Intuitive Surgical (ISRG +6%) reported a standout Q2, achieving its largest earnings beat since 2021, driven by sustained double-digit revenue growth. The company also saw accelerated global procedure growth, hitting the high end of its FY24 guidance. ISRG narrowed its FY24 procedure growth outlook, raising the low end while maintaining the best-case scenario. Additionally, the company made healthy progress on system placements despite recent challenges.
- ISRG's da Vinci 5 system saw significant progress, with 70 systems placed in Q2 compared to just 8 in Q1, despite ongoing supply constraints expected to persist through at least 1H25.
- Challenges with the da Vinci 5 system have impacted other areas of ISRG's business. Potential customers are cautiously holding back on purchases, reflected by 341 placements in Q2, a 21-unit increase year-over-year, but a vast improvement from just 1 additional placement in Q1.
- Despite these headwinds, ISRG delivered strong Q2 results, including a return to double-digit bottom-line growth and a 14.5% year-over-year increase in total revenue to $1.97 billion. Procedures grew nearly 17% year-over-year, up 1 percentage point from last quarter.
- In the U.S., general surgery procedures grew by 14%, while bariatric procedures declined by mid-single digits year-over-year due to the rising popularity of weight-loss drugs. Other procedures compensated for this decline.
- Overseas procedure volume outpaced the U.S., growing by 22% year-over-year, led by non-urology procedures. Europe, Japan, and India were highlights, while growth in China was hindered by competition from emerging domestic robotic systems, affecting capital placements and procedure growth.
- Looking ahead to FY24, ISRG is optimistic, narrowing its procedure growth outlook to +15.5%-17.0%. The low end accounts for continued moderation in bariatric procedures and intensifying headwinds in Asia, though less severe than previously forecasted.
ISRG's Q2 report alleviated many lingering concerns, reenergizing the stock. However, challenges such as delays in the da Vinci 5 timeline, increased competition in China, and the impact of GLP-1 weight-loss drugs on bariatric procedures remain. Nonetheless, the market potential for robotic surgery opportunities is promising, and ISRG's da Vinci 5 rollout is progressing as planned, potentially leading to record highs.
