Freedom Broker: Intuitive Surgical’s profitability supports the investment case

Freedom Broker analysts maintain a “Buy” recommendation on Intuitive Surgical (ISRG) shares, despite cutting the target price from $610 to $540. Following the release of the company’s Q2 2026 results, experts note that the main driver of its investment appeal is improving profitability rather than the pace of business expansion. At the current price of $353, the upside potential is about 50%.

Intuitive Surgical is a leader in the surgical robotics market

Intuitive Surgical (ISRG) is a global leader in robotic surgery and the developer of the da Vinci and Ion systems, which are used to perform minimally invasive procedures. The company generates revenue both from equipment sales and from service and consumables, which provides a high share of recurring revenue.

Margins remain the company’s key advantage

While the market is increasingly focusing on the growth rate of surgical procedures, it is high profitability that has become the key factor behind Intuitive Surgical’s investment appeal today, Freedom Broker analysts believe. The company continues to demonstrate strong operating leverage and the ability to grow earnings faster than revenue. 

According to the experts, the company’s management has become more cautious in assessing procedure growth in the U.S., but at the same time raised its profitability outlook for the current year. This helps offset more moderate revenue expectations.

Earnings grew faster than revenue

In Q2 2026, Intuitive Surgical’s revenue rose 19% year over year to $2.89bn, driven by growth in procedure volumes, an expanding installed base of robotic systems, and higher service revenue.

GAAP net income increased 24% to $818m, and diluted EPS reached $2.29 versus $1.81 a year earlier. Adjusted (non-GAAP) profit rose to $1bn, or $2.80 per share, significantly exceeding last year’s figures.

GAAP operating income increased from $743m to $972m, while non-GAAP gross margin reached 70%, up 210 basis points versus last year. Non-GAAP EBIT margin rose to 42.1% versus the market consensus of 38.5%.

Cash, cash equivalents, and investments on the company’s balance sheet reached $8.63bn, up $650m over the quarter. In addition, Intuitive repurchased 0.9m of its own shares for $380m.

Procedure growth remains resilient

The total number of surgical procedures performed using Intuitive platforms increased by approximately 16% year over year. Procedures using the da Vinci system (a robot-assisted surgical system) grew 15%, while the Ion platform (a robotic catheter for biopsy) surged 36%.

The company installed 468 da Vinci systems, 19% more than a year earlier, including 246 next-generation da Vinci 5 systems. The da Vinci installed base grew 12% to 11 710 systems, and the number of installed Ion platforms increased 21% to 1 096 units.

At the same time, Freedom Broker analysts note that the growth rate of procedures in the U.S. slowed to 12% from 14% in the prior quarter. In the experts’ view, pressure is coming from a decline in bariatric surgeries amid the spread of GLP-1 drugs, weaker elective surgery activity, and worsening access to healthcare in the U.S.

The company raised its profitability outlook

Despite a more cautious view on procedure dynamics, Intuitive’s management improved its 2026 financial guidance. The company still expects da Vinci procedure growth of 13.5–15.5%, but now anticipates a result closer to the midpoint of the range. At the same time, the non-GAAP gross margin forecast was raised to 68–69% from the previous 67.5–68.5%, and the projected growth in operating expenses was narrowed to 11–13%.

In Freedom Broker’s assessment, improving margins, resilient growth in service revenue, and the ongoing equipment upgrade cycle support further earnings growth even as the company gradually transitions to more mature growth rates.

This is not an individual investment recommendation.