The Number One Reason I Keep Buying Intuitive Surgical Now For The Long Run
The Number One Reason I Keep Buying Intuitive Surgical Now For The Long Run
Alex SiroisTue, August 11, 2026 at 1:09 PM UTC
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jfingas / BY-ND 2.0Quick Read -
ISRG is down 31% YTD, but its razor-and-razorblade model now delivers 85% recurring revenue across a fleet of 11,710 da Vinci systems.
MDT's Hugo and JNJ's Ottava remain early or pre-commercial, leaving ISRG's $1.73 billion quarterly instruments-and-accessories stream with no real soft-tissue competition.
The dV5 supercycle is early, with only 1,700 of nearly 13,000 total systems upgraded and over 100 platform updates still planned.
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I keep hitting the buy button on Intuitive Surgical (NASDAQ:ISRG), and the recent drawdown has only made me press it harder. The stock is down 30.54% year to date, and I have been adding on the way down because the business under the ticker keeps getting better while the price keeps getting cheaper.
Here is what pulls me back every time: ISRG runs a razor and razorblade model in a surgical robotics category it built. Every da Vinci system placed in a hospital keeps paying for years through instruments, accessories, and services. That is the compounding engine I want owning a slice of for the next twenty years.
Three Reasons The Thesis Holds
First, the installed base is doing exactly what a long-term compounder should do. The da Vinci fleet grew 12% to 11,710 systems in Q2 2026, and Ion grew 21% to 1,096 systems. Recurring instruments and accessories revenue hit $1.73 billion, up 18%, and recurring revenue now runs at 85% of total revenue. Non-GAAP gross margin expanded to 70.0% from 67.9%. Q2 revenue of $2.89 billion beat consensus, and management has beaten EPS estimates five consecutive quarters.
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Second, the da Vinci 5 supercycle is real and early. ISRG placed 246 dV5 systems in Q2, including 114 dual consoles, and the dV5 installed base is just over 1,700 systems used by more than 15,000 surgeons. The platform brings 10,000x the processing power of previous generations, force-feedback sensing, and enhanced 3D visualization. Management is rolling out more than 100 planned updates to the da Vinci 5 platform. CFO Jamie Samath reminded us on the Q2 call that when Xi launched, "it took about seven years before we got to the peak trade-in volumes going from Si to Xi." We are early in this one.
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Third, the balance sheet lets me be patient. Cash and investments sit at $8.6 billion, up 153.46% year over year, against just $2.58 billion in total liabilities and $18.30 billion in shareholders' equity. Free cash flow ran $1.8 billion in H1 2026, a 71% increase. The company bought back 0.9 million shares for $380 million in Q2 on top of a Q1 repurchase.
Why This One And Not The Alternatives
Readers usually reach for Medtronic (NYSE:MDT) with its Hugo system or Johnson & Johnson (NYSE:JNJ) with the developing Ottava platform. My money keeps going to ISRG because the gap in scale is the whole ballgame. ISRG owns a da Vinci installed base of almost 13,000 systems worldwide and posted 15% global da Vinci procedure growth in Q2. Hugo is early commercial, Ottava is pre-commercial, and Stryker's (NYSE:SYK) Mako plays in orthopedics, a separate vertical. ISRG's $1,734,900,000 quarterly I&A stream stands alone in soft-tissue robotics.
The Risk I Take Seriously
Tariffs are the real threat. ISRG makes instruments in Mexico and endoscopes in Germany, and guidance already bakes in an estimated 1.0% adverse impact from tariffs currently in effect. Additional tariffs could bite deeper. U.S. da Vinci procedure growth decelerated to 12% in Q2 2026 from 14% in Q1, partly because ACA subsidy expirations pushed some patients to defer care. The thesis still holds because CEO Dave Rosa put it plainly: "the underlying disease burden is unchanged, and deferred conditions typically progress and will ultimately require treatment."
At $393.38, ISRG trades at a forward P/E of 35x with analyst consensus at $477.25 and a 23:9:1 buy/hold/sell split. My time horizon runs decades. I am buying a compounder with a widening moat during a hardware refresh cycle that only comes around once every seven years, and my finger stays on the button.
Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Intuitive Surgical didn't make the cut. Grab the names FREE today.
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Source: “AOL Money”
