ISRG Stock Down More than 13% in 3 Months: How to Play the Stock?

Shares of Intuitive Surgical ISRG have been declining since the stock touched an all-time high of $616.00 on Jan. 23, 2025. The company’s shares have lost 13.4% in the past three months, underperforming both the industry’s gain of 0.1% and the S&P 500 Index’s rise of 10.4%.

Intuitive Surgical has also underperformed other major players in the robotic surgery market, including Johnson & Johnson JNJ or J&J and Medtronic MDT. However, ISRG has outperformed its smaller competitor, PROCEPT BioRobotics PRCT. In the past three months, shares of J&J and Medtronics have risen 14.7% and 7%, respectively, while those of PROCEPT BioRobotics have lost 38.5%.

ISRG has reported better-than-expected top and bottom-line numbers for the second quarter. However, the contraction in gross margin led to a decline in its share price. The decline in the past three months can be primarily attributed to emerging worries over gross margin decrease due to higher costs and product mix shifts.

3-Month Price Performance

The company also expects a 200-300 basis points (bps) contraction in adjusted gross margin in 2025 compared to the previous year. Meanwhile, ISRG’s leading position in the robotic market and strong procedure growth bode well, which is likely to support strong top-line growth going forward.

Now investors may face a dilemma whether to invest in the stock amid the mixed market signals. Let us delve deeper and analyze Intuitive Surgical’s fundamentals to answer the question.

Factors Driving Growth

Leadership Position in Growing Market: ISRG is a pioneer in the robotic-assisted surgery market with its da Vinci systems dominating the U.S. market as well as globally. Per a Grand View Research report, the global surgical robots market size is expected to witness a CAGR of almost 9.4% from 2025 to 2030. ISRG is well-positioned to ride on this global growth with its leading position in the market.

Strong Procedure Growth: Intuitive Surgical has reported recovery in procedures since February 2023, following a declining rate of infections and hospitalization due to COVID19. The recovery in procedures continued through the first half of 2025, a trend that is likely to continue in the rest of the year.

ISRG has raised its full-year 2025 procedure growth guidance to 15.5-17% from 13-16% previously. Procedure volume in the rest of 2025 is likely to be driven by growth across a wide range of surgical procedures in the United States. Rising demand for cholecystectomy, colon resection, lung resection and foregut procedures should drive procedures in international markets, led by China, Germany, and the United Kingdom.

Recurring Revenues Driving Major Sales: With the rise in use of the da Vinci system in approved markets, demand for its accessories has increased. While the sale of the da Vinci system can be time-consuming and inconsistent due to its high selling price, the sale of accessories provides the company with a recurring revenue source that generates the majority of revenues.

Recurring revenues accounted for 85% of total sales in the first half of 2025, highlighting the significance of instruments and accessories (I&A). I&A revenue per procedure held steady at nearly $1,780-$1,800, despite mix pressures from declining bariatric surgeries offset by increased cholecystectomy volumes and contributions from da Vinci 5 and SP procedures.

Challenges

Gross Margin Contraction: Adjusted gross profit was $1.66 billion, up 17.8% year over year. However, as a percentage of revenues, the gross margin was 67.9%, down approximately 200 bps from the prior-year quarter’s figure.

During the first quarter, the gross margin was 66.4%, down approximately 120 bps from the prior-year quarter’s figure. The company anticipates gross margin to contract 200-300 bps to 66-67% for full-year 2025, which includes 100 bps from tariffs alone.

Apart from tariffs, the ongoing launch of da Vinci 5 is also likely to keep gross margin under pressure due to the high cost associated with the latest device. The margin pressure is evident from the fact that while sales are likely to grow 18.2% and 10.9% in the next two quarters, earnings are likely to grow 8.7% in the third quarter and decline 1.8% in the fourth.

Weak Bariatric Procedures: Intuitive Surgical has been witnessing moderating growth in its bariatric procedures, used to treat patients with morbid obesity and its associated conditions, such as diabetes, over the past few quarters. Launch of new drugs in 2023, especially the GLP-1 class of drugs, targeting the obesity and diabetes market, has adversely impacted da Vinci surgical system bariatric procedures as some patients reconsider the surgical option. Although it is currently unclear what the long-term impact of these drugs will be on bariatric procedures, the weaker trend is likely to have a material impact on top-line growth for ISRG.

Budget Constraints in International Markets: Broader international budget constraints are emerging as a critical headwind for Intuitive Surgical, limiting adoption of its da Vinci systems outside the United States.

Macroeconomic pressures, rising inflation, and fiscal austerity are forcing governments in Japan, China, and Europe to prioritize essential healthcare over capital-intensive robotic platforms. High upfront costs, over $1 million per system plus per-procedure premiums, further decelerate uptake, particularly in developing regions. Geopolitical frictions and restrictive procurement rules in China and the EU amplify risks, while inconsistent reimbursement weakens hospital incentives.

Rising Competition: Although ISRG currently holds the leading position in robotic surgery, several big and small players are challenging its dominance, especially in its largest market, the United States, by introducing systems that emphasize cost-effectiveness, modularity, and specialized applications.

Key among the competitors is Medtronic, which is positioning itself as a strong player, with its Hugo robotic-assisted surgery system gaining traction for soft-tissue procedures. In 2025, Medtronic’s Hugo is expected to expand in the United States following FDA clearances, offering a more modular and lower-cost alternative to da Vinci. J&J is ramping up with its Ottava system, focusing on minimally invasive surgeries in gynecology, urology, and general procedures.

In 2025, J&J's efforts include AI-enhanced features, directly competing with da Vinci's ecosystem. A smaller rival, PROCEPT BioRobotics, is emerging as a targeted competitor to Intuitive Surgical in the urology segment of the robotic surgery market, primarily through its Aquablation therapy. While ISRG's da Vinci systems dominate multi-specialty robotic surgery, including urology, Aquablation poses challenges by offering a specialized, potentially more efficient alternative for prostate procedures.

Valuation Looks Expensive

Valuation-wise, Intuitive Surgical is overvalued, as suggested by the Value Score of D.

In terms of forward 12-month Price/Earnings (P/E), ISRG shares are trading at 50.56X, higher than the sector’s 27.51X.

ISRG Forward P/E Multiple

Conclusion

Although Intuitive Surgical’s top line is likely to be driven by strong procedure growth and a rise in recurring revenues, the company’s bottom line is likely to be under pressure in the rest of 2025 due to continued contraction of gross margin.

Meanwhile, uncertainty around U.S. tariffs and continued budget constraints in international markets raise concern. The U.S. president has recently proposed a 50-100% tariff on China, whose enactment may further raise costs for ISRG, contracting gross margin further. A subdued earnings report is likely to keep ISRG’s share price under pressure, too.

ISRG’s share price is also trading below both its 50-day and 200-day moving averages, implying weakness in the stock price. We recommend waiting for greater clarity on demand trends before adding new positions. For existing shareholders, maintaining exposure may be prudent, given ISRG’s long-term prospects and leading positioning, but near-term volatility is likely to persist.

50-DMA & 200-DMA Chart

ISRG currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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