Zacks Industry Outlook Highlights Intuitive Surgical, Edwards Lifesciences and Electromed

For Immediate Release

Chicago, IL – February 24, 2026 – Today, Zacks Equity Research discusses Intuitive Surgical ISRG, Edwards Lifesciences EW and Electromed ELMD.

Industry: Medical Instruments

Link: https://www.zacks.com/commentary/2873177/3-medical-instrument-stocks-banking-on-genai-to-tackle-industry-woes

The application of generative AI (GenAI) in the Medical Instruments industry has transitioned from experimental to operational in the last 12 months, improving diagnostics, patient monitoring and intervention workflows. A 2025 U.S. National Science Foundation report states GenAI's potential to transform health care through synthetic medical imaging, disease progression modeling and drug molecule design with simulated effects.

At the same time, regulatory bodies are adapting. In December 2025, the European Commission proposed simplification of the current rules for medical devices to promote competitiveness. In August, the FDA issued guidance on predetermined change control plans (PCCPs) as part of a marketing submission for an AI-enabled device.

Going by a Fortune Business Insights report, global AI in the healthcare market was estimated at $39.34 billion in 2025 and was projected to grow at a CAGR of 43.9% through 2034. However, the industry faces obstacles, including high expenses tied to implementing AI-based solutions, data breach risks and biased outputs from incomplete or unrepresentative data. Broader macroeconomic pressures, such as tariffs, staffing shortages and research funding cuts, also weigh on the MedTech sector.

Against this backdrop, players like Intuitive Surgical, Edwards Lifesciences and Electromed have adapted well to changing consumer preferences.

Industry Description

The Zacks Medical - Instruments industry is highly fragmented, with participants engaged in research and development (R&D) in therapeutic areas. This FDA-regulated sector encompasses a vast array of products, from transcatheter valves and orthopedic devices to advanced imaging equipment and robotics. Recent trends highlight the integration of AI in diagnostics, the expansion of telemedicine, the rise of robotic-assisted surgeries and developments in 3D printing, continuous glucose monitoring systems, gene editing and nanomedicine.

The rise of GenAI is also reshaping MedTech, from speeding up patient recruitment to optimizing trial designs and improving regulatory processes. The FDA's Total Product Life Cycle approach supports faster development of safe and effective medical devices critical to public health.

3 Trends Shaping the Future of the Medical Instruments Industry

GenAI Revolution: Over the past couple of years, there has been a significant increase in the adoption of GenAI within the medical instrument space, with hyper-personalization being the primary feature of GenAI-driven treatment options. GenAI, while analyzing vast and complex genetic and molecular data, is expected to help healthcare reach new heights in terms of predictive treatment options and smart hospital systems.

According to the latest analysis by Towards Healthcare, global GenAI in the healthcare market is valued at $2.65 billion in 2025 and projected to expand at a CAGR of 35.1% through 2035. Key factors fueling the market's growth include the increasing adoption of AI in healthcare, the growing availability of large healthcare datasets, and the need for more efficient and accurate decision-making tools. The application of AI in the diagnostics space is growing enormously, with the market expected to witness a CAGR of 46.1% by 2034.

M&A Trend: The medical instrument space has been benefiting from the ongoing merger and acquisition (M&A) trend. It is a known fact that smaller and mid-sized industry players attempt to compete with the big shots through consolidation. The big players attempt to enter new markets through a niche product. According to the latest Bain & Company report, the Medtech deal value in 2025 rose year over year and rebounded above pre-2023 levels, with the second half of the year being particularly strong.

While large deals such as Waters' acquisition of BD's Biosciences and Diagnostics businesses and Stryker's acquisition of Inari Medical grabbed headlines, deal-making momentum continues to be dominated by smaller, targeted transactions. Spin-offs and divestitures accounted for more than a third of strategic deal value in the first 11 months of 2025, up from the previous five-year average. The report expects the robust dealmaking to continue in 2026, as already seen with Boston Scientific's $14.5 billion agreement to acquire Penumbra and Danaher's $9.9 billion definitive agreement to acquire Masimo Corp.

Business Trend Disruption: Per the IMF's January 2026 World Economic Outlook, global growth is expected to remain steady at 3.3% in 2026 and 3.2% in 2027. The forecast marks 0.2% points upward revision for 2026 and no change for 2027 compared with that in the October 2025 report.

A few countries, especially low-income developing countries, have seen sizable downside growth revisions, often as a result of increased conflicts and recent tariff shocks. The good news is that global headline inflation is expected to decline from an estimated 4.1% in 2025 to 3.8% in 2026, with advanced economies reaching the targets sooner than emerging markets and developing economies.

However, the IMF apprehends that the current policy-generated disruptions to the ongoing disinflation process could interrupt the pivot to easing monetary policy, with implications for fiscal sustainability and financial stability. There are chances of higher nominal wage growth, which, in some cases, reflects the catch-up of real wages, accompanied by weak productivity, and could make it difficult for firms to moderate price increases, especially when profit margins are already squeezed.

Zacks Industry Rank Indicates Bright Prospects

The Zacks Medical Instruments industry's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates upbeat near-term prospects. The industry, housed within the broader Zacks Medical sector, currently carries a Zacks Industry Rank #75, which places it in the top 31% of 243 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

We will present a few stocks that have the potential to outperform the market based on a strong earnings outlook. It's worth taking a look at the industry's shareholder returns and current valuation first.

Industry Underperforms S&P 500 & Sector

The industry has underperformed both the Zacks S&P 500 composite and the sector in the past year.

The industry has declined 9.4% compared to the broader sector's growth of 0.8%. The S&P 500 has surged 18.3% in a year.

Industry's Current Valuation

On the basis of the forward 12-month price-to-earnings (P/E), which is commonly used for valuing medical stocks, the industry is currently trading at 26.66X compared with the broader industry's 21.22X and the S&P 500's 22.71X.

Over the past five years, the industry has traded as high as 40.71X, as low as 25.71X and at the median of 31.83X.

3 Stocks to Buy Right Now

Intuitive Surgical: California-based Intuitive Surgical is a pioneer in robotic-assisted surgery. The company's da Vinci surgical systems are designed for a wide range of surgical procedures using a minimally invasive approach, while the Ion endoluminal system enables minimally invasive biopsies in the lung. Throughout 2025, demand for Intuitive's new da Vinci 5 continued to grow, aided by broader availability from scaled manufacturing and expanded capability through subsequent software and product releases.

The Zacks Consensus Estimate for this Zacks Rank #1 (Strong Buy) company's 2026 EPS indicates a 12.3% rise compared with 2025. The consensus mark for 2026 revenues implies a 14.9% improvement. ISRG has a long-term earnings growth rate of 15.7%. You can see the complete list of today's Zacks #1 Rank stocks here.

Edwards Lifesciences: Irvine, CA-based Edwards Lifesciences operates as a global structural heart disease innovation company. The company sold off its Critical Care product group in September 2024, aligning with its vision to develop the most comprehensive structural heart disease portfolio. Edwards continues to lead globally in transcatheter heart valve replacement technologies, designed for the minimally invasive replacement of aortic heart valves.

The Zacks Consensus Estimate for this Zacks Rank #2 (Buy) company's 2026 EPS calls for 14.8% growth. The consensus mark for 2026 revenues indicates a 9.6% improvement. Edwards has an earnings yield of 3.7% compared with the industry's 0.4% yield.

Electromed: Minnesota-based Electromed develops, manufactures, markets and sells products that provide airway clearance therapy, including the SmartVest Airway Clearance System, to patients with compromised pulmonary function. Its products are sold in both the homecare market and the hospital market for inpatient use. To act on its massive bronchiectasis market opportunity, Electromed launched the Triple Down on Bronchiectasis Campaign in 2025, promoting a powerful three-pronged treatment paradigm.

The Zacks Consensus Estimate for this Zacks Rank #2 company's fiscal 2026 EPS implies year-over-year growth of 29.4%. The consensus mark for fiscal 2026 revenues indicates an improvement of 13.2%. Electromed has an earnings yield of 4.5% compared with the industry's 0.4% yield.

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