Will ISRG's R&D Focus Following Solid Earnings Growth Drive Demand?

After an impressive 2025, Intuitive Surgical ISRG remains focused on sustaining earnings strength while investing aggressively in its future. The company posted 22% pro forma earnings per share (EPS) growth in 2025, its third consecutive year above 20%, driven by strong procedure growth, higher recurring revenue and disciplined operations.

Management’s outlook for 2026 emphasizes ISRG’s key focus on growth rather than short-term profitability. Pro forma operating expenses are expected to increase 11-15%, indicating heavier investments across various fields.

A large portion of this spending increase is allocated to research and development, where Intuitive Surgical continues to fund new platform features, software and early-stage programs. These efforts are not aimed at generating immediate returns but are designed to enhance the clinical value of its systems and expand the range of procedures that can be performed robotically over time.

The company faces higher costs as it scales its organizational structure and commercial infrastructure. Workforce growth in engineering and sales teams extends through 2025, and 2026 is expected to bring incremental expenses tied to distributor buyouts and the move to direct operations across select European markets. Although these actions pressure margins temporarily, they enhance Intuitive Surgical’s control over customers and market reach.

With operating margins at 37%, the company has room to take on higher near-term spending to build long-term advantages and maintain steady procedure growth. Investors need to evaluate whether the current investment strategy drives sustainable demand in the years ahead.

Other Big Players Focused on R&D to Sustain Growth

Apart from Intuitive Surgical, several other large-cap players in the medical device segment, including Boston Scientific BSX and McKesson MCK, are focused on increasing R&D expenses to develop and assimilate new technologies within their portfolio, especially artificial intelligence, to sustain their growth trend in the future.

Boston Scientific closed 2025 with strong earnings momentum, underscored by adjusted EPS of $3.06, up 22% year over year. Management framed this performance as a result of consistent mid-teens revenue growth and disciplined margin execution.

Boston Scientific expects 12-14% EPS growth in 2026, even as it continues to reinvest. Operating expenses are expected to rise as the company funds clinical programs, global supply-chain investments and integration of recent acquisitions. R&D remains a strategic priority, with sustained investment in electrophysiology, WATCHMAN and cardiovascular pipelines, which are aimed at supporting above-market growth in 2026.

McKesson delivered another quarter of durable earnings growth. It posted third-quarter fiscal 2026 EPS of $9.34, up 16% year over year, and raised fiscal 2026 EPS guidance to $38.80-$39.20, implying 17-19% growth. The company’s bottom-line strength reflects scale advantages in oncology, biopharma services and pharmaceutical distribution.

MCK expects future operating expenses to grow modestly, supported by targeted investments in technology, automation, and AI-driven infrastructure rather than traditional R&D. While McKesson does not carry classic product R&D, it steadily increases spending on digital platforms and workflow solutions in 2026. This positions the company to sustain margin expansion while supporting long-term earnings growth.

ISRG’s Price Performance, Valuation and Estimates

Shares of ISRG have lost 0.7% over the past six months compared with the industry’s 4.9% decline.

From a valuation standpoint, Intuitive Surgical trades at a forward price-to-earnings ratio of 47.02, above the industry average. But, it is still lower than its five-year median of 71.25. ISRG carries a Value Score of F.

The Zacks Consensus Estimate for Intuitive Surgical’s 2026 earnings implies a 12.3% rise from the year-ago period’s level.

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

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

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