Intuitive Surgical (ISRG) shares closed lower on July 22 after Johnson & Johnson (JNJ) finally entered its market. The FDA granted De Novo authorization for J&J’s Ottava surgical robot, clearing it for general surgery procedures in the upper abdomen. It is J&J’s first move into soft-tissue surgery, which covers the most common operations performed in the U.S. Ottava’s selling point is its design, with the robotic arms built into the operating table instead of separate carts. The design cuts the floor space needed by up to half.
The market read this as bad news for Intuitive, but I believe the case against that is strong. J.P. Morgan analyst Robbie Marcus said his checks with doctors still point to Intuitive as the clear favorite. The analyst cited surgeon relationships and da Vinci’s place in hospital workflows as the reasons for backing ISRG.
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The deeper issue for J&J is what Intuitive actually sells. Intuitive's recurring revenue made up 85% of the quarter’s total. The business is tied to procedures already running on machines already installed. Winning that away takes more than a hospital buying one Ottava. It takes surgeons switching, and most surgeons performing robotic surgery today trained on da Vinci. Changing platforms means retraining the whole operating room team. This is not theoretical. Medtronic’s (MDT) Hugo cleared the FDA last December for urology and has barely moved the needle since. Ottava is a stronger product from a bigger company than Hugo, but it starts from the same place, selling to hospitals that already own the alternative and surgeons who already know how to use it. A clearance gives J&J the right to compete, but it does not guarantee that the surgeons will buy in.
About Intuitive Surgical Stock
Intuitive Surgical operates as a medical technology company focused on robotics-assisted surgery. The company’s da Vinci Surgical platform is used in a wide range of minimally invasive procedures, while its Ion system helps physicians perform minimally invasive lung biopsies. In addition to its robotic systems, ISRG supplies surgical instruments, training, software, and ongoing technical support to healthcare providers.
Over the past year, Intuitive Surgical shares have fallen roughly 33%, dropping from above $590 to around $330. While the broader medical device sector also faced pressure, it performed much better than ISRG stock. During the same period, the iShares US Medical Devices ETF (IHI) declined about 19%. The company’s underperformance was driven by several factors, including GLP-1/ACA demand headwinds and decelerating procedure growth guidance.
www.barchart.com Intuitive’s valuation looks reasonable by most measures. The forward GAAP price-to-earnings (P/E) of 38.63x sits 44% below the company’s 5-year average of 69.35x. The forward price-to-sales (P/S) ratio of 10.53x is also 38% below its 5-year average of 17.02x. Both point to a stock trading at a considerable discount to its historical norms. EPS growth trajectory is steady but modest. Earnings are expected to grow 21% in 2026 before settling into a range of 11% to 13% through 2029.
The capital structure is almost flawless. Intuitive holds $8.63 billion in cash against no debt at all. This gives the company room to keep funding new platforms while competitors spend to catch up. The market has already marked ISRG stock down for the competition that is now arriving. What it has not priced is the chance that the switching costs hold. From that point of view, the discounted stock could become an attractive entry point for a business that is not actually losing ground.
Intuitive Surgical Reports Solid Quarter
On July 16, the company released its second-quarter fiscal 2026 earnings report, posting revenue of $2.89 billion. Recurring revenue accounted for $2.47 billion, representing 85% of total sales. Intuitive Surgical reported a non-GAAP gross margin of 70%, excluding a one-time $36 million tariff refund benefit. Non-GAAP net income reached $1 billion, or $2.80 per share. At the end of the quarter, the company had $8.6 billion in cash and investments.
Looking ahead, management reaffirmed its full-year 2026 procedure growth outlook. It expects da Vinci procedure growth to range from 13.5% to 15.5%, with results likely to be close to the midpoint of that range. However, Intuitive Surgical revised its non-GAAP gross profit margin forecast to 68% to 69% of revenue. It also warned that higher semiconductor memory and freight costs will continue to put pressure on margins.
What Do Analysts Expect for ISRG Stock?
Following the company’s earnings report, Bernstein cut its price target on ISRG stock from $750 to $685 while reaffirming an “Outperform” rating on July 17. The firm highlighted that ISRG delivered another strong quarter, reporting revenue ahead of market expectations. However, the firm expects investor sentiment to remain cautious as concerns about the pace of U.S. procedure growth could create pressure on the shares, especially heading into the third quarter.
According to 31 Wall Street analysts covering ISRG stock, it has a consensus “Moderate Buy” rating. Their estimates suggest that ISRG has an average price target of $503.64, offering around 52% upside from current levels. In addition to this, the highest price target of $685 reflects an impressive 106% upside from the current share price.
www.barchart.com On the date of publication, Jabran Kundi did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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