Intuitive's Q4 Earnings Confirm Growth Deceleration Amid Margin Pressures

What happened

Intuitive Surgical announced its fourth-quarter and full-year 2025 financial results, revealing revenue growth to approximately $10.1 billion driven by an 18% increase in da Vinci procedures. However, gross margins compressed to around 67-67.5% for 2025, down from 69.1% in 2024, primarily due to tariff impacts and costs from the da Vinci 5 launch. Management provided 2026 guidance projecting da Vinci procedure growth to slow to 13-15%, confirming a deceleration from the previous year's pace. This guidance reset occurs amid rising competitive threats from Medtronic's Hugo and other robotic systems, which could pressure market share and pricing. The stock, trading at a high multiple of ~68x trailing EPS, reflects optimistic growth assumptions, leaving it vulnerable to multiple compression if growth or margins disappoint.

Implication

The earnings report validates the assessment that Intuitive's growth is normalizing, with 2026 guidance setting a lower bar that may be challenging amidst competition. Margin compression from tariffs and product launches is persistent, and any additional escalations could further erode profitability. High valuation multiples leave no margin of safety, making the stock sensitive to negative news like slower procedure growth or competitive wins. Existing shareholders should consider trimming positions on strength, as the risk-reward skew is unfavorable for new buying. Key monitoring points over the next 6-12 months include procedure growth rates relative to guidance, gross margin trends, and competitive developments in markets like the U.S. and China.

Thesis delta

The Q4 earnings announcement does not materially alter the investment thesis; it reinforces existing concerns about decelerating growth and margin pressures. The thesis remains that at current valuations, the stock offers limited upside and significant downside risk if execution falters or competitive threats intensify, supporting the recommendation to trim on strength.