Intuitive Surgical
ISRG · NasdaqA $450M settlement, not the business, cut operating profit
The repair settlement equals 14.8% of revenue, more than the 10.9 point fall in operating margin, while gross profit rose 25.4%.
Q3 FY2026, the quarter to Sep 30, 2026 · 10-Q filed Oct 21, 2026
- Operating margin
- 19.4%
- Net income
- $522.8M
- Free cash flow, quarter
- $1.1B
Largest source of revenue: Instruments and accessories, 59.0% of the total.
Where Intuitive Surgical's money goes
- 01
A $450M settlement, not the business, cut operating profit
The repair settlement equals 14.8% of revenue, more than the 10.9 point fall in operating margin, while gross profit rose 25.4%.
Why it matters
Operating income fell 22.0% to $592.6M from $759.7M a year earlier, and sat well below the $971.9M of the quarter before. The cause sits on one line: a $450M charge to settle a hospital class action over the service and repair of da Vinci instruments. The charge was larger than the quarter's research and development spending of $408.3M. Gross profit, by contrast, rose 25.4% to $2.08B on revenue up 21.7%.1
The filing describes the settlement as a one-time payment with mutually agreed injunctive relief, reached without any admission of liability or wrongdoing. It still needs preliminary and final court approval, and class members may object. The charge sits in this quarter's operating expenses, with a matching liability in accrued liabilities. Net income attributable to Intuitive fell 25.8% to $522.8M.1
AnalysisAnalysis: the core economics moved the other way. The charge alone is 14.8% of revenue, while operating margin fell 10.9 points to 19.4%, so the margin before the charge widened year on year. The dispute concerns the instrument line, which earns 59.0% of revenue, so the charge is a cost of how that line is serviced, not a sign of weaker demand.
- 02
Each operation earns more, just before planned price cuts
Instrument revenue rose 18.3% on about 906,000 procedures against 797,000, but the company plans pricing actions it expects to lower revenue per procedure.
Why it matters
Instruments and accessories brought in $1.80B, 59.0% of revenue, up 18.3%. Da Vinci procedures rose to about 906,000 from about 797,000, and Ion procedures to about 49,700 from about 37,900. The filing attributes the gap between instrument growth and procedure growth to higher revenue per procedure from the instrument mix of the fifth-generation and single-port systems, plus faster Ion growth.1
The filing then describes pricing actions from the first half of next year: more uses for a subset of core instruments on the fourth- and fifth-generation platforms, and volume-based pricing, both meant to lower the instrument cost per procedure for hospitals. It also expects price cuts in China from next quarter. Together, the company expects these to reduce instrument revenue per procedure by a few percent once fully in place.1
AnalysisAnalysis: the mix gain and the price cut pull in opposite directions. The extended-use instruments target benign, lower-acuity cases where hospitals are most cost sensitive, which reads as a way to keep those cases on the robot. For instrument revenue to keep outgrowing procedures, the richer mix from new systems would have to outweigh a lower take per case.
- 03
Cash flow outran profit while the settlement stays unpaid
Operating cash flow was 2.34 times net income, and the $450M settlement, still accrued, equals 40.5% of the quarter's $1.11B free cash flow.
Why it matters
Operating cash flow was $1.22B against $841.0M a year earlier, and free cash flow was $1.11B against $735.6M, or 36.4% of revenue, with capital spending at only 3.7% of revenue. Over the same period net income attributable to Intuitive fell 25.8% to $522.8M.1
The settlement was charged against earnings but not yet paid. The filing records a matching liability in accrued liabilities and says the rise in those liabilities came mainly from litigation accruals recorded this quarter.1
Below the operating line, interest and other income fell 20.6% to $75.8M, which the filing attributes to lower cash and investment balances after share repurchases and an acquisition, and to lower interest rates. Diluted shares fell to 351.6M from 361.8M.1
AnalysisAnalysis: a charge that cuts profit without moving cash widens the gap between the two, so this quarter's cash is flattered in timing, not in kind. Once the court approves the settlement, the payment leaves in a later period, and at $450M it equals 40.5% of this quarter's free cash flow.
- 04
Hospitals added robots faster than they added operations
Placements rose to 546 from 427 and systems revenue grew 30.3%, while the filing reports procedures per robot up only modestly.
Why it matters
Da Vinci placements rose to 546 from 427 a year earlier, and 315 of them, 57.7%, were the fifth-generation system. The installed base reached about 12,094 systems from about 10,763. Systems revenue rose 30.3% to $769.1M, faster than any other line, and its share of revenue rose 1.66 points to 25.2%. The filing names higher operating lease revenue and lease buyouts alongside more placements.1
The filing ties the placements to demand for more capacity and to customers trading in fourth-generation robots. It reports procedures per system up only modestly, and links slower U.S. procedure growth partly to the end of enhanced ACA premium subsidies. The average selling price was about $1.61M, helped by geographic and product mix and partly offset by higher discounts.1
AnalysisAnalysis: a placement is the start of an instrument stream, not the stream itself. Robots placed ahead of use earn instrument revenue only as procedures per system rise. If utilization stays flat, today's fast systems growth would show up later as slower instrument growth per robot, and instruments are the line that compounds.
Sources
- 1.Intuitive Surgical 10-Q for the period to 2026-09-30 (the filing), Oct 21, 2026, read Nov 2, 2026
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Growth, profit and margin
Revenue went from $600.8M in FY2007 to $10.1B in FY2025, the operating margin from 34.4% to 29.3%, over 18 years.
- Revenue$10.1B
- Operating income$2.9B
- Operating margin29.3%
- Period
- Q3 FY2026
- Revenue
- $3.0B
- Operating income
- $592.6M
- Operating margin
- 19.4%
- Net income
- $522.8M
- Free cash flow
- $1.1B
Does the profit turn into cash?
Q3 FY2026: free cash flow of $1.1B against net income of $522.8M in the quarter.
- Operating cash flow$3.0B
- Capital expenditure$539.8M
- Free cash flow$2.5B
- Net income$2.9B
Capital expenditure is drawn below the axis as cash out. Cash conversion is operating cash flow over net income, shown in the tooltip for years with a profit.
Financial data and sources
How the revenue mix has shifted
Each breakdown the filing reports, as shares of revenue, for every period it restates.
REVENUE AND CONTRACT ACQUISITION COSTS - Revenue Disaggregated by Types and Geography (Details). The filing restates this breakdown for 1 period.
Click a member to isolate it across the years shown.
The figures
Margins, cash and growth for the period, each with what it was computed from.
Where revenue comes from
Every breakdown the filing reports for the period, with each item's share.
Revenue streams
| Instruments and accessories | $1.8B | 59.0% |
| Systems | $769.1M | 25.2% |
| Service | $482.2M | 15.8% |
GeographicDistribution
| U.S. | $2.1B | 67.7% |
| Outside of the U.S. (“OUS”) | $985.7M | 32.3% |
What it costs
The cost lines beneath operating income, each as a share of revenue, then the operating result.
Costs are reported by function: what it cost to make what was sold, then the expenses of selling, developing and administering.
| Cost line | Q3 FY2026 | Of revenue | Source |
|---|---|---|---|
| Total cost of revenue | $964.4M | 31.6% | Source10-Q, us-gaap:CostOfGoodsAndServicesSold, as reported in the 10-Q filed 2026-10-21 |
| Income from operations | $592.6M | 19.4% | Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-10-21 |
Operating figures the company states
From the text of the filing rather than its statements, each with the sentence that states it.
View source
As of September 30, 2026, we have an installed base of 2,023 da Vinci 5 surgical systems, of which 177 systems are located in geographic markets outside of the U.S.
View source
During the third quarter of 2026, we placed 315 da Vinci 5 systems, compared to 240 systems in the third quarter of 2025.
View source
As of September 30, 2026, we had a da Vinci surgical system installed base of approximately 12,094 systems, an increase of 12% compared to an installed base of approximately 10,763 systems as of September 30, 2025.
View source
Approximately 906,000 da Vinci procedures were performed during the three months ended September 30, 2026, a growth of 14% compared to approximately 797,000 da Vinci procedures for the three months ended September 30, 2025.
View source
We are in the early stages of launching our da Vinci SP surgical system, and we have an installed base of 487 da Vinci SP surgical systems as of September 30, 2026.
View source
The da Vinci surgical system ASP, excluding systems placed under fixed-payment or usage-based operating lease arrangements, Ion systems, and the impact of specified-price trade-in rights, was approximately $1.61 million for the three months ended September 30, 2026, compared to approximately $1.60 million for the three months ended September 30, 2025.
View source
546 da Vinci surgical systems were placed during the three months ended September 30, 2026, an increase of 28% compared to 427 systems during the three months ended September 30, 2025.
View source
As of September 30, 2026, we had an Ion system installed base of approximately 1,152 systems, an increase of 21% compared to an installed base of approximately 954 systems as of September 30, 2025.
View source
Approximately 49,700 Ion procedures were performed during the three months ended September 30, 2026, a growth of 31% compared to approximately 37,900 Ion procedures for the three months ended September 30, 2025.
View source
56 Ion systems were placed during the three months ended September 30, 2026, an increase of 12% compared to 50 systems during the three months ended September 30, 2025.
The statements, as filed
The income statement, cash flow statement and balance sheet in the company's own order and words. Every line links to the filing.
Income statement31 lines, as presented in the 10-Q
Cash flow statement2 lines, as presented in the 10-Q
Year to date, as a quarterly filing reports it.
| Line | Q3 FY2026 | A year earlier | Change | Source |
|---|---|---|---|---|
| Operating activities: | ||||
| Net income | $524.4M | $709.2M | -26% | Source10-Q, us-gaap:ProfitLoss, as reported in the 10-Q filed 2026-10-21 |
| Statement of Cash Flows | ||||
| Cash, cash equivalents, and restricted cash, end of period | $3.02B | $2.85B | +6.1% | Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-10-21 |
Balance sheet28 lines, as presented in the 10-Q
About this data
- Source
- Intuitive Surgical 10-Q, accession 0001035267-26-000071, filed Oct 21, 2026, read on Nov 2, 2026.
- History
- From the SEC's XBRL company facts, the value from the latest filing that stated each period.
- Reading
- Paragraphs marked Analysis are CXProWealth's reading; everything else is the filing's own numbers and words, or a cited source.
- Version
- methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02
What holds Intuitive Surgical's model up, and what could bend it
Competitive edge
Every installed robot keeps selling instruments and service
Instruments at 59.0% and service at 15.8% of revenue come from about 12,094 installed robots, not from new hospital purchases.
The detail
Instruments and accessories were $1.80B and service $482.2M, against $769.1M from systems. The filing explains why instruments repeat: they have limited lives and expire or wear out with use. Service contracts are signed when systems are sold or leased and have generally been renewed at the end of the initial term. Service revenue rose 21.8%, which the filing attributes mainly to a larger installed base.1
AnalysisAnalysis: the advantage holds because each robot ties a hospital's surgeons, training and instrument supply to one platform for years. Revenue then follows surgical activity more than hospital capital budgets, which is why the instrument and service lines kept growing in a quarter when the operating line fell.
The new generation brings instruments only it can use
The fifth-generation system made 315 of 546 placements, and its force feedback instruments work only on it, enriching the instrument mix.
The detail
The fifth-generation installed base reached 2,023, 16.7% of about 12,094 da Vinci systems. The filing says its force feedback instruments are compatible only with that system, and the single-port system, with 487 installed, has its own instrument set. The filing credits both for higher instrument revenue per procedure, and the new system for better product mix in service revenue and the system selling price.1
Research and development rose 24.0% to $408.3M, 13.4% of revenue, which the filing attributes to an expanded portfolio of product development programs. The new system's cleared uses keep widening, including European certification this quarter for adult cardiac surgery and for its force feedback instruments.1
AnalysisAnalysis: each generation resets the base. Trade-ins move hospitals onto the new platform, and its newest features need instruments only that platform takes, so the upgrade cycle renews the instrument relationship rather than merely replacing hardware.
Overhead grew far slower than revenue
Selling and administrative costs rose 10.5% against revenue growth of 21.7%, falling 2.1 points to 20.8% of revenue.
The detail
Selling, general and administrative costs were $633.4M, up 10.5%, which the filing attributes to more staff and higher pay. Revenue grew 21.7%, so these costs fell to 20.8% of revenue. Gross margin widened 2.0 points to 68.4%, in part, the filing says, from fixed overhead spread over more volume.1
The capacity was built earlier. Capital spending was $1.06B in fiscal 2023, 14.9% of that year's $7.12B revenue, and $539.8M last fiscal year, 5.4% of $10.06B. This quarter it was $113.1M, 3.7% of revenue.1
AnalysisAnalysis: the edge is scale already paid for. Once factories and field teams are in place, each extra procedure adds instrument revenue with little added overhead. The filing expects depreciation and acquisition amortization to keep rising, so part of that leverage will be absorbed in cost of revenue.
What to watch
Repaired instruments challenge the line earning 59.0% of revenue
The one updated risk factor covers remanufactured instruments and unauthorized service, and an appeals court revived a servicer's antitrust case this quarter.
The detail
The filing's only updated risk factor says third parties offer remanufactured or unauthorized instruments, including some remanufactured for use beyond their labeled useful life, and unauthorized service on the robots. The company says this could reduce revenue, raise patient safety risk and bring negative publicity, and that laws governing how third parties interact with its systems could also hurt the business.1
An appeals court reversed the judgment Intuitive had won against an instrument servicer and sent the case back; the company has petitioned for rehearing and says it cannot estimate any loss. A second servicer's appeal is pending. The $450M class settlement includes agreed injunctive relief, whose terms the quarterly report does not set out.1
AnalysisAnalysis: this is the risk aimed most directly at the profit engine, since instruments and accessories earned $1.80B, 59.0% of revenue. If repair routes widen, the defence shifts from litigation to performance, safety and price, the direction the planned extended-use instruments already take.
China combines fewer placements with national price limits
The filing reports fewer China placements than expected, domestic rivals, delayed tenders, and a national pricing framework that is prompting instrument price cuts.
The detail
The filing says competition from domestic robot makers, industrial policy measures and a government governance campaign that delays or cancels hospital tenders led to fewer systems placed in China than the company anticipated. It also links lower procedure growth in China to fewer systems placed in recent quarters.1
China's national healthcare security regulator set a unified framework requiring provinces to keep robotic surgery prices within mandated limits. The company says the limits applied so far have not been material, but it expects to cut instrument prices in China from next quarter, lowering instrument revenue per procedure. Revenue outside the U.S. was $985.7M, 32.3% of the total.1
AnalysisAnalysis: in China the usual sequence runs backwards. Elsewhere placements lead and procedures follow; there, with fewer new robots, procedure growth has to come from existing systems while the price per case falls.
Part of the gross margin gain came from tariff refunds
Gross margin rose to 68.4% from 66.4%, and the filing names refunds of past tariffs first among the causes, with further refunds uncertain.
The detail
The filing attributes the product margin gain mainly to refunds of tariffs the Supreme Court ruled unlawful, paid in earlier periods, and to fixed overhead leverage. Refunds are recognized only when realized or realizable, the government has appealed the refund order, and the filing calls the amount and timing of further refunds uncertain.1
The supply chain stays exposed. Most instruments are made in Mexico, most endoscopes in Germany, and some materials come from China. The filing flags possible Chinese export limits on rare earths and magnets, longer lead times and price swings for memory chips and circuit boards, and reliance on sole- and single-source suppliers.1
AnalysisAnalysis: a quarter without refunds is the cleaner read of the underlying margin. If gross margin holds near 68.4% once refunds stop, scale is doing the work; if it slips back toward 66.4%, the refunds carried most of the gain.
Sources
- 1.Intuitive Surgical 10-Q for the period to 2026-09-30 (the filing), Oct 21, 2026, read Nov 2, 2026
Intuitive Surgical, further in
Member research, then your own questions on ChatGPT.
What could change the outlook
What Intuitive Surgical's numbers depend on from here, read from the filing: the conditions behind this period's margins and growth, and where a change would show first.
- What instrument revenue depends on once prices change
How procedure growth, the new-generation mix and the coming pricing actions interact, and which of them carries the instrument line from here.
- What the repair settlement closes, and what stays open
The open cases, the settlement's conditions and what they could mean for the instrument and service lines that fund the business.
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Have a question about Intuitive Surgical?
Explore its profit drivers, competitive edge, risks, or your own investment and business questions with CXProWealth on ChatGPT.
- How could extended-use instruments and volume pricing change Intuitive Surgical's instrument revenue per da Vinci procedure?
- Why was Intuitive Surgical's operating cash flow 2.34 times net income, and how will paying the $450M settlement change that?
- What happens to Intuitive Surgical's instrument revenue if more hospitals use remanufactured or third-party repaired instruments?
Business Lens describes Intuitive Surgical from its own filings with the SEC. It is not a view on its shares, a target, or advice to buy, sell or hold anything; figures are as filed and may be restated by the company later. The filing, the dates and the version are under the financial data above.