Intuitive Surgical shares tumble 34 per cent as tariff fears and recall dampen growth outlook
Wall Street remains divided, with Bernstein projecting 83 per cent upside while HSBC downgrades the stock, as investors weigh strong fundamentals against supply chain headwinds.
Intuitive Surgical shares have shed a third of their value this year, significantly underperforming peers Medtronic and Stryker, following a deceleration in its full-year da Vinci procedure growth forecast. The medical device giant now expects procedure growth of 13.5 per cent to 15.5 per cent for 2026, a notable slowdown from the approximately 18 per cent pace that investors had anticipated. The decline was further compounded by tariff impacts, a Class II recall of da Vinci SP drapes, and moderation in US elective procedures.
Despite the sharp sell-off, the company delivered a fifth consecutive quarterly earnings beat. For the second quarter of 2026, Intuitive Surgical reported non-GAAP earnings per share of $2.80, surpassing the consensus estimate of $2.50. Revenue grew 18.5 per cent year-on-year to $2.89 billion, while non-GAAP gross margin expanded to 70.0 per cent from 67.9 per cent in the prior year period. The company also placed 246 da Vinci 5 systems in the quarter, with management comparing the trajectory to the previous da Vinci Xi cycle, which took approximately seven years to reach peak trade-in volumes.
Headwinds from global trade policies are now embedded in the company’s financial outlook. Management has factored in a 1.0 per cent revenue drag from tariffs into its gross margin guidance, citing supply chain exposure with instruments manufactured in Mexico, endoscopes in Germany, and certain materials sourced from China. The company warned that further escalation in trade tensions could materially impact results, adding to investor concerns about margin compression.
Regulatory and operational noise also weighed on sentiment. A Class II recall affecting 11,113 da Vinci SP drapes added to the negative market reaction, while moderation in US elective procedures, linked to the expiration of ACA subsidies, further pressured growth expectations. These factors contributed to a valuation gap, with the stock trading at a trailing P/E of 42 and a forward P/E of 34, both premium to the broader medical device group.
Wall Street analysts remain largely bullish, though opinions on the near-term outlook are divided. Bernstein has set a price target of $685, implying an 83 per cent upside, citing the da Vinci 5 upgrade cycle as a key growth driver. In contrast, HSBC downgraded the stock from Buy to Hold and cut its price target from $604 to $391. The average consensus target sits at $477.25, suggesting the stock is trading roughly 28 per cent below analyst expectations, while peers like Medtronic and Stryker have seen much smaller declines year-to-date.
