Is Intuitive Surgical a buy after its latest earnings report?

Intuitive Surgical (NASDAQ: ISRG) delivered its second-quarter earnings report last week. It crushed the average analyst bottom-line estimate for profitability and edged past the consensus for revenue. Why, then, was the stock punished by a concentrated investor sell-off that it hasn't yet recovered from?

Here's a look at the quarter and -- more importantly -- whether the company's weakened share price makes it an irresistible bargain.

Robots in the room

Intuitive -- a next-generation medical device company that specializes in surgical robots -- booked total revenue of $2.89 billion, up almost 19% year over year, in the quarter.

That was on the back of a roughly 16% rise in the number of procedures performed by the company's robots. Currently, Intuitive offers two product lines, da Vinci (for general surgical use) and Ion (a specialized system for diagnosing lung issues).

Breaking that down further, da Vinci procedures worldwide rose by around 15%, and those for Ion advanced at a 36% clip. Those figures from U.S. procedures were 12% for da Vinci -- down from 14% in the first quarter -- and 21% for Ion.

The number of da Vinci systems in place with clients at the end of the quarter was 11,710, 12% higher than at the same time in 2025. The installed base of Ion rose by 21% to 1,096.

Turning to profitability, net income not under generally accepted accounting principles (GAAP) landed at just over $1 billion, or $2.80 per share. That represented a nearly 26% improvement over the year-ago profit. On average, prognosticators tracking Intuitive stock were expecting $2.82 billion in revenue and merely $2.51 per share in non-GAAP (adjusted) net income.

Intuitive charges its clients for the single- and limited-use instruments needed for each Ion or da Vinci procedure; purchasing or leasing the system is only the initial expense for those customers. On top of that, the company earns its keep from services such as training and maintenance; these are highly sophisticated robotic surgical tools, after all.

Intuitive makes most of its revenue from the per-procedure charges. It breaks its top line down into three streams, with these fees comprising the instruments and accessories category. This brought in more than $1.73 billion in the quarter, for growth of 18%.

As for the other two, systems is the company's revenue bucket for those initial customer buys/leases. This also grew handsomely, rising by 19% to $685 million. Finally, services (again, maintenance, training, etc.) increased by 21% to over $472 million.

Eyes on the declines

In other words, there was growth all over the place in Intuitive's fundamentals. So why the sell-off?

Most likely, the culprit was the decline in growth of da Vinci procedures in the U.S., its most important market. Also, management maintained its guidance for da Vinci worldwide procedure growth of around 13.5% to 15.5% for the full year, with adjusted gross profit margin hitting 68% to 69%.

So da Vinci procedures experienced a sequential slowdown in the company's most critical market, and for 2026, international growth might land a bit below the second-quarter result.

On top of that, in Intuitive's conference call disseminating the quarter's results, management indicated that closer scrutiny of high expenses in China's healthcare system could put some pressure on its business in that sizable market.

The power of incumbency

To me, this is a classic case of high expectations meeting closer-to-the-ground reality. Even the most innovative companies can't keep high growth rates forever. Yet I don't feel that the da Vinci procedure dynamic represents a sufficient (current and potential) slowdown to warrant selling out of Intuitive.

Which, let's bear in mind, is still a leader in robotic surgery after all these years -- da Vinci was introduced over 25 years ago. Intuitive still has a mighty market share approaching 80% in soft-tissue procedures, even though monster rivals like device king Medtronic have spent, and are continuing to spend, billions of dollars developing rival systems.

With its relatively long presence in this niche yet high-potential healthcare segment, Intuitive is well established with practitioners and hospital operators. It's also, thanks to its business model, locked in as a robo-surgery provider with many of them. It isn't easy or quick to switch to a new system, nor are there many choices on the market.

Meanwhile, this planet's population -- and that of the U.S. -- is aging proportionally, meaning it'll require more healthcare. And, it follows, more surgical procedures that Intuitive's machines can assist with.

Given all that, I wouldn't be worried about slight dips in Intuitive's growth. I also wouldn't fret about the company's seemingly high valuations, given its potential to at least sustain its double-digit growth cadence. For me, this stock is clearly and compellingly a buy candidate.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intuitive Surgical and Medtronic. The Motley Fool recommends the following options: long January 2028 $520 calls on Intuitive Surgical and short January 2028 $530 calls on Intuitive Surgical. The Motley Fool has a disclosure policy.