Shares of robotic-assisted surgery pioneer Intuitive Surgical (ISRG 7.65%) were up 6% as of 12:45 p.m. ET on Wednesday, according to data provided by S&P Global Market Intelligence.
This morning, Intuitive Surgical announced preliminary fourth-quarter earnings that far exceeded analysts’ expectations. Even though the company’s shares are priced for perfection (trading at 73 times next year’s earnings), the market rewarded the stock for its outstanding results in Q4.
Priced for perfection, but rightfully so
Analysts expected Intuitive Surgical to grow revenue by roughly 14% during its final quarter of 2024. So it was a pleasant surprise for investors when the company preliminarily announced that its Q4 sales would jump by a surprising 25% instead.
To give this 25% revenue growth rate some perspective, it is the fastest the company has grown since 2021, when it rebounded from COVID-19. Furthermore, it is well above Intuitive Surgical’s average 15% annualized growth rate over the last decade.
The company’s newest system iteration, the da Vinci 5, helped lead this charge following its launch in 2024. Thanks in part to this release, Intuitive Surgical grew systems revenue (surgical robots installed) by 36%.
This disproportionately large growth in systems revenue bodes well for shareholders over the long term. Since the company has a razor-and-blade business model (systems paired with instruments, accessories, and services to run them), growing its installed base of systems faster than usual should lead to higher recurring revenue down the road.
With 83% of its total sales coming from recurring revenue, Intuitive Surgical’s installed base of roughly 10,000 da Vinci systems acts like a cash-printing machine, justifying the stock’s lofty valuation. The far-and-away leader in market share in the robot-assisted surgery industry, Intuitive Surgical has a wide moat around its business that continues to give it a considerable advantage.
