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Following a banner year in 2024 in which shares rocketed higher by 55%, the bullish trend is continuing in 2025 for Intuitive Surgical (ISRG) as the stock breaks out to new all-time highs after the company guided Q4 revenue well above expectations. The robotic surgery leader, which had been contending with supply chain issues and COVID-related headwinds, especially in China, has put those issues in the rearview mirror and is now capitalizing on some key growth catalysts, most notably including strong demand for its new da Vinci 5 system.

• In March 2024, ISRG received FDA clearance for its da Vinci 5 robotic system, but the initial rollout of that system was limited as the company optimized its manufacturing capacity and worked through supply chain bottlenecks. In Q3, though, the ramp up gained steam with ISRG placing 110 da Vinci 5 robots, up from 70 placements in Q2. That momentum continued into Q4, illustrated by the company placing 174 da Vinci 5 systems, which feature several notable upgrades from the last version, such as Force Feedback technology and more realistic 3D imaging.
• Similar to the razor/razorblade model, more systems sales for ISRG leads to higher sales of instruments and accessories. With total system sales increasing by 19% yr/yr to 493, Q4 instruments and accessories revenue grew by an estimated 23% yr/yr to $1.41 bln.
• On neither a positive nor negative basis, ISRG is no longer experiencing any impact on procedure volume due to COVID-19. A resurgence in COVID-19 infections across parts of China pressured procedure volume growth in various periods in 2023 and 2024, while the unwinding of a procedure backlog in the U.S. due to patients delaying treatment during the pandemic has now fully played out. Underlying procedure demand is healthy, as evidenced by an 18% increase in procedures in Q4, driven by strength in general surgery procedures in the U.S. (+19%) and international procedure growth of 23%.
• The one hiccup, though, is that ISRG expects global da Vinci procedure growth to slow to 13-16% in 2025 after growing by 17% in 2024. However, the company seems to be taking a conservative approach with its outlook given the momentum for da Vinci 5, and the reaction in the stock suggests that the market is betting that is indeed the case.

The main takeaway is that after a sluggish start, ISRG's da Vinci 5 system is gaining strong adoption, providing the company with a potent growth catalyst. It's worth noting, though, that the stock is quite expensive with a 1-year forward P/E that's now approaching 70x, leaving little room for error when ISRG reports earnings and issues guidance on January 23.