Understanding Intuitive Surgical's Real Growth Engine: Why the Next Decade Matters

The Market’s Misconception About Intuitive Surgical

When investors analyze Intuitive Surgical (NASDAQ: ISRG), most focus narrowly on a single metric: da Vinci surgical robot sales each quarter. It’s an understandable mistake. After all, the company’s name and primary product are synonymous with surgical automation. Yet this laser focus obscures the true powerhouse of the business.

The reality is more nuanced. While the da Vinci systems represent the foundation of Intuitive Surgical’s empire, they account for only about 25% of revenue. Over the next decade, as this company matures, investors who understand the complete revenue picture will recognize why Intuitive Surgical’s valuation carries a premium despite being expensive by traditional metrics.

Breaking Down the Revenue Streams

Intuitive Surgical generates income from three distinct channels. First, the “systems” segment—the da Vinci robots themselves—brings in roughly one-quarter of sales. Recent performance shows the company deployed 427 new da Vinci systems in Q3 2025, up from 379 units in Q3 2024. Globally, 10,763 systems were operational, reflecting a 13% year-over-year surge. This segment drove a nearly 33% revenue increase.

But here’s where the story becomes interesting.

The second revenue stream, services and maintenance, contributes around 15% of the top line. It’s steady, but not the catalyst driving growth.

The dominant force? Instruments and accessories—the consumables used during every single procedure. This category now represents approximately 60% of total sales, making it the genuine profit engine for Intuitive Surgical. Each surgical procedure creates demand for disposable instruments, creating a recurring revenue model that compounds over time.

Why Procedure Growth Outpaces System Installations

The growth differential tells you everything. While da Vinci system placements climbed 13% year-over-year in Q3 2025, the number of surgeries performed using these systems jumped 20%. This divergence is the key insight for long-term investors.

More installed systems lead to more procedures. More procedures mean exponentially higher consumption of instruments and accessories. This cascading effect creates what amounts to an annuity business—predictable, recurring income that grows alongside the installed base.

The Long-Term Thesis

A decade ago, system sales represented roughly 30% of Intuitive Surgical’s revenue. Following historical trends, the next ten years could see that proportion shrink to 20%, while instruments and services expand to 80%. This transition doesn’t represent declining system demand; it reflects the maturation of a business model shifting from product sales to predictable recurring revenue.

Intuitive Surgical trades at a P/E ratio of approximately 72x—nearly 2.5 times the S&P 500 average of around 29x. This premium isn’t arbitrary. It reflects investor recognition that the business is morphing from a device-sales company into a healthcare services business with superior margins and visibility.

The Investment Consideration

For investors wondering if Intuitive Surgical belongs in a portfolio, the critical factor isn’t today’s valuation or the quarterly robot shipment numbers. Instead, focus on whether you believe this recurring revenue model will continue expanding for the next decade. If surgical volumes keep outpacing system installations, and if instrument consumption remains tied to procedure growth, then Intuitive Surgical’s current valuation may prove justified by the 2030s economy.

The company isn’t cheap by absolute standards, but it’s priced rationally for what it’s becoming: not a medical device manufacturer, but a recurring revenue machine built on surgical infrastructure.