Intuitive Surgical Inc.
10/21/2026 | Press release | Distributed by Public on 10/21/2026 15:15
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management's discussion and analysis is provided in addition to the accompanying Condensed Consolidated Financial Statements and Notes thereto. Management's discussion and analysis of financial condition as of September 30, 2026, and results of operations for the three and nine months ended September 30, 2026, should be read in conjunction with management's discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2025.
We refer to the years ending December 31, 2026, 2025, and 2024, as "2026," "2025," and "2024," respectively.
Period-over-period changes are calculated based upon the respective underlying non-rounded data. Unless the context requires otherwise, we are referring to Intuitive Surgical, Inc. and its consolidated subsidiaries when we use the terms "Intuitive," the "Company," "we," "our," or "us."
Forward-Looking Statements
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements relate to expectations concerning matters that are not historical facts. Statements using words such as "estimates," "projects," "believes," "anticipates," "plans," "expects," "intends," "may," "will," "could," "should," "commit," "would," "seek," "potential," "targeted," and similar words and expressions are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to the following: statements related to future results of operations; future financial condition; the goals we share with our customers, including improving patient outcomes; our financing plans and future capital requirements; our potential tax assets or liabilities, including the expected impact of global minimum tax rules; statements based on current expectations, estimates, forecasts, projections, and assumptions about the economies and geographic markets in which we operate; our beliefs and assumptions regarding these economies and markets; expectations regarding future procedure volumes and adoption rates; anticipated future depreciation, amortization, and research and development expenses; expectations regarding future system placements, including the factors that may impact such placements; statements regarding competition and competitive dynamics; expectations regarding the timing and receipt of regulatory clearances, approvals, and certifications; expectations regarding the integration of acquisitions, including the transition to a direct sales model in certain geographic markets; statements regarding the expansion of our product offerings and commercialization of new products; expectations regarding the impact of tariffs and other trade measures, including the amount and timing of tariff refunds; expectations regarding future lease buyout activity; the proposed settlement of the antitrust class action litigation, including the receipt of preliminary and final court approval, and the extent of any class member objections; and expectations regarding our liquidity and capital expenditures. These forward-looking statements are necessarily estimates reflecting the judgment of our management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These forward-looking statements should be considered in light of various important factors, including, but not limited to, the following: the overall macroeconomic environment, which may impact customer spending and our costs, including tariffs, the levels of inflation, and interest rates; the conflict in Ukraine; conflicts in the Middle East, including Israel and Iran; disruption to our supply chain, including increased difficulties in obtaining a sufficient supply of materials; curtailed or delayed capital spending by hospitals; the impact of global and regional economic and credit market conditions on healthcare spending; delays in obtaining new product approvals, clearances, or certifications from the United States ("U.S.") Food and Drug Administration ("FDA"), comparable regulatory authorities, or notified bodies; the risk of our inability to comply with complex FDA and other regulations, which may result in significant enforcement actions; regulatory approvals, clearances, certifications, and restrictions or any dispute that may occur with any regulatory body; healthcare reform legislation in the U.S. and its impact on hospital spending, reimbursement, and fees levied on certain medical device revenues; changes in hospital admissions and actions by payers to limit or manage surgical procedures; the expiration of enhanced Affordable Care Act premium subsidies; pricing limits and reimbursement decisions for robotic-assisted procedures outside of the U.S., including the implementation of a unified national pricing framework in China and procedure reimbursement in Japan; the timing and success of product development and customer acceptance of developed products; the results of any collaborations, in-licensing arrangements, joint ventures, strategic alliances, or partnerships, including the joint venture with Shanghai Fosun Pharmaceutical (Group) Co., Ltd.; our completion of and ability to successfully integrate acquisitions, including the recently completed acquisition of the da Vinci and Ion distribution businesses in Italy, Spain, and Portugal and the transition from a distributor to a direct sales model in those markets; intellectual property positions and litigation; competition from companies offering alternative surgical approaches or robotic-assisted surgical systems, including domestic competitors in certain geographic markets, such as China; governmental quotas, tender processes, and governance campaigns affecting system placements in China; risks associated with our operations and any expansion outside of the U.S.; unanticipated manufacturing disruptions or the inability to meet demand for products; our reliance on sole- and single-sourced suppliers; extended lead times and price volatility for certain semiconductor components; the results of legal proceedings to which we are or may become a party; the risk that the proposed settlement of the antitrust class action litigation
does not receive preliminary or final court approval on the agreed terms or at all, including as a result of objections by class members, or that any approval is appealed; adverse publicity regarding us and the safety of our products and adequacy of training; the offering of remanufactured or unauthorized instruments and accessories, or unauthorized service on our systems, by third parties; the impact of changes to tax legislation, guidance, and interpretations; changes in tariffs, trade barriers, and regulatory requirements (including changes to tariffs imposed by the U.S. on imports from various countries, including Mexico, where we currently manufacture a significant majority of our instruments and accessories, Germany, where a majority of our endoscopes are manufactured, and China, where we currently import certain materials); the amount and timing of any refunds of tariffs imposed under the International Emergency Economic Powers Act, which remain subject to review by U.S. Customs and Border Protection and ongoing legal proceedings; hospital staffing constraints and labor availability; cybersecurity risks, including risks to our supply chain and confidential and proprietary information; and other risks and uncertainties, including those listed under the caption "Risk Factors." Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report and which are based on current expectations and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those risk factors described throughout this filing and identified under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025, as updated by our other filings with the Securities and Exchange Commission ("SEC"). Our actual results may differ materially and adversely from those expressed in any forward-looking statement, and we undertake no obligation to publicly update or release any revisions to these forward-looking statements, except as required by law.
Trademarks
Product and brand names and logos, including Intuitive, da Vinci, and Ion, are trademarks or registered trademarks of Intuitive Surgical, Inc. or one of its subsidiaries or of their respective owners. Additional information about our trademarks can be found on our website at www.intuitive.com/trademarks. Although we reference our trademarks located on our website, this list of trademarks and any other materials on our corporate website are not incorporated by reference into this Form 10-Q or any of our other filings under the Securities Act of 1933, as amended, or the Exchange Act.
Overview
As part of our mission, we believe that minimally invasive care is life-enhancing care. Since our founding over 30 years ago, we have been delivering on this mission by combining innovative technology with clinical expertise to advance minimally invasive care. We do so by providing a comprehensive ecosystem that includes robotic-assisted systems, instruments and accessories, customer learning, and support services all connected by a digital portfolio that enables actionable insights across the care continuum.
To ensure continued alignment with the patients and healthcare communities we serve, we have adopted the Quintuple Aim as our "north star." Starting foremost with a focus on patients, we seek to demonstrate that our products can deliver better outcomes that are validated by rigorous peer-reviewed evidence. Second, we aim to work with clinicians and care teams to create better patient experiences that enable patients to more quickly get back to what matters most in their lives, with fewer complications, less pain and discomfort, and greater predictability. Third, we aim to enable the care teams who use our platforms and technology-enabled ecosystem to have better experiences that augment their skills while reducing fatigue and increasing efficiency and reliability. Fourth, we aim to help lower the total cost of care per patient episode when compared with existing treatment alternatives, providing a return on investment for hospitals and healthcare systems and value for payers. Lastly, we aim to expand access to high-quality minimally invasive care by partnering with hospitals, healthcare systems, and patient advocacy groups to address barriers to care.
Open surgery remains a prevalent form of surgery and is used in almost every area of the body. However, the large incisions required for open surgery create trauma to patients, typically resulting in longer hospitalization and recovery times, increased hospitalization costs, and additional pain and suffering relative to minimally invasive surgery ("MIS"), where MIS is available. For over four decades, MIS has reduced trauma to patients by allowing selected surgeries to be performed through small ports rather than large incisions. MIS has been widely adopted for certain surgical procedures.
Da Vinci surgical systems enable surgeons to extend the benefits of MIS to many patients who would otherwise undergo a more invasive surgery. Our da Vinci surgical systems are designed to address certain limitations of traditional open surgical or conventional MIS approaches through enhancements in visualization, precision, and ergonomics. Our da Vinci products fall into five broad categories: da Vinci surgical systems, da Vinci instruments and accessories, da Vinci stapling, da Vinci energy, and da Vinci vision. We provide a comprehensive suite of systems, learning, and services offerings that are digitally enabled and aim to reduce variability by providing dependable, consistent functionality and an integrated user experience. We have a global network of field service engineers and distributors through which we deliver a suite of services, including installation, repair, maintenance, around-the-clock technical support, and system monitoring. We also offer customized analytics and consultation to hospitals for program optimization.
We have commercialized the following da Vinci surgical systems: the da Vinci standard surgical system in 1999, the da Vinci S surgical system in 2006, the da Vinci Si surgical system in 2009, the fourth-generation da Vinci Xi surgical system in 2014, and the fifth-generation da Vinci 5 surgical system in 2024. We extended our fourth-generation platform by adding the da Vinci X surgical system, commercialized in 2017 and targeted at more cost-sensitive geographic markets.
In March 2024, we obtained FDA clearance for our da Vinci 5 surgical system, our next-generation multi-port system, for use in all surgical specialties and procedures indicated for da Vinci Xi, except for cardiac and pediatric indications as well as one contraindication related to the use of force feedback in hysterectomy and myomectomy surgical procedures. In October 2024, we obtained regulatory clearance in South Korea for the da Vinci 5 surgical system for use in urologic, general, gynecologic, thoracoscopic, thoracoscopically-assisted cardiotomy, and transoral otolaryngology surgical procedures. In June 2025, we obtained regulatory clearance in Japan for the da Vinci 5 surgical system for use in all surgical specialties and procedures indicated for da Vinci Xi, including select cardiac indications. In July 2025, we obtained European certification in accordance with Regulation (EU) 2017/745 of the European Parliament and of the Council of 5 April 2017 on medical devices (the "EU MDR") for the da Vinci 5 surgical system for adult and pediatric use in minimally invasive endoscopic procedures across abdominopelvic and thoracoscopic surgical procedures, including urologic, gynecologic, and general laparoscopic procedures. In select geographic markets outside of the U.S. ("OUS") where we have obtained regulatory clearance, we have launched our da Vinci 5 surgical system. 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.
Additionally, we extended our fourth-generation platform by adding the da Vinci SP surgical system, commercialized in 2018. The da Vinci SP surgical system accesses the body through a single incision, while the other da Vinci surgical systems access the body through multiple incisions. 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. We have received FDA clearance for the da Vinci SP surgical system for urologic, colorectal, general thoracoscopic, and certain transoral procedures. Additionally, the da Vinci SP surgical system has received regulatory clearance in South Korea for a broad set of procedures. The da Vinci SP surgical system has also received regulatory clearance in Japan for the same set of procedures that are currently allowed with the da Vinci Xi surgical system in Japan. In January 2024, the da Vinci SP surgical system received European certification in accordance with the EU MDR for use in endoscopic abdominopelvic, thoracoscopic, transoral otolaryngology, transanal colorectal, and breast surgical procedures, and we are broadening the commercialization of the da Vinci SP surgical system in additional countries and surgical specialties. In August 2024, we obtained regulatory clearance in Taiwan for our da Vinci SP surgical system for use in endoscopic abdominopelvic, thoracoscopic, transoral otolaryngology, transanal colorectal, transanal total mesorectal excision, and breast surgical procedures. We plan to seek FDA clearances for additional indications for the da Vinci SP surgical system and expand the system's regulatory approvals (including for additional indications) in other OUS geographic markets over time. The success of the da Vinci SP surgical system is dependent on positive experiences and improved clinical outcomes for the procedures for which it has been cleared as well as securing additional clinical clearances.
We offer approximately 70 different multi-port da Vinci instruments to provide surgeons with flexibility in choosing the types of tools needed to perform a particular surgery. These multi-port instruments are generally robotically controlled and provide end effectors (tips) that are similar to those used in either open or laparoscopic surgery. We offer advanced instrumentation for the da Vinci 5, da Vinci X, and da Vinci Xi surgical systems, including da Vinci energy and da Vinci stapler products, to provide surgeons with sophisticated, computer-aided tools to precisely and efficiently interact with tissue. The da Vinci 5, da Vinci X, and da Vinci Xi surgical systems generally share the same instruments, whereas the da Vinci Si surgical system uses instruments that are not compatible with the da Vinci 5, da Vinci X, and da Vinci Xi systems. Additionally, we have introduced a unique set of force feedback instruments that are only compatible with our da Vinci 5 surgical system. We also currently offer 16 core instruments on our da Vinci SP surgical system. We plan to expand our da Vinci SP instrument offering over time.
Our learning and enabling technology offerings facilitate access to education and training on our products. Our enabling technologies include telepresence and Advanced Insights Suite (which includes Case Insights and Insights Engine), and our learning technology solutions include Intuitive Learning, SimNow, customized training models, remote case observations, and remote proctoring.
In 2019, we commercialized our Ion endoluminal system, which is a flexible, robotic-assisted, catheter-based platform that utilizes instruments and accessories for which the first cleared indication is minimally invasive biopsies in the lung. Our Ion system extends our commercial offering beyond surgery into diagnostic, endoluminal procedures. The system features an ultra-thin, ultra-maneuverable catheter that can articulate 180 degrees in all directions and allows navigation far into the peripheral lung and provides the stability necessary for precision in a biopsy. Many suspicious lesions found in the lung may be small and difficult to access, which can make diagnosis challenging, and Ion helps physicians obtain tissue samples from deep within the lung, which could help enable earlier diagnosis. Our Ion endoluminal system has received FDA clearance, and OUS regulatory clearances include European certification in accordance with the EU MDR, regulatory clearance in South Korea, and National Medical Products Administration ("NMPA") regulatory clearance in China. We plan to seek additional clearances, approvals, and certifications for our Ion endoluminal system in OUS geographic markets over time.
The success of new product introductions depends on a number of factors, including, but not limited to, pricing, competition, geographic market and consumer acceptance, the effective forecasting and management of product demand, inventory levels, the management of manufacturing and supply costs, and the risk that new products may have quality or other defects in the early stages of introduction.
Trade and Tariffs Update
Beginning in 2025, the U.S. implemented a baseline tariff framework on most imports with higher country- and product-specific rates for certain trading partners, including Mexico, Germany, and China, among others, in some cases giving rise to retaliatory tariffs announced by other jurisdictions. In February 2026, the U.S. Supreme Court ruled that these tariffs levied under the International Emergency Economic Powers Act ("IEEPA") were unlawful, because IEEPA does not authorize the President to impose tariffs.
Following the Supreme Court's ruling, the U.S. imposed a temporary 10% import surcharge under Section 122 of the Trade Act of 1974. The Section 122 surcharge applied to most imports entered for consumption, or withdrawn from warehouse for consumption, from February 24, 2026 through July 24, 2026, subject to certain exemptions, including qualifying goods from Canada and Mexico under the United States-Mexico-Canada Agreement ("USMCA").
Effective July 24, 2026, following the expiration of the temporary Section 122 surcharge, the U.S. imposed additional duties under Section 301 of the Trade Act of 1974 on products from 60 trading partners in connection with determinations by the Office of the U.S. Trade Representative concerning their prohibition and enforcement of bans on imports produced with forced labor. The additional duties are generally imposed at rates of 10% or 12.5%, depending on the originating economy and applicable treatment, and are subject to certain product exemptions. The scope, rates, exemptions, and duration of these and other tariff actions remain subject to further governmental action and could change.
As a result of the Supreme Court's ruling in February 2026, and in response to the order from the U.S. Court of International Trade, the U.S. Customs and Border Protection ("CBP") agency formalized a process for refunds. On April 20, 2026, the CBP launched an online portal to submit IEEPA tariff refund requests. The U.S. Department of Justice has filed a notice of appeal of the refund order in the U.S. Court of Appeals for the Federal Circuit.
IEEPA tariff refunds are accounted for as gain contingencies and are recognized in the financial statements when fully realized or realizable. Refunds attributable to inventory previously sold are recorded as a reduction of cost of revenue. The amount and timing of any additional refunds remain uncertain and are subject to CBP review and the outcome of ongoing legal proceedings.
We currently manufacture a significant majority of our instruments and accessories in Mexicali, Mexico. Most of these products qualify as originating under the USMCA and, therefore, have not been subject to U.S. import tariffs to date. We also import certain raw materials and finished goods from outside of the U.S. that are subject to tariffs, including our endoscopes, a majority of which are manufactured in Germany. In addition, our operations involve importing certain raw materials from China, importing sub-assemblies to support our local da Vinci Xi surgical system manufacturing in China, and selling U.S.-manufactured da Vinci Xi surgical systems into China. These imports into the U.S. and China are subject to tariffs, which we expect to continue to have an adverse impact on the product cost of our da Vinci Xi surgical system in China.
Some of our suppliers have also incurred incremental tariffs and have passed or may pass on those additional costs to us. These pass-through tariffs and other specific tariff actions against steel and aluminum, critical minerals, semiconductors, and other products have not had a material direct impact on our operations to date, but the long-term effect of these and other existing and future tariff actions is difficult to predict.
U.S. tariffs have also given rise to retaliatory trade measures by other countries, including additional restrictions on certain exports. These trade measures could impact the reliability and efficiency of our supply chain if they are imposed on materials important to our production operations. In particular, restrictions on the export of rare earth elements, including magnets, and critical minerals from China could potentially restrict access to components used in many of our products and could have a material adverse effect on our business, financial condition, or results of operations.
During the three and nine months ended September 30, 2026, tariffs and other trade measures recognized in total cost of revenue were $23.4 million and $72.4 million, respectively. During the three and nine months ended September 30, 2026, the Company recognized $27.8 million and $63.7 million, respectively, of refunds related to IEEPA tariffs paid in prior periods, which reduced total cost of revenue. Future changes to tariff rates and the imposition of new tariffs by the U.S. and/or other countries could result in a material impact on our results of operations. The ultimate impact of changes to tariffs and trade barriers will depend on various factors, including the timing, amount, scope, and nature of any tariffs or trade barriers that are implemented, all of which could have a material adverse effect on our business, financial condition, or results of operations.
Other Macroeconomic Environment Factors
Our future results of operations and liquidity could be materially adversely affected by uncertainties surrounding macroeconomic and geopolitical factors, both in the U.S. and globally. These uncertainties include the introduction or modification of tariffs and trade restrictions, as well as supply constraints resulting from price inflation, industry demand, elevated interest rates, and disruptions within commodity markets associated with political conflicts, including those between Russia and Ukraine and conflicts in the Middle East, including those with Iran.
Existing tariffs and country-specific trade requirements, including export license controls between major economies, may contribute to cost inflation in certain raw materials and/or may result in supply constraints due to shipment delays or limited availability of alternative sources for critical materials used in the manufacture of our products. Additionally, lengthened lead times in certain commodity markets are creating price volatility and availability risks with certain raw materials and finished components. Elevated interest rates may also impact the ability of certain suppliers to fund necessary investments in capacity and infrastructure. Deteriorating financial health or insolvency of suppliers, including sole- and single-sourced suppliers, could present heightened supply continuity risks.
In addition, while the conflict in the Middle East has not resulted in any material disruption to the supply of component materials that we source directly or the delivery of our products to customers, we continue to monitor supplier operations, commodity markets, and transportation-related factors, including shipping lanes. These geopolitical factors, including increased defense industry consumption, could adversely affect the availability and cost of raw materials as well as the cost and timing of transporting our products to customers.
We continue to experience extended delivery lead times and price volatility for certain semiconductor components, including memory and printed circuit boards, driven by industry demand for data processing and storage applications. We are actively managing these pressures through ongoing supplier engagement, focused mitigations, and close monitoring of relevant developments. While these dynamics have not had a material impact on our business to date, they may result in material cost pressures and supply constraints in future periods.
Although incidents of cybersecurity breaches have not significantly impacted our supply chain to date, such risks continue to be actively monitored given their potential to disrupt supplier operations and logistics networks. We have mitigation measures in place intended to address potential supply chain disruptions and their impact on our operations.
Certain hospitals are facing significant financial pressure as supply chain constraints and inflation have driven up operating costs and elevated interest rates have made access to credit more expensive. Hospitals may also be adversely affected by the liquidity concerns as a result of the broader macroeconomic environment. Any or all of these factors could negatively impact the number of da Vinci procedures performed or surgical systems placed and have a material adverse effect on our business, financial condition, or results of operations.
Regulatory Activities
Our products must meet the requirements of a large and growing body of international regulations and standards that govern the product safety, efficacy, advertising, labeling, safety reporting, design, manufacture, materials content and sourcing, testing, certification, packaging, installation, use, and disposal of our products. Examples of such standards include electrical safety standards, such as those of the International Electrotechnical Commission, and composition standards, such as the Restriction of Hazardous Substances and the Waste Electrical and Electronic Equipment Directives in the European Union ("EU"). Failure to meet these standards could limit our ability to market our products in those regions that require compliance with such standards.
Our products and operations are also subject to increasingly stringent medical device, privacy, and other regulations by national, regional, federal, state, and local authorities. After a device is placed on the market, numerous FDA and comparable foreign regulatory requirements continue to apply. These requirements include establishment registration, potential quality system and manufacturing audits and inspections, and device listing with the FDA or other foreign regulatory authorities and compliance with medical device reporting regulations, which require that manufacturers report to the FDA or other foreign regulatory authorities if their device caused or contributed, or may have caused or contributed, to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur.
We anticipate that timelines for the introduction of new products and/or indications may be extended relative to past experience as a result of these regulations. For example, we have seen elongated regulatory approval timelines in the U.S. and Europe.
Clearances, Approvals, and Certifications
We have generally obtained the regulatory clearances, approvals, and certifications required to market our products for our targeted surgical specialties within the major geographic markets in which we operate. We have additionally obtained regulatory clearances, approvals, and certifications for the following products over the past several years:
Da Vinci Surgical Systems
Multi-port
•In September 2026, we obtained European certification in accordance with the EU MDR for our da Vinci 5 surgical system for adult cardiac surgery, as well as the use of force feedback instruments on our da Vinci 5 surgical system. In July 2025, we obtained the same certification for adult and pediatric use in minimally invasive endoscopic procedures across abdominopelvic and thoracoscopic surgical procedures, including urologic, gynecologic, and general laparoscopic procedures. In August 2026, we obtained regulatory approval in Brazil in accordance with the Brazil Ministry of Health for our da Vinci 5 surgical system for adult and pediatric use in minimally invasive endoscopic abdominopelvic and thoracoscopic procedures, including the use of force feedback. In July 2026, we obtained regulatory approval in India for the da Vinci 5 surgical system for adult and pediatric use in minimally invasive endoscopic procedures across abdominopelvic and thoracoscopic surgical procedures, including urologic, gynecologic, and general laparoscopic procedures, including the use of force feedback.
In June 2025, we obtained regulatory clearance in Japan for the da Vinci 5 surgical system for use in all surgical specialties and procedures indicated for da Vinci Xi, including select cardiac indications. In October 2024, we obtained regulatory clearance in South Korea for the da Vinci 5 surgical system for use in urologic, general, gynecologic, thoracoscopic, thoracoscopically-assisted cardiotomy, and transoral otolaryngology surgical procedures.
In March 2024, we obtained FDA clearance for our da Vinci 5 surgical system for use in all surgical specialties and procedures indicated for da Vinci Xi, except for cardiac and pediatric indications as well as one contraindication related to the use of force feedback in hysterectomy and myomectomy surgical procedures.
•In April 2026, we obtained NMPA regulatory approval for our E-200 generator in China. In December 2024, we obtained European certification in accordance with the EU MDR for the same generator. The E-200 generator can be used in da Vinci robotic procedures, as well as non-robotic open and laparoscopic procedures, to deliver high-frequency energy for cutting, coagulation, and vessel sealing of tissues.
•In March 2026, we obtained FDA clearance for updates to our force feedback instruments used with our da Vinci 5 surgical system, including approval for extended instrument lives. Five of the six force feedback instruments were cleared for up to 15 uses, while the remaining instrument was cleared for up to 10 uses. Following this clearance, these force feedback instruments are now broadly available for use with our da Vinci 5 surgical system.
•In January 2026, we obtained FDA clearance for the use of our da Vinci 5 surgical system in selected thoracoscopically-assisted cardiac surgical procedures using non-force feedback instruments, including mitral valve repair and replacement, tricuspid valve repair, IMA mobilization for cardiac revascularization, patent foramen ovale closure, atrial septal defect repair, left atrial appendage closure/occlusion, atrial myxoma excision, and epicardial pacing lead placement procedures.
•In September 2025, we obtained regulatory clearance in Japan for our Vessel Sealer Curved for use with our da Vinci 5, da Vinci X, and da Vinci Xi surgical systems for grasping and blunt dissection of tissue, as well as bipolar coagulation and mechanical transection of blood vessels (veins and arteries) up to 7mm in diameter, lymphatic vessels, and tissue bundles that fit within the instrument's jaws. In June 2025, we obtained FDA clearance for the same instrument.
•In September 2024, we obtained FDA clearance for our redesigned 8 mm SureForm 30 stapler and 8 mm SureForm 30 Curved-Tip stapler instruments and reloads for use with our da Vinci 5, da Vinci X, and da Vinci Xi surgical systems in general, thoracic, gynecologic, urologic, and pediatric surgical procedures. In April 2024, we obtained European certification in accordance with the EU MDR for our redesigned 8 mm SureForm 30 stapler and 8 mm SureForm 30 Curved-Tip stapler instruments and reloads for use in general, thoracic, gynecologic, urologic, and pediatric surgical procedures.
Single-port
•In September 2026, we obtained European certification in accordance with the EU MDR for the use of our da Vinci SP surgical system in transvaginal gynecologic procedures. In January 2024, we obtained European certification in accordance with the EU MDR for our da Vinci SP surgical system for use in endoscopic abdominopelvic, thoracoscopic, transoral otolaryngology, transanal colorectal, and breast surgical procedures.
•In December 2025, we obtained FDA clearance for the use of our da Vinci SP surgical system in cholecystectomy, inguinal hernia repair, appendectomy, and nipple sparing mastectomy (NSM) procedures. In May 2025, we obtained FDA clearance for the use of our da Vinci SP surgical system in transanal local excision/resection, a form of minimally invasive surgery performed through a natural orifice to avoid abdominal surgical incisions, for select procedures. In December 2024, we obtained FDA clearance for the use of our da Vinci SP surgical system in colorectal surgical procedures. In July 2024, we obtained FDA clearance for the use of our da Vinci SP surgical system in general thoracoscopic surgical procedures.
•In June 2025, we obtained regulatory clearances in South Korea and Japan for our SP SureForm 45 stapler and our SP SureForm 45 curved-tip stapler for use with our da Vinci SP surgical system. In March 2025, we obtained FDA clearance for our SP SureForm 45 stapler and our SP SureForm 45 curved-tip stapler for use with our da Vinci SP surgical system, which may be particularly useful in thoracic and colorectal surgical procedures.
•In August 2024, we obtained regulatory clearance in Taiwan for our da Vinci SP surgical system for use in endoscopic abdominopelvic, thoracoscopic, transoral otolaryngology, transanal colorectal, transanal total mesorectal excision, and breast surgical procedures.
Ion Endoluminal System
•In October 2025, we obtained FDA clearance for software advancements for the Ion endoluminal system. This software release introduces artificial intelligence across Ion's entire navigational workflow, while also integrating new advanced imaging capabilities to support accurate and efficient lung biopsies.
•In February 2025, we obtained European certification in accordance with the EU MDR to extend the number of uses of our catheter instrument used with our Ion endoluminal system from five to eight uses. In April 2024, we obtained FDA clearance to extend the number of uses of our catheter instrument from five to eight uses.
•In March 2024, we obtained NMPA regulatory approval for our Ion endoluminal system in China. We placed our first Ion systems in China during the third quarter of 2024 and will continue our rollout of the Ion system in China in a measured fashion.
In June 2023, the China National Health Commission published the 14th five-year plan quota for major medical equipment to be sold in China on its official website (the "2023 Quota"). Under the original 2023 Quota, the government will allow for the sale of 559 new surgical robots into China, which could include da Vinci surgical systems as well as surgical systems introduced by others. As of September 30, 2026, including systems that were sold in prior quarters, we have placed 176 da Vinci surgical systems under the original 2023 Quota and 3 da Vinci surgical systems under special approval. Future sales of da Vinci surgical systems under this and any previously published open quotas are uncertain, as they are open to other medical device companies that have introduced robotic-assisted surgical systems and are dependent on hospitals completing a tender process and receiving associated approvals. Our ability to track the number of systems that could be sold under these quotas in the future is limited by provincial and national agencies making such information publicly available.
Since 2022, several provinces in China have implemented significant limits on what hospitals can charge patients for surgeries using robotic-assisted surgical technology, including soft tissue surgery. These limits have impacted the number of procedures performed in those provinces as well as pricing of our instruments and accessories, which have impacted our instruments and accessories revenue. During the second quarter of 2026, China's National Healthcare Security Administration ("NHSA") issued guidelines establishing a unified national framework for robotic-assisted surgery pricing and requiring all provinces to implement robotic-assisted surgery pricing within NHSA-mandated limits in the upcoming quarters. As of the date of this report, the limits that have been implemented have not had a material impact on our business, financial condition, or results of operations, as only a small portion of our installed base in China is currently located in impacted provinces. Beginning in the fourth quarter of 2026, we expect to implement price reductions on instruments sold in China in response to the continued rollout of the NHSA unified national pricing framework. We expect these price reductions to reduce instruments and accessories revenue per procedure. We cannot assure you that the rollout of the NHSA unified national framework or future actions by provincial or national healthcare agencies will not result in further pricing limits or pressures, which could have a material impact on procedure volumes and our instruments and accessories revenue in China.
The Japanese Ministry of Health, Labor, and Welfare ("MHLW") considers reimbursement for procedures in April of even-numbered years. The process for obtaining reimbursement requires Japanese university hospitals and surgical societies,
with our support, to seek reimbursement. There are multiple pathways to obtain reimbursement for procedures, including those that require in-country clinical and economic data. In April 2026, an additional seven da Vinci procedures were granted reimbursement, including inguinal hernia repair, effective in June 2026. Furthermore, certain rectal robotic-assisted procedures have been granted higher reimbursement, as compared to rectal laparoscopic procedure reimbursements. In addition, the MHLW recently introduced incremental reimbursement for hospitals that exceed robotic-assisted procedure volumes of 200 qualifying cases per year. The additional reimbursed procedures have varying levels of conventional laparoscopic penetration and will generally be reimbursed at rates equal to the conventional laparoscopic procedures. Given the reimbursement level and laparoscopic penetration for these additional procedures, there can be no assurance that the adoption pace for these procedures will be similar to prostatectomy or partial nephrectomy, given their higher reimbursement, or any other da Vinci procedure.
Field Actions, Recalls, and Corrections
Medical device companies have regulatory obligations to correct or remove medical devices in the field that could pose a risk to health. The definition of "recalls and corrections" is expansive and includes repair, replacement, inspections, relabeling, and issuance of new or additional instructions for use or reinforcement of existing instructions for use and training when such actions are taken for specific reasons of safety or compliance. These field actions require stringent documentation, reporting, and monitoring worldwide. There are other actions that a medical device manufacturer may take in the field without reporting including, but not limited to, routine servicing and stock rotations.
As we determine whether a field action is reportable in any regulatory jurisdiction, we prepare and submit notifications to the appropriate regulatory agency for the particular jurisdiction. Regulators can require the expansion, reclassification, or change in scope and language of the field action. In general, upon submitting required notifications to regulators regarding a field action that is a recall or correction, we will notify customers regarding the field action, provide any additional documentation required in their national language, and arrange, as required, the return or replacement of the affected product or a field service visit to perform the correction.
Field actions, as well as certain outcomes from regulatory activities, can result in adverse effects on our business, including damage to our reputation, delays by customers of purchase decisions, reduction or stoppage of the use of installed systems, and reduced revenue as well as increased expenses.
Third Quarter 2026 Operational and Financial Highlights
•Total revenue increased by 22% to $3.05 billion for the three months ended September 30, 2026, compared to $2.51 billion for the three months ended September 30, 2025.
•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.
•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.
•Instruments and accessories revenue increased by 18% to $1.80 billion for the three months ended September 30, 2026, compared to $1.52 billion for the three months ended September 30, 2025.
•Systems revenue increased by 30% to $769 million for the three months ended September 30, 2026, compared to $590 million during the three months ended September 30, 2025.
•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. The third quarter 2026 da Vinci surgical system placements included 315 da Vinci 5 systems compared to 240 systems in the third quarter of 2025.
•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.
•Utilization of da Vinci surgical systems, measured in terms of procedures per system per year, increased 2% relative to the third quarter of 2025.
•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.
•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.
•Gross profit as a percentage of revenue was 68.4% for the three months ended September 30, 2026, compared to 66.4% for the three months ended September 30, 2025.
•Operating income decreased by 22% to $592.6 million for the three months ended September 30, 2026, compared to $759.7 million during the three months ended September 30, 2025. Operating income included $215.7 million and $206.0 million of share-based compensation expense related to employee stock plans and $9.3 million and $3.9 million of intangible asset-related charges for the three months ended September 30, 2026, and 2025, respectively.
•Operating income included a charge of $450 million in connection with the settlement of antitrust class action litigation.
•During the three months ended September 30, 2026, we repurchased 7.8 million shares of our common stock at an aggregate cost of $2.94 billion.
•As of September 30, 2026, we had $6.80 billion in cash, cash equivalents, and investments, compared to $9.03 billion as of December 31, 2025. Cash, cash equivalents, and investments decreased by $2.23 billion, primarily driven by cash used for repurchases of common stock, the acquisition of a business, and purchases of property, plant, and equipment, partially offset by cash generated from operations.
Results of Operations
Procedures
We measure the value of procedures performed using our systems based on the benefits they deliver to patients, physicians and care teams, hospital customers, and healthcare systems. We believe that adoption of robotic-assisted procedures occurs by procedure and by country and is driven, over the long term, by the value that our products and services deliver to these stakeholders compared to the next-best alternative treatment options. The combination of our leading-edge technology and clinical expertise with a comprehensive ecosystem of services and support allows us to deliver differentiated outcomes.
We use the number and type of procedures as metrics for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Management believes that the number and type of procedures provide meaningful supplemental information regarding our performance, as management believes procedure volume is an indicator of the rate of adoption of our robotic-assisted medical procedures as well as an indicator of future revenue (including revenue from usage-based operating lease arrangements). Management believes that both it and investors benefit from referring to the number and type of procedures in assessing our performance and when planning, forecasting, and analyzing future periods. The number and type of procedures also facilitate management's internal comparisons of our historical performance. We believe that the number and type of procedures are useful to investors as metrics, because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making, and (2) they are used by institutional investors and the analyst community to help them analyze the performance of our business.
The vast majority of our installed systems are connected via the internet. System logs can also be accessed by field engineers for systems that are not connected to the internet. We utilize certain methods that rely on information collected from the installed systems for determining the number and type of procedures performed that involve estimates and judgments, which are, by their nature, subject to substantial uncertainties and assumptions. Estimates and judgments for determining the number and type of procedures may be impacted over time by various factors, including changes in treatment modalities, hospital and distributor reporting behavior, and system internet connectivity. Such estimates and judgments are also susceptible to algorithmic or other technical errors. In addition, the relationship between the number and type of procedures and our revenues may fluctuate from period to period, and procedure volume growth may not correspond to an increase in revenue. The number and type of procedures are not intended to be considered in isolation or as a substitute for, or superior to, revenue or other financial information prepared and presented in accordance with GAAP.
Da Vinci Procedures
The adoption of robotic-assisted surgery using the da Vinci surgical system has the potential to grow for those procedures that offer greater patient value than non-da Vinci alternatives and competitive total economics for healthcare providers. Our da Vinci surgical systems are used primarily in general, gynecologic, urologic, cardiothoracic, and head and neck surgical procedures. We focus our organization and investments on developing, marketing, and training products and services for procedures in which da Vinci can bring patient value relative to alternative treatment options and/or economic benefit to healthcare providers. Target procedures in general surgery include hernia repair (both ventral and inguinal), colorectal, cholecystectomy, and bariatric procedures. Target procedures in urology include prostatectomy and partial nephrectomy. Target procedures in gynecology include hysterectomy for both cancer and benign conditions and sacrocolpopexy. In cardiothoracic surgery, target procedures include lung resection. In head and neck surgery, target procedures include transoral surgery. Not all indications, procedures, or products described may be available in a given country or region or on all generations of da Vinci surgical systems. Surgeons and their patients need to consult the product labeling in their specific country and for each product in order to determine the cleared uses, as well as important limitations, restrictions, or contraindications.
The following table summarizes the approximate number of procedures performed on da Vinci surgical systems in the U.S. and OUS for the periods presented (number of procedures shown in thousands):
| Three Months Ended September 30, | % Change* | Nine Months Ended September 30, | % Change* | |||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||||||||||||||||
|
U.S.
|
559 | 507 | 10% | 16% | 1,639 | 1,468 | 12% | 14% | ||||||||||||||||||||||||||||||||||||||||||
| OUS | 347 | 290 | 20% | 24% | 1,003 | 837 | 20% | 24% | ||||||||||||||||||||||||||||||||||||||||||
| Total Procedures | 906 | 797 | 14% | 19% | 2,642 | 2,305 | 15% | 18% | ||||||||||||||||||||||||||||||||||||||||||
| ___________ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| * The approximate procedures are rounded to thousands, but the percentage changes are based on unrounded approximate procedures. | ||||||||||||||||||||||||||||||||||||||||||||||||||
Overall. Total da Vinci procedures performed by our customers grew approximately 14% for the three months ended September 30, 2026, compared to approximately 19% for the three months ended September 30, 2025, and grew approximately 15% for the nine months ended September 30, 2026, compared to approximately 18% for the nine months ended September 30,
2025. The third quarter 2026 procedure growth was primarily attributable to growth in general surgery, gynecology, and OUS urology procedures.
U.S. Procedures. U.S. da Vinci procedures grew approximately 10% for the three months ended September 30, 2026, compared to approximately 16% for the three months ended September 30, 2025, and grew approximately 12% for the nine months ended September 30, 2026, compared to approximately 14% for the nine months ended September 30, 2025. The third quarter 2026 U.S. procedure growth was primarily attributable to strong growth in general surgery procedures, most notably cholecystectomy, hernia repair, and appendectomy procedures, as well as growth in gynecological procedures. The growth in general surgery procedures was partially offset by a low double-digit decline in U.S. bariatric procedures, which comprise approximately 2% of our total worldwide da Vinci procedures. We believe that U.S. procedure growth was also modestly negatively impacted by the expiration of enhanced ACA premium subsidies. The extent of the continued impact of these expirations on U.S. procedure volumes remains uncertain.
OUS Procedures. OUS da Vinci procedures grew approximately 20% for the three months ended September 30, 2026, compared to approximately 24% for the three months ended September 30, 2025, and grew approximately 20% for the nine months ended September 30, 2026, compared to approximately 24% for the nine months ended September 30, 2025. The third quarter 2026 OUS procedure growth was primarily attributable to growth in general surgery procedures, most notably hernia repair, colorectal, and cholecystectomy procedures; urologic procedures, most notably prostatectomy and partial nephrectomy procedures; and gynecologic procedures, most notably hysterectomy procedures. The third quarter 2026 OUS procedure growth rate reflects continued da Vinci adoption in European and Asian markets. We saw strong procedure growth in Japan, Germany, India, the United Kingdom, and Italy during the third quarter of 2026, partially offset by lower procedure growth in South Korea compared to the prior year, as the prior-year period benefited from a recovery in procedure volumes following the conclusion of physician strikes, and lower procedure growth in China, which reflects fewer da Vinci surgical systems placed in recent quarters. We believe that growth in these global markets is being driven by increased acceptance among surgeons and health systems, supported by expanded global evidence validating the clinical and economic value of da Vinci procedures as well as increased surgeon training.
Ion Procedures
The adoption of robotic-assisted bronchoscopy using the Ion endoluminal system has the potential to grow if it can offer greater patient value than non-Ion alternatives and competitive total economics for healthcare providers.
In the three months ended September 30, 2026, approximately 49,700 biopsy procedures were performed by our customers with Ion systems, compared to approximately 37,900 in the three months ended September 30, 2025. In the nine months ended September 30, 2026, approximately 140,300 biopsy procedures were performed by our customers with Ion systems, compared to approximately 103,900 in the nine months ended September 30, 2025. The growth in our overall procedure volume reflects a larger installed base of approximately 1,152 systems as of September 30, 2026, an increase of 21% compared to the installed base of approximately 954 systems as of September 30, 2025. Currently, the vast majority of Ion biopsy procedures are performed in the U.S.
System Demand
System placements are driven by procedure growth in most geographic markets. In some markets, system placements are constrained by regulation. In geographies where da Vinci procedure adoption is in an early stage or system placements are constrained by regulation, system sales will precede procedure growth.
The following table summarizes our da Vinci and Ion placements during the periods presented (amounts shown in ones):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
|
Da Vinci Surgical System Placements by Region
|
|||||||||||||||||||||||
| U.S. unit placements | 335 | 263 | 828 | 683 | |||||||||||||||||||
| OUS unit placements | 211 | 164 | 617 | 506 | |||||||||||||||||||
|
Total unit placements (1)
|
546 | 427 | 1,445 | 1,189 | |||||||||||||||||||
|
________
|
|||||||||||||||||||||||
|
(1) Includes the following number of units involving trade-ins:
|
150 | 141 | 413 | 291 | |||||||||||||||||||
|
Ion System Placements by Region
|
|||||||||||||||||||||||
| U.S. unit placements | 44 | 41 | 125 | 133 | |||||||||||||||||||
| OUS unit placements | 12 | 9 | 38 | 20 | |||||||||||||||||||
|
Total unit placements
|
56 | 50 | 163 | 153 | |||||||||||||||||||
During the third quarter of 2026, 546 da Vinci surgical systems were placed compared to 427 systems in the third quarter of 2025. By geography, 335 systems were placed in the U.S., 115 in Europe, 78 in Asia, and 18 in other geographic markets during the third quarter of 2026, compared to 263 systems placed in the U.S., 63 in Europe, 60 in Asia, and 41 in other geographic markets during the third quarter of 2025. The increase in system placements reflects continued customer demand for additional capacity driven by procedure growth, as well as increased demand for our full portfolio of surgical systems, including da Vinci 5 and Xi systems, inclusive of customers trading in fourth-generation da Vinci systems. During the third quarter of 2026, we placed 315 da Vinci 5 systems, compared to 240 systems in the third quarter of 2025.
As of September 30, 2026, we had a da Vinci surgical system installed base of approximately 12,094 systems compared to approximately 10,763 systems as of September 30, 2025. By geography, 6,807 systems were in the U.S., 2,436 in Europe, 2,176 in Asia, and 675 in the rest of the world. The incremental system installed base reflects continued procedure growth and further customer validation that robotic-assisted surgery addresses their Quintuple Aim objectives.
During the third quarter of 2026, 56 Ion systems were placed compared to 50 systems in the third quarter of 2025. By geography, 44 systems were placed in the U.S., 10 in Europe, 1 in Asia, and 1 in other geographic markets during the third quarter of 2026, compared to 41 systems placed in the U.S., 5 in Europe, and 4 in Asia during the third quarter of 2025. In the U.S., where we estimate that Ion's penetration of overall lung biopsy procedures has exceeded the halfway point, our customers' focus has begun to shift from increasing capacity to increasing utilization of their existing systems. As of September 30, 2026, we had an Ion system installed base of approximately 1,152 systems, compared to approximately 954 systems as of September 30, 2025.
System demand in China has been adversely affected by increasing competition from domestic robotic-assisted surgical system manufacturers as well as a broader central government focus on systematic governance. Targeting the healthcare sector, this campaign was initially launched by the Chinese government in July 2023 and has resulted in heightened scrutiny by medical institutions with respect to initiating tenders, with some tenders being canceled or delayed without a timeline. In the third quarter of 2026, the competitive dynamics in China, various measures related to industrial policy, and the effects of this campaign contributed to fewer systems being placed in China than we anticipated. Currently, the extent and impact of the competitive dynamics in China, any additional measures related to industrial policy, and this campaign on our business remain uncertain.
We expect that future placements of da Vinci surgical systems will be impacted by a number of factors: supply chain risks; economic and geopolitical factors; inflationary pressures; high interest rates; hospital staffing constraints; procedure growth rates; evolving system utilization and point-of-care dynamics; capital replacement trends, including a declining number of older generation systems available for trade-in transactions; additional reimbursements in various global geographic markets, such as in Japan; the timing around governmental tenders and authorizations, as well as governmental actions impacting the tender process, such as the governance campaign in China; hospitals' response to the evolving healthcare environment; the timing of when we receive regulatory clearance in our other OUS markets for our da Vinci 5, da Vinci X, da Vinci Xi, and da Vinci SP surgical systems and related instruments; and the customer response.
Demand may also be impacted by the competition we currently face, or expect to face, from companies offering products for open or MIS surgeries, companies providing other therapeutic approaches for target clinical conditions, and companies developing diagnostic solutions that could serve as alternatives to current or planned Intuitive offerings. Companies that have introduced products in the field of robotic-assisted medical procedures, or have made explicit statements about their efforts to
enter the field, include, but are not limited to, the following: Beijing Surgerii Robotics Company Limited; CMR Surgical Ltd.; Distalmotion SA; Harbin Sizhe Rui Intelligent Medical Equipment Co., Ltd.; Johnson & Johnson; Karl Storz SE & Co. KG; Medicaroid Corporation; Medtronic plc; meerecompany Inc.; Noah Medical Corporation; Shandong Weigao Group Medical Polymer Company Ltd.; Shanghai Microport Medbot (Group) Co., Ltd.; Shenzhen Edge Medical Co., Ltd.; and SS Innovations International, Inc.
Many of the above factors will also impact future demand for our Ion endoluminal system, as we extend our commercial offering into diagnostics, along with additional factors associated with a new product introduction, including, but not limited to, our ability to optimize manufacturing and our supply chain, competition, clinical data to demonstrate value, and customer acceptance.
Distribution Channels
We sell our products and services through direct sales organizations in the U.S., Europe (excluding Greece and Eastern European countries), China (through our majority-owned joint ventures, Intuitive Surgical-Fosun Medical Technology (Shanghai) Co., Ltd. and Intuitive Surgical-Fosun (HongKong) Co., Ltd. (collectively, the "Joint Venture"), with Fosun Pharma), Japan, South Korea, India, Taiwan, and Canada. In the U.S. (for some government customers), China, and Japan, we also utilize certain distributors in addition to our direct sales organizations. In the remainder of our OUS geographic markets, we provide our products for sale through distributors.
Seasonality
More than half of the da Vinci procedures performed are for benign conditions, most notably cholecystectomies, hernia repairs, and hysterectomies. These benign procedures and other short-term elective procedures tend to be more seasonal than cancer operations and surgeries for other life-threatening conditions. Seasonality in the U.S. for procedures for benign conditions typically results in higher fourth quarter procedure volume when more patients have met annual deductibles and lower first quarter procedure volume when deductibles are reset. Seasonality outside of the U.S. varies and is more pronounced around local holidays and vacation periods, which have lower procedure volume.
System placements also vary due to seasonality, largely aligned with hospital budgeting cycles. On an annual basis, we typically place a higher proportion of systems in the fourth quarter and a lower proportion in the first quarter as many customer budgets are reset.
Intuitive System Leasing
Since 2013, we have entered into sales-type and fixed-payment operating lease arrangements directly with certain qualified customers as a way to offer customers flexibility in how they acquire systems and expand their robotic-assisted programs while leveraging our balance sheet. These leases generally have commercially competitive terms as compared to other third-party entities that offer equipment leasing. We also enter into usage-based operating lease arrangements with qualified customers that have committed da Vinci programs where we charge for the system and service as procedures are performed, offering greater predictability in costs for customers. We believe that all of these alternative financing structures have been effective and well-received, and we are willing to expand the proportion of any of these structures based on customer needs and demand.
We include systems placed under fixed-payment and usage-based operating lease arrangements, as well as sales-type lease arrangements, in our system placement and installed base disclosures. We exclude operating lease-related revenue, including usage-based revenue, and Ion system revenue from our da Vinci surgical system average selling price ("ASP") computations.
The following table summarizes our da Vinci and Ion system placements under leasing arrangements for the periods presented (amounts in ones):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Da Vinci Surgical System Placements under Leasing Arrangements | |||||||||||||||||||||||
| Fixed-payment operating lease arrangements | 131 | 116 | 379 | 276 | |||||||||||||||||||
| Usage-based operating lease arrangements | 160 | 115 | 409 | 346 | |||||||||||||||||||
|
Total da Vinci surgical system placements under operating lease arrangements
|
291 | 231 | 788 | 622 | |||||||||||||||||||
|
% of Total da Vinci surgical system placements
|
53% | 54% | 55% | 52% | |||||||||||||||||||
| Sales-type lease arrangements | 12 | 12 | 35 | 28 | |||||||||||||||||||
|
Total da Vinci surgical system placements under leasing arrangements
|
303 | 243 | 823 | 650 | |||||||||||||||||||
|
Ion System Placements under Leasing Arrangements
|
|||||||||||||||||||||||
| Fixed-payment operating lease arrangements | 11 | 11 | 47 | 38 | |||||||||||||||||||
| Usage-based operating lease arrangements | 15 | 6 | 46 | 42 | |||||||||||||||||||
| Total Ion system placements under operating lease arrangements | 26 | 17 | 93 | 80 | |||||||||||||||||||
| % of Total Ion system placements | 46% | 34% | 57% | 52% | |||||||||||||||||||
| Sales-type lease arrangements | 2 | 5 | 2 | 10 | |||||||||||||||||||
| Total Ion system placements under leasing arrangements | 28 | 22 | 95 | 90 | |||||||||||||||||||
Variable lease revenue, which is primarily recognized from usage-based operating lease arrangements, has been included in our operating lease metrics. Operating lease revenue was $275 million and $787 million for the three and nine months ended September 30, 2026, respectively, of which $178 million and $504 million, respectively, represented variable lease revenue, primarily related to our usage-based operating lease arrangements. Operating lease revenue was $223 million and $632 million for the three and nine months ended September 30, 2025, respectively, of which $138 million and $380 million, respectively, represented variable lease revenue, primarily related to our usage-based operating lease arrangements.
Revenue for systems sold or placed under a sales-type lease arrangement is recognized upfront whereas revenue for fixed-payment operating lease arrangements is recognized on a straight-line basis over time. Therefore, in a period when the number of operating lease placements increases as a proportion of total system placements, total systems revenue is reduced, which can create volatility in the systems revenue recognized in any given period. We generally set fixed-payment and usage-based operating lease arrangements' pricing at a modest premium relative to purchased systems reflecting the time value of money and, in the case of usage-based operating lease arrangements, the risk that system utilization may fall short of anticipated levels.
Revenue for usage-based operating lease arrangements is recognized as the system is used to perform procedures. Usage-based arrangements create better matching of reimbursements and cost for our customers. They also reduce our customers' overall risk and need for capital outlay. However, because the number of procedures performed in any given period can vary significantly for many reasons, including but not limited to healthcare emergencies, alternative treatment options, and patient preferences, revenue recognized from these arrangements could be highly volatile.
Customers generally do not have the right to exit or terminate a fixed-payment lease without incurring a penalty. Generally, lease transactions generate similar gross profit margins as our sale transactions. However, because of the variability in revenue recognized for usage-based lease arrangements, including our customers' ability to exit or cancel those arrangements prior to the end of the lease term, there is no guarantee that we will recuperate the cost of the usage-based leased system, which, in turn, could adversely impact our gross profit margins if utilization of those systems is different from our expectations.
The following table summarizes our da Vinci and Ion systems installed base under operating leasing arrangements as of the periods presented (amounts in ones):
|
As of
|
|||||||||||
|
September 30, 2026 |
September 30, 2025 |
||||||||||
| Da Vinci Surgical System Installed Base under Operating Leasing Arrangements | |||||||||||
| Fixed-payment operating lease arrangements | 1,581 | 1,379 | |||||||||
| Usage-based operating lease arrangements | 1,974 | 1,736 | |||||||||
| Total da Vinci surgical system installed base under operating lease arrangements | 3,555 | 3,115 | |||||||||
| Ion System Installed Base under Operating Leasing Arrangements | |||||||||||
| Fixed-payment operating lease arrangements | 109 | 123 | |||||||||
| Usage-based operating lease arrangements | 302 | 239 | |||||||||
| Total Ion system installed base under operating lease arrangements | 411 | 362 | |||||||||
Our exposure to the credit risks relating to our lease financing arrangements may increase if our customers are adversely affected by economic pressures or uncertainty, changes in healthcare laws, coverage and reimbursement, or other customer-specific factors. As a result of these macroeconomic factors impacting our customers, we may be exposed to defaults under our lease financing arrangements. Moreover, usage-based operating lease arrangements generally contain no minimum payments; therefore, customers may exit such arrangements without paying a financial penalty to us.
For some operating lease arrangements, our customers are provided with the right to purchase the leased system at certain points during and/or at the end of the lease term. Revenue generated from customer purchases of systems under operating lease arrangements ("Lease Buyouts") was $45 million and $153 million for the three and nine months ended September 30, 2026, respectively, compared to $22 million and $91 million for the three and nine months ended September 30, 2025, respectively. We expect that revenue recognized from Lease Buyouts will fluctuate based on the timing of when, and if, customers choose to exercise such buyout options.
Systems revenue is also affected by the proportion of system placements under operating lease arrangements, which can fluctuate period to period depending on customer preferences, recurring fixed-payment and usage-based operating lease revenue, Lease Buyouts, product mix, ASPs, trade-in activities, customer mix, and specified-price trade-in rights. We generally do not provide specified-price trade-in rights or upgrade rights at the time of a system purchase; however, in conjunction with the rollout of our da Vinci 5 surgical system, there may be limited instances in which certain arrangements include specified-price trade-in rights. For trade-in activities involving operating lease upgrades, depending on the timing and terms of the upgrade transaction, the amount of revenue generated on the initial and new lease arrangements may not, in the aggregate, generate the same amount of revenue that a traditional sale and trade-in transaction would.
Procedure/Product Mix
Our da Vinci surgical systems are generally used for soft tissue surgery for areas of the body between the pelvis and the neck, primarily in general, gynecologic, urologic, cardiothoracic, and head and neck surgical procedures. Within these categories, procedures range in complexity from cancer and other highly complex procedures to less complex procedures for benign conditions. Cancer and other highly complex procedures tend to be reimbursed at higher rates than less complex procedures for benign conditions. Thus, hospitals are more sensitive to the costs associated with treating less complex, benign conditions. Our strategy is to provide hospitals with attractive clinical and economical solutions across the spectrum of procedure complexity. Our fully featured da Vinci 5 and da Vinci Xi surgical systems with advanced instruments (including da Vinci energy and da Vinci stapler products) and our Integrated Table Motion product target the more complex procedure segment. Our da Vinci X surgical system is targeted toward price-sensitive geographic markets and procedures. Our da Vinci SP surgical system complements the da Vinci 5, da Vinci X, and da Vinci Xi surgical systems by enabling surgeons to access narrow workspaces.
Revenue
We recognize up-front revenue from the placement of da Vinci surgical systems through sales or sales-type lease arrangements. Recurring revenue is recognized over time from the placement of da Vinci surgical systems under fixed-payment or usage-based operating lease arrangements, as well as from service arrangements. Recurring revenue is also recognized up-front from the sale of instruments and accessories.
The da Vinci surgical system generally sells for between $0.6 million and $3.1 million (generally inclusive of one year of service), depending on the model, configuration, and geography, and represents a significant capital equipment investment for our customers when purchased. Our instruments and accessories have limited lives and will either expire or wear out as they are used in surgery, at which point they need to be replaced. We generally earn between $900 and $3,700 of instruments and accessories revenue per surgical procedure performed, depending on the type and complexity of the specific procedures performed and the number and type of instruments used. We typically enter into service contracts at the time systems are sold or leased at an annual fee between $95,000 and $225,000, depending on the configuration of the underlying system and the composition of the services offered under the contract. Our system sale arrangements generally include a five-year period of service, with the first year of service generally included in the selling price of the system. These service contracts have generally been renewed at the end of the initial contractual service periods.
Beginning in the first half of 2027, we expect to implement a set of instrument pricing actions, including extending the number of uses for a subset of core EndoWrist instruments on our fourth- and fifth-generation da Vinci platforms and introducing volume-based pricing, both of which are intended to reduce the instrument cost per procedure for our customers. The introduction of these instruments with extended use is the result of investment in our product design and quality, and in our manufacturing processes, and is targeted at reducing cost in a set of benign procedures and lower-acuity cases where customers are more cost sensitive. In addition, beginning in the fourth quarter of 2026, we expect to implement pricing reductions in China in response to the NHSA unified national framework. Taken together, we expect these pricing actions to reduce da Vinci instruments and accessories revenue per procedure by approximately 3% to 5% once fully implemented, excluding the effect of changes in procedure, product, and geographic mix. The ultimate impact of these pricing actions will depend on various factors, including the pace of implementation and customer response, and could differ materially from our expectations.
We generate revenue from our Ion endoluminal system in a business model consistent with the da Vinci surgical system model described above. We generate up-front revenue from the placement of Ion systems through sales or sales-type lease arrangements and recurring revenue over time through fixed-payment or usage-based operating lease arrangements. We also earn recurring revenue from the sale of instruments, accessories, and services. The Ion endoluminal system generally sells for between $500,000 and $815,000 (generally inclusive of one year of service). Our instruments and accessories have limited lives and will either expire or wear out as they are used in procedures, at which point they need to be replaced. We typically enter into service contracts at the time systems are sold or leased at an annual fee between $55,000 and $70,000.
Additionally, as part of our ecosystem of products and services, we provide a portfolio of learning offerings and digital solutions. We do not currently generate material revenue from these offerings.
The following table summarizes our revenue for the periods presented (amounts in millions):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| Revenue | |||||||||||||||||||||||||||||||||||||||||||||||
| Instruments and accessories | $ | 1,797.4 | $ | 1,518.8 | $ | 278.6 | 18% | $ | 5,218.7 | $ | 4,360.6 | $ | 858.1 | 20% | |||||||||||||||||||||||||||||||||
| Systems | 769.1 | 590.4 | 178.7 | 30% | 2,104.8 | 1,687.8 | 417.0 | 25% | |||||||||||||||||||||||||||||||||||||||
| Total product revenue | 2,566.5 | 2,109.2 | 457.3 | 22% | 7,323.5 | 6,048.4 | 1,275.1 | 21% | |||||||||||||||||||||||||||||||||||||||
|
Service
|
482.2 | 395.9 | 86.3 | 22% | 1,388.3 | 1,150.1 | 238.2 | 21% | |||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 3,048.7 | $ | 2,505.1 | $ | 543.6 | 22% | $ | 8,711.8 | $ | 7,198.5 | $ | 1,513.3 | 21% | |||||||||||||||||||||||||||||||||
| U.S. | $ | 2,063.0 | $ | 1,717.6 | $ | 345.4 | 20% | $ | 5,779.5 | $ | 4,885.2 | $ | 894.3 | 18% | |||||||||||||||||||||||||||||||||
| OUS | 985.7 | 787.5 | 198.2 | 25% | 2,932.3 | 2,313.3 | 619.0 | 27% | |||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 3,048.7 | $ | 2,505.1 | $ | 543.6 | 22% | $ | 8,711.8 | $ | 7,198.5 | $ | 1,513.3 | 21% | |||||||||||||||||||||||||||||||||
| % of Revenue - U.S. | 68% | 69% | 66% | 68% | |||||||||||||||||||||||||||||||||||||||||||
| % of Revenue - OUS | 32% | 31% | 34% | 32% | |||||||||||||||||||||||||||||||||||||||||||
We generally sell our products and services in local currencies where we have direct distribution channels. Revenue denominated in foreign currencies as a percentage of total revenue was approximately 27% and 28% for the three and nine months ended September 30, 2026, respectively, and 24% and 25% for the three and nine months ended September 30, 2025, respectively. Fluctuations in foreign currency exchange rates had an unfavorable impact on OUS total revenue of $6 million for the three months ended September 30, 2026, and a favorable impact on OUS total revenue of $34 million for the nine months ended September 30, 2026. Fluctuations in foreign currency exchange rates had a favorable impact on OUS total revenue of $3 million and $9 million for the three and nine months ended September 30, 2025, respectively. The impact of fluctuations in
foreign currency exchange rates was determined by comparing current period revenue converted to USD using exchange rates that were effective in the comparable prior year period, net of the impacts from foreign currency hedging.
We believe that U.S. revenue has historically accounted for the large majority of total revenue due to U.S. patients' ability to choose their provider and method of treatment, reimbursement structures supportive of innovation and MIS, and our initial investments focused on U.S. infrastructure. We have been investing in our business in OUS geographic markets, and our OUS procedures have grown faster in proportion to U.S. procedures. We expect that our OUS procedures and revenue will make up a greater portion of our business in the long term.
Product Revenue
Three Months Ended September 30, 2026
Instruments and accessories revenue increased by 18% to $1.80 billion for the three months ended September 30, 2026, compared to $1.52 billion for the three months ended September 30, 2025. The increase in instruments and accessories revenue was primarily driven by approximately 14% higher da Vinci procedure volume, higher da Vinci instruments and accessories revenue per procedure, driven by the da Vinci 5 and da Vinci SP instruments and accessories mix, and approximately 31% higher Ion procedure volume. The third quarter 2026 U.S. da Vinci procedure growth was approximately 10%, driven primarily by strong growth in general surgery procedures, most notably cholecystectomy, hernia repair, and appendectomy procedures, as well as growth in gynecological procedures. The growth in general surgery procedures was partially offset by a low double-digit decline in U.S. bariatric procedures, which comprise approximately 2% of our total worldwide da Vinci procedures. The third quarter 2026 OUS da Vinci procedure growth was approximately 20%, driven primarily by growth in general surgery procedures, most notably hernia repair, colorectal, and cholecystectomy procedures; urologic procedures, most notably prostatectomy and partial nephrectomy procedures; and gynecologic procedures, most notably hysterectomy procedures. Geographically, the third quarter 2026 OUS da Vinci procedure growth was driven by several geographic markets with particular strength in Japan, Germany, India, the United Kingdom, and Italy.
Systems revenue increased by 30% to $769 million for the three months ended September 30, 2026, compared to $590 million for the three months ended September 30, 2025. The higher third quarter 2026 systems revenue was primarily driven by an increase in da Vinci surgical system placements, higher operating lease revenue, and higher lease buyout revenue.
Operating lease revenue, including the contribution from Ion systems, was $275 million for the three months ended September 30, 2026, of which $178 million was variable lease revenue, primarily related to usage-based arrangements, compared to $223 million for the three months ended September 30, 2025, of which $138 million was variable lease revenue, primarily related to usage-based arrangements. Revenue from Lease Buyouts was $45 million for the three months ended September 30, 2026, compared to $22 million for the three months ended September 30, 2025. We expect revenue from Lease Buyouts to fluctuate period to period depending on the timing of when, and if, customers choose to exercise buyout options embedded in their leases.
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. The higher third quarter 2026 ASP was primarily driven by favorable geographic mix and favorable product mix, including from da Vinci 5 system placements, partially offset by higher pricing discounts. ASP fluctuates from period to period based on geographic and product mix, product pricing, systems placed involving trade-ins, and changes in foreign exchange rates.
Nine Months Ended September 30, 2026
Instruments and accessories revenue increased by 20% to $5.22 billion for the nine months ended September 30, 2026, compared to $4.36 billion for the nine months ended September 30, 2025. The increase in instruments and accessories revenue was primarily driven by approximately 15% higher da Vinci procedure volume, higher da Vinci instruments and accessories revenue per procedure, driven by the da Vinci 5 and da Vinci SP instruments and accessories mix, approximately 35% higher Ion procedure volume, and customer buying patterns. The year-to-date 2026 U.S. da Vinci procedure growth was approximately 12%, driven by strong growth in general surgery procedures, most notably cholecystectomy, hernia repair, and appendectomy procedures, as well as growth in gynecological procedures. The growth in general surgery procedures was partially offset by a low double-digit decline in U.S. bariatric procedures, which comprise approximately 2% of our total worldwide da Vinci procedures. The year-to-date 2026 OUS da Vinci procedure growth was approximately 20%, driven by growth in general surgery procedures, most notably colorectal, hernia repair, and cholecystectomy procedures; urologic procedures, most notably prostatectomy and partial nephrectomy procedures; and gynecologic procedures, most notably hysterectomy procedures. Geographically, the year-to-date 2026 OUS da Vinci procedure growth was driven by several markets with particular strength in Germany, India, the United Kingdom, and Italy.
Systems revenue increased by 25% to $2.10 billion for the nine months ended September 30, 2026, compared to $1.69 billion for the nine months ended September 30, 2025. The higher year-to-date 2026 system revenue was primarily driven by an increase in da Vinci surgical system placements, partially offset by an increase in the proportion of da Vinci surgical system placements under operating leases, higher operating lease revenue, and higher lease buyout revenue.
Operating lease revenue, including the contribution from Ion systems, was $787 million for the nine months ended September 30, 2026, of which $504 million was variable lease revenue, primarily related to usage-based arrangements, compared to $632 million for the nine months ended September 30, 2025, of which $380 million was variable lease revenue, primarily related to usage-based arrangements. Revenue from Lease Buyouts was $153 million for the nine months ended September 30, 2026, compared to $91 million for the nine months ended September 30, 2025. We expect revenue from Lease Buyouts to fluctuate period to period depending on the timing of when, and if, customers choose to exercise buyout options embedded in their leases.
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 $1.64 million for the nine months ended September 30, 2026, compared to approximately $1.57 million for the nine months ended September 30, 2025. The higher year-to-date 2026 ASP was primarily driven by favorable product mix, including from da Vinci 5 system placements, partially offset by higher pricing discounts. ASP fluctuates from period to period based on geographic and product mix, product pricing, systems placed involving trade-ins, and changes in foreign exchange rates.
Service Revenue
Service revenue increased by 22% to $482 million for the three months ended September 30, 2026, compared to $396 million for the three months ended September 30, 2025. The increase in service revenue was primarily driven by a larger installed base of systems producing service revenue and favorable product mix, particularly from da Vinci 5 system placements.
Service revenue increased by 21% to $1.39 billion for the nine months ended September 30, 2026, compared to $1.15 billion for the nine months ended September 30, 2025. The increase in service revenue was primarily driven by a larger installed base of systems producing service revenue and favorable product mix, particularly from da Vinci 5 surgical system placements.
Recurring Revenue
Recurring revenue represents the revenue recognized from instruments and accessories, service, and operating lease arrangements. Recurring revenue is an operating measure that we use to assess the strength of our installed base, system utilization, and procedure adoption.
Recurring revenue during the periods presented was as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Instruments and accessories revenue | $ | 1,797.4 | $ | 1,518.8 | $ | 5,218.7 | $ | 4,360.6 | |||||||||||||||
| Service revenue | 482.2 | 395.9 | 1,388.3 | 1,150.1 | |||||||||||||||||||
| Operating lease revenue | 275.0 | 223.0 | 787.0 | 632.0 | |||||||||||||||||||
| Total recurring revenue | $ | 2,554.6 | $ | 2,137.7 | $ | 7,394.0 | $ | 6,142.7 | |||||||||||||||
| % of Total revenue | 84% | 85% | 85% | 85% | |||||||||||||||||||
Gross Profit
Product
Our product gross profit during the periods presented was as follows (dollars in millions):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
|
Product gross profit (1)
|
$ | 1,768.8 | $ | 1,409.8 | $ | 359.0 | 25% | $4,968.8 | $3,992.1 | $ | 976.7 | 24% | |||||||||||||||||||||||||||||||||||
|
Product gross profit margin
|
68.9% | 66.8% | 67.8% | 66.0% | |||||||||||||||||||||||||||||||||||||||||||
|
________
|
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|
(1) Includes the following expenses:
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | $ | 28.4 | $ | 31.5 | $ | (3.1) | (10)% | $86.5 | $92.0 | $ | (5.5) | (6)% | |||||||||||||||||||||||||||||||||||
| Intangible asset amortization | $ | 7.6 | $ | 2.2 | $ | 5.4 | 245% | $33.4 | $6.7 | $ | 26.7 | 399% | |||||||||||||||||||||||||||||||||||
Product gross profit margin increased for the three months ended September 30, 2026, compared to the three months ended September 30, 2025, primarily driven by IEEPA tariff refunds and fixed overhead leverage.
Product gross profit margin increased for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, primarily driven by IEEPA tariff refunds, fixed overhead leverage, lower logistics costs, and product cost reductions, partially offset by higher tariff expenses and higher intangible asset amortization.
Our capital expenditures increased in 2025, as we continued to build the infrastructure needed to scale our business and, as a result, depreciation expense increased in the three and nine months ended September 30, 2026. We expect depreciation expense to continue to increase in the remainder of 2026. Additionally, in connection with the acquisition of a business in the first quarter of 2026, we expect amortization of intangible assets to be higher in the remainder of 2026 compared to 2025.
In 2025, new and incremental tariffs were imposed on goods imported to the U.S. We import raw materials and finished goods from sources outside of the U.S., which were subject to tariffs, including but not limited to our endoscopes, which are primarily manufactured in Germany. In 2026, there were changes to the tariffs imposed on goods imported to the U.S. In addition, during the three and nine months ended September 30, 2026, we recognized $25.7 million and $53.2 million, respectively, of refunds related to IEEPA tariffs paid in prior periods, which reduced cost of product revenues. The ultimate impact of tariffs will depend on various factors, including the amount, scope, timing, and nature of the tariffs imposed.
Service
Our service gross profit during the periods presented was as follows (dollars in millions):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
|
Service gross profit (1)
|
$ | 315.5 | $ | 252.6 | $ | 62.9 | 25% | $ | 906.4 | $ | 745.9 | $ | 160.5 | 22% | |||||||||||||||||||||||||||||||||
|
Service gross profit margin
|
65.4% | 63.8% | 65.3% | 64.9% | |||||||||||||||||||||||||||||||||||||||||||
|
________
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
(1) Includes the following expenses:
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | $ | 10.1 | $ | 8.8 | $ | 1.3 | 15% | $ | 28.6 | $ | 25.6 | $ | 3.0 | 12% | |||||||||||||||||||||||||||||||||
| Intangible asset amortization | $ | 1.1 | $ | 0.2 | $ | 0.9 | 450% | $ | 5.2 | $ | 0.6 | $ | 4.6 | 767% | |||||||||||||||||||||||||||||||||
Service gross profit margin increased for the three months ended September 30, 2026, compared to the three months ended September 30, 2025, primarily driven by lower excess and obsolete inventory charges and IEEPA tariff refunds.
Service gross profit margin increased for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, primarily driven by IEEPA tariff refunds and favorable repair parts mix, partially offset by incremental fixed costs, including depreciation expense, and higher costs associated with our da Vinci 5 surgical system.
In connection with the acquisition of a business, we expect amortization of intangible assets to be higher in the remainder of 2026 compared to 2025.
During the three and nine months ended September 30, 2026, we recognized $2.1 million and $10.5 million, respectively, of refunds related to IEEPA tariffs paid in prior periods, which reduced cost of service revenue. The ultimate impact of tariffs will depend on various factors, including the amount, scope, timing, and nature of the tariffs imposed.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses include costs for sales, marketing, and administrative personnel, sales and marketing activities, trade show expenses, legal expenses, regulatory fees, and general corporate expenses.
Selling, general, and administrative expenses during the periods presented were as follows (dollars in millions):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
|
Selling, general, and administrative (1)
|
$ | 633.4 | $ | 573.3 | $ | 60.1 | 10% | $ | 1,864.6 | $ | 1,697.9 | $ | 166.7 | 10% | |||||||||||||||||||||||||||||||||
| % of Total revenue | 21% | 23% | 21% | 24% | |||||||||||||||||||||||||||||||||||||||||||
| ________ | |||||||||||||||||||||||||||||||||||||||||||||||
|
(1) Includes the following expenses:
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | $ | 89.5 | $ | 88.1 | $ | 1.4 | 2% | $ | 270.3 | $ | 256.7 | $ | 13.6 | 5% | |||||||||||||||||||||||||||||||||
| Intangible asset amortization | $ | 0.5 | $ | 0.1 | $ | 0.4 | 400% | $ | 1.2 | $ | 0.7 | $ | 0.5 | 71% | |||||||||||||||||||||||||||||||||
Selling, general, and administrative expenses for the three and nine months ended September 30, 2026, increased compared to the three and nine months ended September 30, 2025, primarily due to higher personnel-related expenses, driven by an increase in headcount and higher employee compensation, including variable compensation expense and share-based compensation expense.
Antitrust Class Action Litigation Settlement
| Three Months Ended September 30, | 2026 vs 2025 | Nine Months Ended September 30, | 2026 vs 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
|
Antitrust class action litigation settlement
|
$ | 450.0 | $ | - | $ | 450.0 | 100% | $ | 450.0 | $ | - | $ | 450.0 | 100% | |||||||||||||||||||||||||||||||||
| % of Total revenue | 15% | -% | 5% | -% | |||||||||||||||||||||||||||||||||||||||||||
During the three and nine months ended September 30, 2026, a charge of $450 million was recognized in connection with the settlement of an antitrust class action litigation. Refer to Note 8 to the Condensed Consolidated Financial Statements (Unaudited) included in Part I, Item 1 for more information on the class action litigation settlement.
Research and Development Expenses
Research and development costs are expensed as incurred. Research and development expenses include costs associated with the research and design, development, testing, and significant enhancement of our products. Our main product development initiatives include multi-port, Ion, and SP platform investments as well as digital products and services and various research projects.
Research and development expenses during the periods presented were as follows (dollars in millions):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
|
Research and development (1)
|
$ | 408.3 | $ | 329.4 | $ | 78.9 | 24% | $ | 1,140.8 | $ | 958.9 | $ | 181.9 | 19% | |||||||||||||||||||||||||||||||||
|
% of Total revenue
|
13% | 13% | 13% | 13% | |||||||||||||||||||||||||||||||||||||||||||
|
________
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
(1) Includes the following expenses:
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | $ | 87.7 | $ | 77.6 | $ | 10.1 | 13% | $ | 256.4 | $ | 221.3 | $ | 35.1 | 16% | |||||||||||||||||||||||||||||||||
| Intangible asset-related charges | $ | 0.1 | $ | 1.4 | $ | (1.3) | (93)% | $ | 0.6 | $ | 9.2 | $ | (8.6) | (93)% | |||||||||||||||||||||||||||||||||
Research and development expenses for both the three and nine months ended September 30, 2026, increased compared to the three and nine months ended September 30, 2025. The increase in research and development expenses for the three and nine months ended September 30, 2026, was primarily driven by higher direct project costs incurred to support an expanded portfolio of product development initiatives, as well as increased personnel-related expenses, including share-based compensation, driven by higher headcount.
Research and development expenses fluctuate with project timing. Based upon our broader set of product development initiatives and the stage of the underlying projects, we expect to continue to make substantial investments in research and development and anticipate that research and development expenses will continue to increase in the future.
Interest and Other Income, Net
Interest and other income, net during the periods presented was as follows (dollars in millions):
| Three Months Ended September 30, | 2026 vs 2025 | Nine Months Ended September 30, | 2026 vs 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
|
Interest and other income, net
|
$ | 75.8 | $ | 95.5 | $ | (19.7) | (21)% | $ | 243.6 | $ | 274.6 | $ | (31.0) | (11)% | |||||||||||||||||||||||||||||||||
|
% of Total revenue
|
2% | 4% | 3% | 4% | |||||||||||||||||||||||||||||||||||||||||||
Interest and other income, net, for the three and nine months ended September 30, 2026, decreased compared to the three and nine months ended September 30, 2025, primarily due to lower interest income earned on lower average cash and investment balances, resulting from cash used for stock repurchases and the acquisition of a business in the first quarter of 2026, as well as a decrease in average interest rates. The decrease during the nine months ended September 30, 2026, was partially offset by unrealized gains on strategic investments (compared to unrealized losses during the nine months ended September 30, 2025) and lower foreign exchange losses, net of the impacts of derivatives and hedging.
Income Tax Expense
Income tax expense (benefit) during the periods presented was as follows (dollars in millions):
| Three Months Ended September 30, | 2026 vs 2025 | Nine Months Ended September 30, | 2026 vs 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
|
Income tax expense (benefit)
|
$ | 144.0 | $ | 146.0 | $ | (2.0) | (1)% | $ | 489.8 | $ | 278.7 | $ | 211.1 | 76% | |||||||||||||||||||||||||||||||||
| Effective income tax rate | 21.5% | 17.1% | 18.4% | 11.8% | |||||||||||||||||||||||||||||||||||||||||||
Our effective tax rate increased for the three months ended September 30, 2026, compared to the three months ended September 30, 2025, primarily due to the non-recurrence of a 2025 release of unrecognized tax benefits, higher taxes on foreign earnings, and lower excess tax benefits associated with employee equity plans, as discussed below.
Our effective tax rate increased for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, primarily due to lower excess tax benefits associated with employee equity plans, as discussed below, the non-recurrence of a 2025 release of unrecognized tax benefits, and a lower federal research and development credit.
Our provision for income taxes for the three months ended September 30, 2026, and 2025, included excess tax benefits associated with employee equity plans of $12.6 million and $24.2 million, respectively, which reduced our effective tax rate by 1.9 and 2.8 percentage points, respectively. Our provision for income taxes for the nine months ended September 30, 2026, and 2025, included excess tax benefits associated with employee equity plans of $103.2 million and $202.5 million, respectively, which reduced our effective tax rate by 3.9 and 8.6 percentage points, respectively. The amount of excess tax benefits or deficiencies will fluctuate from period to period based on the price of our stock, the volume of share-based awards settled or vested, and the value assigned to employee equity awards under GAAP, which results in increased income tax expense volatility.
In 2021, the Organization for Economic Co-operation and Development ("OECD") established an inclusive framework on base erosion and profit shifting and agreed on a two-pillar solution to global taxation, focusing on global profit allocation and a 15% global minimum effective tax rate ("Pillar Two"). The OECD issued Pillar Two model rules and continues to release guidance on these rules. Many countries have adopted new tax laws to align with the global minimum tax. We considered the applicable tax law changes on Pillar Two implementation in the relevant countries, and we do not expect a material impact on our tax provision in 2026.
In January 2026, the OECD released administrative guidance recognizing the U.S. minimum tax regime and introducing a "side-by-side" package intended to exempt U.S.-parented groups from Pillar Two minimum taxes imposed by foreign jurisdictions on U.S. earnings. Although full adoption of the guidance is expected to eliminate this exposure with respect to the U.S. jurisdiction, laws to implement the framework have not been enacted in all relevant countries. Accordingly, our financial results reflect the laws enacted and in effect as of September 30, 2026, which did not have a material impact on our tax provision as of September 30, 2026.
We file federal, state, and foreign income tax returns in many jurisdictions in the U.S. and OUS. Years before 2020 are considered closed for significant jurisdictions. Certain of our unrecognized tax benefits could change due to activities of various tax authorities, including evolving interpretations of existing tax laws in the jurisdictions in which we operate, potential assessment of additional tax, possible settlement of audits, or through normal expiration of various statutes of limitations, which could affect our effective tax rate in the period in which they change.
We are subject to the examination of our income tax returns by the Internal Revenue Service and other tax authorities. The outcome of these audits cannot be predicted with certainty. Management regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. If any issues addressed in our tax audits are resolved in a manner not consistent with management's expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs.
Liquidity and Capital Resources
Sources and Uses of Cash and Cash Equivalents
Our principal source of liquidity is cash provided by our operations. Cash and cash equivalents plus short- and long-term investments decreased by $2.23 billion to $6.80 billion as of September 30, 2026, from $9.03 billion as of December 31, 2025, primarily as a result of cash used for repurchases of common stock and the acquisition of a business, partially offset by cash generated from operations.
Our cash requirements depend on numerous factors, including customer acceptance of our products, the resources we devote to developing and supporting our products, and other factors. We expect to continue to devote substantial resources to expand procedure adoption and acceptance of our products. We have made substantial investments in our commercial operations, product development activities, facilities, and intellectual property. Based on our business model, we anticipate that we will continue to be able to fund future growth through cash provided by our operations. We believe that our current cash, cash equivalents, and investment balances, together with income to be derived from our business, will be sufficient to meet our liquidity requirements for the foreseeable future. However, we may experience reduced cash flow from operations as a result of macroeconomic and geopolitical headwinds.
See "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" in our Form 10-K for the year ended December 31, 2025, for discussion on the impact of interest rate risk and market risk on our investment portfolio.
Condensed Consolidated Cash Flow Data
The following table summarizes our cash flows for the periods presented (in millions):
| Nine Months Ended September 30, | |||||||||||
|
2026
|
2025
|
||||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | $ | 3,197.0 | $ | 2,138.0 | |||||||
| Investing activities | 956.7 | 875.2 | |||||||||
| Financing activities | (4,535.2) | (2,226.6) | |||||||||
| Effect of exchange rates on cash, cash equivalents, and restricted cash | (3.5) | 0.5 | |||||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | $ | (385.0) | $ | 787.1 | |||||||
Operating Activities
For the nine months ended September 30, 2026, net cash provided by operating activities of $3.20 billion exceeded our net income of $2.17 billion, primarily due to the following factors:
1.Our net income included non-cash charges of $1.56 billion, consisting primarily of share-based compensation of $632.0 million; depreciation expense and losses on the disposal of property, plant, and equipment of $559.0 million; and deferred income tax expense of $315.9 million.
2.Changes in operating assets and liabilities resulted in $532.5 million of cash used in operating activities during the nine months ended September 30, 2026. Inventory, including the transfer of equipment from inventory to property, plant, and equipment, increased by $822.0 million, primarily to address the growth in our business, including the expansion of our leasing business, and to mitigate risks of disruption that could arise from global supply chain shortages. Prepaids and other assets increased by $167.7 million, primarily driven by an increase in prepaid taxes caused by accelerated deductions for previously capitalized research and development expenditures, which will reduce the Company's future income taxes paid. Accrued compensation and employee benefits decreased by $149.6 million, primarily due to payments for accrued salaries, incentive compensation, and stock purchases related to our ESPP. Accounts receivable increased by $103.2 million, primarily due to the timing of customer billings and collections. The unfavorable impact of these items on cash provided by operating activities was partially offset by an increase in other accrued liabilities of $631.8 million, primarily due to an increase in litigation accruals recorded in the third quarter of 2026, as well as higher taxes payable due to timing of payments and growth in our business.
Investing Activities
Net cash provided by investing activities for the nine months ended September 30, 2026, consisted primarily of proceeds from maturities and sales of investments, net purchases of investments of $1.76 billion, partially offset by $518.6 million paid for the acquisitions of a business and intellectual property, and $329.0 million paid for purchases of property, plant, and equipment. We invest predominantly in high quality, fixed income securities. Our investment portfolio may, at any time, contain investments in money market funds, U.S. treasury and U.S. government agency securities, high-quality corporate notes and bonds, commercial paper, non-U.S. government agency securities, and taxable and tax-exempt municipal notes.
Financing Activities
Net cash used in financing activities for the nine months ended September 30, 2026, consisted primarily of cash used for the repurchase of our common stock for $4.42 billion and taxes paid on behalf of employees related to net share settlements of vested employee equity awards of $378.5 million, partially offset by cash proceeds from stock option exercises and employee stock purchases of $283.8 million.
Capital Expenditures
We continue to build the infrastructure needed to scale and supply our customers with highly differentiated products manufactured in highly automated factories to facilitate outstanding performance in product quality, availability, and cost. A significant portion of our investment involves the construction of facilities to expand our manufacturing and commercial capabilities. We have also been vertically integrating key technologies to develop a more robust supply chain and bring important products to market at attractive price points. These investments include increased ownership of our imaging pipelines, and investments in strategic instruments and accessories technologies that allow us to serve our customers better. We intend to continue to fund our capital investments with cash generated from operations.
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations are based upon our Financial Statements, which have been prepared in accordance with GAAP. The preparation of these Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. On an ongoing basis, we evaluate our critical accounting estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There have been no new or material changes to the critical accounting estimates discussed in our Annual Report on Form 10-K for the year ended December 31, 2025, that are of significance, or potential significance, to us.
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