Key Points
Intuitive Surgical‘s (NASDAQ: ISRG) stock is having a tough year. The stock has fallen 30% from its 52-week high, with a decline of more than 25% in the first seven months or so of 2026. There are multiple reasons for this drop, but the biggest issue isn’t the company’s business. Here’s why this sell-off may not be as scary as it seems.
Intuitive Surgical has yet another big drawdown
If you look back to Intuitive Surgical’s initial public offering, it has suffered through eight drawdowns of 30% or more. So the current decline isn’t really unusual for the growth-oriented stock.
In fact, the medical device maker’s recent performance has been pretty solid. In the fourth quarter of 2025, its installed base of surgical robots increased 12% year over year. In the first quarter of 2026, the installed base was larger 12% year over year, too. There hasn’t been a dramatic shift in direction here.
That said, the real story isn’t the number of new da Vinci surgical systems it sells. Robot sales only account for around 25% of the company’s revenues. The rest comes from the sale of services, instruments, and accessories. These are annuity-like income streams that will continue to flow as long as the da Vinci robots that support them are in use. It is an attractive growth story, with each new da Vinci robot building an ever stronger income stream from selling what amounts to parts and services.
The big problem, and a smaller one
The most notable issue for Intuitive Surgical’s stock price is really investor perception. Even after the dramatic drawdown, the stock’s price-to-earnings ratio remains lofty at 50x. What’s shocking is that this figure is well below the five-year average of 69x. Over the past five years, the P/E has reached as high as 84x. Investors have a history of pricing in a lot of good news here.
With such a lofty P/E ratio, it doesn’t take much of a shift in investor sentiment to cause a sizable stock pullback. So far, after each big pullback, however, the stock has eventually gone on to even higher highs. That doesn’t mean that pattern will repeat this time around, but it does suggest growth investors who have been watching from the sidelines should take a second look at what might be a wish-list stock.
The deeper issue here is that Intuitive Surgical is no longer the leader it once was. It helped create the surgical robotics market and remains one of the industry’s most important players. But there are new, formidable competitors to consider, including Medtronic (NYSE: MDT), among others. That could make it harder for Intuitive Surgical to sell its robots in the future, even if the market is large enough to support more than one surgical robotic system. Still, hospitals that have bought a da Vinci system aren’t going to suddenly stop using it just because other surgical robots are on the market.
Pay attention to new da Vinci placements, but remember the real flywheel
When Intuitive Surgical reports second-quarter earnings, investors should pay close attention to the number of da Vinci systems it has in place. A dramatic slowdown in growth would be worrying and could further compress the stock’s valuation. However, the story is much more robust than just the sale of robots, given that parts and services are the main drivers of revenues.
That’s why you’ll also want to look at the number of surgeries performed with a da Vinci system. The company entered 2026 expecting that figure to rise between 13% and 15%, down from 18% in 2025. However, the first quarter was above the target range at 17%, suggesting that Intuitive Surgical is still a fast-growing company even if investors are less excited about the future than they were not too long ago. And even if the full-year number drops to 13%, it will hardly suggest that Intuitive Surgical’s business model is broken.
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Reuben Gregg Brewer has positions in Medtronic. The Motley Fool has positions in and recommends Intuitive Surgical and Medtronic. The Motley Fool recommends the following options: long January 2028 $520 calls on Intuitive Surgical and short January 2028 $530 calls on Intuitive Surgical. The Motley Fool has a disclosure policy.
