surgical

Franklin Street Advisors disclosed an exit from Intuitive Surgical (ISRG -0.92%) in its latest SEC filing for the quarter ended September 30, selling 42,601 shares for an estimated $23.2 million.

What Happened

According to a filing with the Securities and Exchange Commission released on Thursday, Franklin Street Advisors sold its entire holding in Intuitive Surgical, divesting 42,601 shares. The estimated value of the transaction, calculated using the average market price during the quarter, was approximately $23.2 million.

What Else to Know

Franklin Street Advisors’ Intuitive Surgical position previously comprised 1.4% of the fund’s 13F assets.

Top holdings after the filing:

• NVDA: $132.2 million (7.6% of AUM)
• MSFT: $115.2 million (6.6% of AUM)
• AAPL: $110.4 million (6.4% of AUM)
• GOOGL: $91.2 million (5.3% of AUM)
• AMZN: $72.5 million (4.2% of AUM)

As of Thursday afternoon, shares of Intuitive Surgical were priced at $443.87, down 9.5% over the past year and underperforming the S&P 500’s 16% gain.

Company Overview

Company Snapshot

• Intuitive Surgical offers the da Vinci Surgical System for minimally invasive surgery and the Ion endoluminal system for diagnostic lung procedures, along with surgical instruments, digital solutions, and support services.
• The company generates revenue primarily through the sale of surgical systems, recurring instrument and accessory sales, and service contracts for its installed base.
• It serves hospitals, surgical centers, and healthcare providers globally, targeting institutions seeking advanced minimally invasive surgical capabilities.

Intuitive Surgical, Inc. develops, manufactures, and markets products that enable physicians and healthcare providers to enhance the quality of, and access to, minimally invasive care in the United States and internationally. Its strategic focus on innovation and expanding procedure adoption underpins its long-term growth trajectory.

Foolish take

Franklin Street Advisors’ $23.2 million sale of its entire Intuitive Surgical position marks a clear step back from the medical robotics firm after a volatile year for the stock. Shares have fallen more than 25% from their all-time high in January, as investors weigh valuation concerns and new tariff-related risks that management warned could trim 2025 margins by about 1 percentage point.

In its second-quarter 2025 earnings, Intuitive posted revenue of $2.4 billion, up 21% year-over-year, with worldwide da Vinci procedure volume climbing 17%. Meanwhile, GAAP net income rose 25% to $658 million ($1.81 per share). Yet even with expanding adoption, tightening gross margins—driven by higher input costs and tariffs on components from Mexico, Germany, and China—tempered enthusiasm.

CEO Dave Rosa said Intuitive remains “committed to advancing care” and expanding access to minimally invasive surgery worldwide. But after a multi-year run-up, Franklin’s decision to take profits may signal growing caution among institutional investors who see near-term headwinds outpacing the company’s impressive long-term growth story.

Glossary

13F reportable assets: Assets that institutional investment managers must disclose quarterly to the SEC, showing their holdings in U.S. publicly traded securities.
Assets under management (AUM): The total market value of investments that a fund or firm manages on behalf of clients.
Full exit: When an investor sells all shares of a particular holding, eliminating exposure to that asset.
Stake: The amount of ownership or investment a fund or individual holds in a company or asset.
Filing: An official document submitted to a regulatory authority, such as the SEC, to disclose financial or operational information.
Divesting: Selling off an asset or investment, often to reduce risk or change portfolio strategy.
Minimally invasive surgery: Surgical procedures performed through small incisions, often using specialized instruments or robotic systems.
Installed base: The total number of a company’s products currently in use by customers.
Service contracts: Agreements for ongoing maintenance, support, or services related to products sold.
Procedure adoption: The rate at which new medical procedures or technologies are implemented by healthcare providers.
TTM: The 12-month period ending with the most recent quarterly report.

Philippe Laffont was known for successfully investing in technology stocks before he founded Coatue Management, a technology-focused hedge fund, in 1999. Since then, he has grown the fund’s size to more $35 billion in assets under management.

Laffont has his finger on the pulse of the artificial intelligence (AI) revolution. His contrarian investment in Super Micro Computer, a company that manufactures high-end servers for data centers, turned some heads earlier this year.

Image source: Getty Images.

Coatue bought into Supermicro at a controversial moment, but it seems Laffont had a change of heart. At the end of June, there were zero shares of the custom server builder in its portfolio.

While Coatue was disposing of Supermicro with its left hand, it was buying up shares of Intuitive Surgical (ISRG -1.34%) with its right. The hedge fund snapped up 39,512 shares of the robot-assisted surgery pioneer in the second quarter.

Intuitive Surgical stock has tumbled this year, but Laffont has reasons to expect a rebound. Here’s a look at what they are to see whether this stock could be a good fit for your portfolio.

An unbeatable advantage

When the market closed on Sept. 12, 2025, shares of Intuitive Surgical were up 19,390% since its initial public offering (IPO) 25 years ago. A few years before its IPO, the Food and Drug Administration made the company’s da Vinci robotic surgical system the first one with clearance to assist with minimally invasive abdominal surgeries.

Medtronic, Johnson & Johnson, and Stryker market surgical robots, but they entered the market after Intuitive Surgical. The pioneer is still the largest member of its industry. At the end of 2024, there were 11,040 Intuitive Surgical systems installed in hospitals worldwide.

Intuitive’s massive installed base of machines isn’t sitting idle either. Surgical teams trained to use da Vinci systems performed 2.7 million procedures last year. Plus, Ion, its more recently launched lung tumor biopsy machine, performed 95,000 procedures last year.

To date, competing systems generally address procedures that don’t already employ da Vinci systems, such as knee replacements and spinal surgeries. Hospital systems can spend more than $1 million installing a da Vinci system and then an even larger sum supporting and training the professionals who will use it. That’s a huge advantage over newer surgical systems that competitors probably won’t be able to overcome.

Placing systems and training surgeons to use them generates revenue for Intuitive, but these aren’t the main sources. Around 84% of total revenue last year came from recurring sources such as instruments and accessories that must be replaced before each procedure.

Why Intuitive Surgical stock is down

Intuitive Surgical has been a terrific stock for its long-term shareholders, but it’s been a stinker this year. It’s down about 26% from a peak it set in February.

Fear that tariffs will pressure profit margins has been a weight on Intuitive Surgical’s stock price. When reporting second-quarter results in July, management reduced its adjusted gross profit margin expectation to a range between 66% and 67%. That would be a minor decline from the 69.1% gross margin reported last year, but this temporary setback is hardly a reason to avoid the stock.

Earlier this year, Medtronic submitted an application to the Food and Drug Administration to perform urology procedures with its Hugo RAS system. Roughly one-fifth of all procedures performed with da Vinci machines last year were in the urology category.

Investors concerned that the Hugo system will pull market share from da Vinci should know that its launch overseas hasn’t been very successful. It’s been authorized for sale in the European Union since 2021, but Medtronic still doesn’t tell investors how much revenue Hugo’s generating in its quarterly reports.

Time to buy?

In the U.S., hospitals considering a new surgical system for urologic surgeries could have a new option from Medtronic by the end of the year. Luckily for Intuitive Surgical, the da Vinci 5 system, which launched in March 2024, already makes Medtronic’s Hugo system seem outdated.

Despite tariff pressure, investors can expect significant growth from Intuitive Surgical. Management is forecasting overall procedure growth of 15.5% to 17.0% this year. High switching costs for hospitals could lead to procedure growth that continues rising for another decade or two.

With a stock price that’s been trading at 55.3 times forward earnings expectations, investors are already expecting profit growth at a double-digit percentage for years to come. Intuitive Surgical stock could fall hard if Medtronic or another competitor begins pressuring sales growth in the years ahead.

Given Hugo’s performance in the E.U., threats from well-heeled competitors appear toothless. Adding some shares to a diverse portfolio now could be the right move for investors with a high risk tolerance.

If you don’t know much about Intuitive Surgical (ISRG 1.71%), you might want to remedy that. It’s a very impressive growth stock. Its past performance is likely to wow you, and its future looks very promising.

Over the past decade, Intuitive Surgical stock has grown in value at an average annual rate of 23%. Over the past three years, that growth rate ramped up to nearly 30%! If you had invested $10,000 in Intuitive a decade ago, your stake would be worth roughly $80,610 today. The S&P 500 index, in contrast, averaged 13.6% in that period, turning $10,000 into $33,720 — a still-quite-solid performance.

Image source: Gertty Images.

Intuitive Surgical is a leader in robotic surgery equipment. It has more than 9,900 of its million-dollar-plus da Vinci robotic surgery systems installed in 72 countries. Together, the systems have been used to perform more than 16 million procedures.

Its business model is delightful, too, as it derives 84% of its revenue not from the costly systems themselves but from rather dependable recurring sales of servicing, supplies, and accessories for the machines. Once a hospital has committed to a da Vinci machine, it can’t go elsewhere for servicing and supplies.

And as our world’s population ages, there’s likely to be more demand for the kinds of procedures that Intuitive Surgical’s machines facilitate, such as colorectal surgery, cardiac surgery, hernia surgery, and more. Intuitive’s Ion systems also facilitate lung procedures.

According to some metrics, Intuitive’s stock is not a bargain right now; for example, its forward-looking price-to-earnings (P/E) ratio was recently 51, which is on the steep side. But that’s still well below the stock’s five-year average of 56. That’s because the stock has pulled back recently, presenting a tempting buying opportunity for interested long-term investors.