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Intuitive Surgical (ISRG -3%) stitched together a decent performance in Q4, delivering sizeable beats on its top and bottom lines. The robotic surgery equipment manufacturer also delivered sound procedure growth during the quarter, with placements expanding at a similar rate. Meanwhile, ISRG reiterated its FY25 guidance, continuing to expect a +13-16% lift in procedures, building off a healthy +17% gain in FY24.

So why are shares down today? ISRG outlined its Q4 expectations two weeks ago, predicting Q4 revenue of $2.41 bln. Shares reached record highs on the guidance, surging by over +14% in just five trading days. It is worth mentioning that the stock was already at record highs before ISRG's Q4 guidance. As such, an impressive jump on top of record highs led the way to moderate profit-taking today.

• As we mentioned yesterday, there were not too many surprises in Q4. ISRG achieved its recently outlined projections, delivering revenue growth of 25.2% yr/yr to $2.41 bln on an approximately 18% improvement in worldwide da Vinci procedures. Meanwhile, ISRG placed 493 da Vinci systems, of which 174 were da Vinci 5, a 19% gain yr/yr.
• With Q4 numbers already priced in, investors place more emphasis on management commentary. A minor negative trend that continued in Q4 was a continuously modest drop in bariatric procedures due to the increasing popularity of GLP-1 medications, declining in the U.S. by a low to mid-single-digit percentage, similar to Q3.
• Conversely, an encouraging trend from the quarter was the uptick in placements, capping off 2H24 with an over 35% jump in U.S. placement growth. However, system utilization, a critical indicator of customer health as it is correlated to patient demand and hospital financial health, ticked up by only a few percentage points. The low utilization, despite substantial placement growth, could signal higher procedure growth going forward. ISRG commented that not every account will be a high-volume account. However, management believes that utilization has room to run.
• Looking at 2025, a slight nitpick is that ISRG expects non-GAAP gross margins to be a little lower compared to 2024, targeting 67-68% compared to 69.1% in the previous year. The range also did not include any potential tariff impacts, which ISRG cautioned could be material. Still, ISRG reiterated its confidence in returning to margins beyond 70% over the medium run as it works to improve margins in specific surgical systems.

With the market already pricing in impressive Q4 numbers, any small blemishes from ISRG were prone to magnification. However, even though a persistent decline in bariatric procedures and a slight dip in margins projected in FY25 were tiny rough patches, today's sell-the-news reaction likely stems more from recent appreciation and rich valuation multiples. While ISRG has plenty of wind at its back, its 72x forward earnings multiple makes it susceptible to quick profit-taking on any unforeseen setbacks, including tariffs.