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Intuitive Surgical's (ISRG +6%) Q2 report was a cut above the rest, delivering its widest earnings beat since 2021 on sustained double-digit revenue growth. The robotic surgical equipment maker also accelerated global procedure growth in the quarter, which tracked at the high end of its FY24 guidance. Speaking of which, ISRG narrowed its FY24 procedure growth outlook, bumping up the low end while keeping the best-case scenario on the table. Rounding off the quarter was healthy progress on system placement, a development that has hit a few snags in recent months.

• The rollout of ISRG's da Vinci 5 system made considerable progress from Q1. ISRG placed 70 of these systems during Q2 versus a measly 8 last quarter, reflecting significantly improved supply constraints. Nevertheless, ISRG warned that supply will remain a headwind through at least 1H25.
• The challenges associated with da Vinci 5 are leaking into other areas of ISRG's business. Given the numerous enhancements the new system boasts, potential customers are continuing to moderately hold back on purchasing any da Vinci systems, reflected by a bump of 21 additional placements yr/yr in Q2 to 341. However, this mightily improved from just 1 additional placement last quarter.
• Despite the headwinds connected to da Vinci 5, ISRG still managed to deliver impressive headline results in Q2, including a return to double-digit bottom-line upside and a 14.5% jump in total revs yr/yr to $1.97 bln. Procedures grew nearly 17% yr/yr, a 1 pt jump from last quarter, despite lapping an uptick in patients following the pandemic.
• In the U.S., general surgery supported a 14% jump in procedures. In contrast, bariatric procedures turned negative, falling by mid-single digits yr/yr. The surging popularity of weight-loss drugs has moderated bariatric procedures for ISRG since last year. However, as has been the case throughout much of this period, other procedures more than made up for it.
• Overseas procedure volume continued to outpace the U.S., expanding by 22% yr/yr on top of a +28% jump in 2Q23, led by non-urology procedures. Europe was a highlight, as was Japan and India. Conversely, growth in China was stressed as ISRG battled emerging domestic robotic systems, which adversely impacted capital placements and, thus, procedure growth.
• Looking ahead to FY24, ISRG remained bullish, narrowing its previous +14.0-17.0% procedure growth outlook to +15.5%-17.0%. The low end assumes continued moderation in bariatric procedures with intensifying headwinds in Asia, albeit to a lesser degree than forecasted three months ago.

The overarching theme from ISRG's Q2 report was that sequential improvements squashed many lingering fears. Shares were slipping in recent trading only for Q2 numbers to reenergize the stock. There are still cracks worth keeping an eye on, such as ISRG's da Vinci 5 timeline encountering delays, competition in China heating up, and GLP-1 weight-loss drugs taking additional bariatric business. However, the market potential for further robotic surgery opportunities remains bright. Meanwhile, ISRG's da Vinci 5 rollout is progressing as planned. As such, ISRG may continue tacking on record highs.