expected greater unfavorable impact from oil and memory prices in the remainder of the year.

Mitigation:Continuing initiatives to improve gross margins, including fixed overhead leverage, improving product and service margins for da Vinci 5, and additional product cost reductions for SP and Ion.

Cyber incident Q1 2026

Unauthorized access to some customer business and contact information as well as certain Intuitive employee and corporate data. Did not disrupt business or manufacturing operations and did not have a significant impact on Q1 financial results.

Mitigation:Contained the incident, notified customers, informed appropriate data privacy regulators, and taking additional steps to further strengthen cybersecurity protocols.

Q&A highlights

How does Intuitive envision its digital and AI roadmap, and what is the timing for technologies like ROSE and EBUS?

CEO Dave Rosa detailed a layered AI strategy focused on high-quality data, insights, and consumable delivery to customers, including AI-enabled anatomy identification and future automation. He highlighted the differentiation from Intuitive's installed base and unique data sets. CFO Jamie Samath added that ROSE and EBUS are short-term integrations, not expected this year, but will offer significant differentiated value.

“Our advantage, we believe, lies is in the unique data sets that are available to us today through something like Force Feedback and will be increasingly available to us as we add capability to da Vinci 5.”

asked by Travis Steed · answered by David Rosa

2 min read 6 chapters

Detailed narrative

Digital and AI Ecosystem Development

Intuitive is building a layered AI strategy, starting with high-quality data from surgeries (video, kinematic, force) and connected electronic medical records. This data is used to generate meaningful insights, which are then delivered to customers in a consumable fashion, such as operational guidance for hospital programs or AI-enabled anatomy identification in the operating room.

The company expects to advance towards augmented dexterity and automation, leveraging its installed base of systems, including 1,500 da Vinci 5 systems, and over 3 million annual procedures to strengthen its differentiation.

Japan Market Policy Developments

The Japanese Ministry of Health, Labor and Welfare (MHLW) introduced new policies effective June 2026, including incremental reimbursement for hospitals exceeding 200 robotic procedure volumes annually. Additionally, seven new procedures have been granted robotic reimbursement, and rectal resection received premium reimbursement when performed robotically.

While these steps are encouraging, management remains cautious about the short-term outlook for the Japanese market due to the financial position of public hospitals.

SP Platform Expansion and Innovation

The Single Port (SP) platform continues to gain momentum, with procedures growing 68% year-over-year, driven by expansion in Korea and the U.S. and early adoption in other international markets. The company recently received FDA 510(k) clearance for additional uses of Force Feedback instruments and moved its single-port stapler into broad launch in the U.S., with plans for measured launches in Korea and Europe in Q2.

SP is expected to incorporate much of the da Vinci 5 ecosystem, including future digital and AI capabilities, to drive meaningful improvements in patient care.

Ion Platform Progress and Lung Cancer Focus

The Ion platform is focused on improving lung cancer patient survival, with recent clinical publications, including a Mayo Clinic study of nearly 2,000 patients, reinforcing its progress. The study demonstrated a 79% diagnostic yield and 85% sensitivity for malignancy, with a low complication rate.

Intuitive is also developing rapid on-site tissue evaluation (ROSE) technology and endobronchial ultrasound (EBUS) integration to streamline the detection-to-diagnosis pathway for lung cancer.

Innovation-Led Revenue Growth Strategy

Intuitive's strategy emphasizes innovation-led revenue growth, where differentiated products like da Vinci 5 drive revenue growth ahead of procedure growth. This is achieved through accretive pricing, higher integration levels, and incremental trade-in volumes. The company balances this with efforts to reduce product costs and share savings in cost-sensitive markets, creating a mix dynamic that leverages R&D investments to create value for customers and patients.

International Market Prioritization and Competition

Intuitive employs a localized approach for its international strategy, investing in regional teams, ensuring product portfolios (including XiR) and ecosystems are cleared, and tailoring economic programs and pricing to market needs. The company aims to articulate and substantiate the value of its robotic programs to customers and government agencies, emphasizing clinical output, system reliability, and comprehensive training and services to compete effectively against new entrants.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.