Intuitive Surgical (Intuitive Surgical (ISRG)) reported a solid second quarter that beat Wall Street estimates on both earnings and revenue. But the market is focused on something else: the company's warning that changes in insurance coverage could slow down U.S. procedure growth. Shares dropped more than 11% in premarket trading on Friday, hitting a new 52-week low.
The robotic surgery company reported earnings of $2.80 per share, topping the consensus estimate of $2.50 by 12%. Revenue increased 19% year over year to $2.89 billion, ahead of analysts' expectations of $2.82 billion. The growth was driven by a 16% increase in procedures and a 19% rise in recurring revenue. Adjusted gross margin improved to 70% from 67.9% a year earlier, helped by lower product costs, fixed-cost leverage and a $36 million benefit from tariff refunds.
So why the sell-off? The company maintained its 2026 da Vinci procedure growth forecast of 13.5% to 15.5% but warned that changes in insurance coverage, including the expiration of enhanced Affordable Care Act premium subsidies, modestly slowed U.S. procedure growth in the second quarter. During the earnings call, CEO David Rosa said, "In our customer conversations, some have said changes in patient coverage and premium dynamics may be affecting when patients seek care and move forward with treatment."
That cautious tone contrasts with recent optimism from Abbott Laboratories (ABT) and follows a warning from HCA Healthcare (HCA) about softer surgical demand, according to Reuters. It seems the whole surgical supply chain is feeling a bit of a pinch from insurance uncertainty.
Procedure Growth Drives Business
Despite the insurance headwinds, the underlying business continues to expand. The company ended the quarter with nearly 13,000 installed da Vinci and Ion systems worldwide. The da Vinci installed base grew 12%, while the Ion installed base increased 21%.
Da Vinci procedures rose 15% year over year, and Ion procedures climbed 36%. Intuitive placed 468 da Vinci systems and 55 Ion systems during the quarter, reflecting continued demand for the da Vinci 5 platform. Da Vinci placements increased 18% to 468 systems, including 246 da Vinci 5 systems and 114 dual-console systems. The installed base of da Vinci 5 systems surpassed 1,700 units. U.S. placements rose 24% to 267 systems, while international placements increased 12% to 201.
Instrument and accessory revenue grew 18% to $1.73 billion, supported by higher adoption of da Vinci 5 and SP systems. The company also introduced its Extended Use Program, which is expected to launch in the first half of 2027 and is designed to extend instrument life while lowering costs for select high-volume procedures.
International markets remained a growth driver, led by Europe, Asia and India. However, China continued to face pressure from domestic competition, weaker tender activity and pricing challenges.
Intuitive ended the quarter with $8.6 billion in cash and investments, up from $8 billion in the first quarter. Free cash flow totaled $1.8 billion during the first half of 2026, up 71% year over year. The company also repurchased $379 million of its shares.
Intuitive Surgical Outlook
Intuitive reaffirmed its 2026 da Vinci procedure growth forecast of 13.5% to 15.5%, citing continued strength in U.S. general surgery, after-hours procedures and international expansion.
The company raised its full-year non-GAAP gross margin guidance to 68% to 69%, up from its previous range of 67.5% to 68.5%. It maintained its outlook for operating expense growth of 11% to 13%.
ISRG Price Action: Intuitive Surgical shares were down 10.65% at $359.50 during premarket trading on Friday. The stock is trading at a new 52-week low.
