Intuitive Surgical Slows Growth Amid U.S. Healthcare Headwinds

Intuitive Surgical (ISRG) reported a deceleration in its revenue growth rate to 21% in the first half of 2024, matching its full-year 2023 growth but falling short of its long-term average of 14%–15%. The company’s operating margin reached 41% in H1 2024, above its 2023 full-year level of 37% and its long-term target range of 35%–40%. First-half earnings per share growth exceeded 30%, compared with 22% for full-year 2023, with an outlook for 28% for 2024. Free cash flow margin also improved to 31% in H1 2024, up from its long-term average of 22%. The company spent $1.5 billion on share buybacks in H1 2024, following $2.3 billion in 2023, maintaining its focus on capital returns despite slower growth. Global procedure growth is expected to stabilize at 13.5%–15.5% for the year, with results likely near the midpoint. U.S. market share remains robust at about 60% of total revenue, with system placements rising 24% in Q2 to 267 units, including 27 new installations in ambulatory surgery centers (ASCs), where 20 were reconditioned Xi units. International placements grew 12% to 201 systems, with Asia up 9%, Europe 8%, and rest-of-world up 27%. China’s quota still limits installations to around 250 systems. Jamie Samath, CFO, attributed the growth slowdown to a modest impact from lower Affordable Care Act subsidies, though no significant disruptions were observed in Q2. Competition is framed as centered on software capabilities, AI features, and ecosystem integration, rather than just hardware. The company also highlighted its Case Insights and My Intuitive+ tools, priced at approximately $40,000 per system annually, with no opt-outs noted after their first-year anniversary in Q2. A new table-mounted robotic system, Ottava (from Medtronic), is expected to launch in 2027, though its adoption may face constraints related to patient size and procedure breadth. Bariatric surgery, once a key driver at over 5% of global procedures, now accounts for slightly above 2% of total da Vinci operations. The total addressable procedure market remains at 9 million, expanding steadily over the past three years. Cardiac procedures, cleared for use in the U.S., Korea, and Japan, represent a 160,000-procedure opportunity. In the U.S., adoption metrics show prostate procedures in the fourth quartile, cholecystectomy in the second, and appendectomy in the first quartile.