ISRG Stock Gains More than 8% YTD: Will the Uptrend Continue?

Shares of Intuitive Surgical ISRG seem to gain momentum after declining for more than two months. The stock has risen 9.7% in the past month after declining more than 30% from its all-time high of $616 in January. The rally can be attributed to strong fundamentals despite tariff risks. Meanwhile, a trade deal between the United States and China has significantly lowered tariffs for 90 days, which must lower the anticipated tariff impact of 170 basis points on the cost of goods sold in 2025.

Intuitive Surgical remains at the forefront of robotic-assisted surgery, driven by solid revenue performance and continued procedural growth. As the company heads into 2025, its strategic priorities include technological advancement, international expansion and improvement of manufacturing operations. However, global macroeconomic uncertainties persist, most notably the growing risk of trade conflicts, as the United States adopts a more protectionist stance under President Trump following his return to office earlier this year.

Financial Performance and Revenue Growth

ISRG reported first-quarter 2025 revenues of $2.25 billion, marking a 19.2% year-over-year increase. This underscores the company’s ability to generate consistent, recurring revenues — now 85% of total earnings. ISRG recorded strong earnings per share (EPS) growth of 20% (to $1.81) and an operating margin of 34.1%. It anticipates a declining operating margin for 2025 due to increased depreciation expenses and a higher mix of lower-margin products like da Vinci 5, Ion and SP.

Despite the recent fall in share price, ISRG’s shares are up 8.4%, outperforming the Zacks Medical - Instruments industry’s decline of 6.9% year to date. The broader Zacks Medical sector has declined 6.7% and the S&P 500 Index has decreased 0.6% in the same period.

YTD Price Performance

Rising Procedure Volume and Market Expansion

During the first quarter, revenues were primarily driven by continued improvements in the company’s da Vinci procedure volume, coupled with strong growth in Ion and SP procedures. Intuitive Surgical has been increasing the pricing of procedures to fight inflationary pressure, which has also aided sales growth.

Moreover, the rising adoption of the da Vinci 5 system further aided the top line. The company plans to launch da Vinci 5 broadly in the second half, which should drive system revenues. However, weakness in Germany, the U.K. and Japan may lead to slower adoption. Meanwhile, the clearance of the Ion platform in Australia and its launch in China should drive system placements and procedure volume. The clearance for the da Vinci SP SureForm 45 stapler in the United States, which will expand the use of SP in thoracic and colorectal indications, looks promising.

The recent FDA clearance for ISRG’s da Vinci Single Port surgical system for transanal local excision/resection should further drive system revenues going forward. This approved device will be used for minimally invasive surgery performed through a natural orifice to avoid abdominal surgical incisions for select procedures, especially colorectal surgery.

ISRG Stock Trades Above 200-Day Average

To fuel further expansion, ISRG plans to market its da Vinci products directly in Italy, Spain, and Portugal, at a cost of EUR 290 million, thereby deepening its customer relationships. Manufacturing expansion continues with the addition of new facilities in California, Germany, and Bulgaria, ensuring scalable production for the Da Vinci 5 and Ion systems. Additionally, digital tools, such as the My Intuitive app and VR simulators, should improve surgeon training and optimize procedural outcomes.

Competitive Challenges and Market Headwinds

In 2025, Intutitive Surgical expects gross margin to reflect 170 bps headwind due to newly implemented global tariffs. These costs primarily stem from three key areas — U.S.-China trade friction, European retaliatory tariffs and a small subset of Mexican exports that do not meet USMCA certification. Specifically, ISRG will incur steep tariffs on components imported from China and on finished products entering the country, with U.S. tariffs also applied to Chinese-sourced components and subassemblies for the Ion platform.

The company expects the impact of tariffs to increase each quarter over the remainder of the year. However, the impact is likely to be significantly lower as the United States reduced tariffs from 145% to 30% on Chinese imports, and U.S. exports will garner a 10% tariff in China, down from 125% imposed earlier.

Additionally, ISRG faces growing competition in the robotic-assisted surgery space, making cost efficiency crucial. The competition is coming from larger players, including Johnson & Johnson JNJ and Medtronic MDT, both of which are investing heavily in robotic surgery. Medtronic has recently filed an application seeking FDA clearance for its Hugo robotic-assited surgery system. A potential approval is expected in the second half of 2025.

ISRG’s P/E F12M Higher Than Industry

Wrapping Up

The share price of ISRG has crossed the significant level of 200-DMA earlier this month, reflecting strength. However, the stock’s pricey valuation raises concerns. The company is trading significantly higher than the industry. However, it is currently trading below its five-year median, which can act as a cushion against further decline.

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

Moreover, the Style Scores don’t look quite promising. The company has a Value Score of D and a Growth Score of C. The valuation chart also shows the significant premium for ISRG stock compared with the industry. Moreover, the Momentum score of ‘F’ implies that the stock may trade within the range in the upcoming few months.

As such, we believe that investors may hold the stock for now. Nevertheless, we caution against taking a new position. Strong fundamentals suggest an upside to the share price, but investors should wait for an attractive entry point.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research