# Intuitive Surgical: the best business in this series, at a price above its Bull case ISRG, NASDAQ. Published September 25, 2026. Price as of the September 24, 2026 regular session close. ## Verdict: HOLD at $399.52 (do not add) Do not add. Intuitive is an exceptional compounder, and because the business is so predictable the margin of safety is only 25%. But the shares trade 38% above the Base value and even above the Bull value. The buy zone starts at $217.41. - Bear value: $185.10 - Base value: $289.88 (downside 27.4%) - Bull value: $376.24 - Expected value (20/55/25 weighting): about $290.51 - Required margin of safety: 25% - Maximum buy price: $217.41 - Growth implied by the price: about 19% a year for five years (Base 14%) - Dividend: none - Business quality: 94/100 - Valuation score: 28/100 - Confidence: 23/25, grade A Intuitive Surgical makes the da Vinci surgical robot and earns most of its money every time one is used: instruments, accessories and service. It has the highest business quality score in this series, net cash and strong free cash flow even after stock compensation. The only problem is that the market already pays for almost all of that, and then some. At $399.52 on September 24, 2026, the shares trade 37.8% above my triangulated Base value of $289.88, a downside of 27.4% to Base. Even the Bull value of $376.24 is 5.8% below the price. The required margin of safety of 25% puts the maximum buy price at $217.41. For existing holders this is a hold, because great compounders are rarely worth selling on valuation alone. New money should not add at this price. Route: SF-09 Medical devices, with the compounder override. Economic classification: Compounder (11/12). Primary method: 10-year two-stage DCF on free cash flow after stock compensation. Secondary methods: a forward free cash flow multiple and a historical reference. Values are present fair-value estimates, not 12-month price targets. ## What Intuitive is Intuitive sells and leases da Vinci robotic surgery systems to hospitals, plus the Ion platform for lung biopsies. Each installed system generates recurring revenue from instruments, accessories and service for years. In 2025, 84% of revenue was recurring. The da Vinci installed base reached 11,710 systems, up 12%, and Ion 1,096, up 21%. The new da Vinci 5 starts an upgrade cycle, and leasing makes revenue even more recurring. There is no leverage- or acquisition-driven change in the character of the business. ## Results 2025 revenue grew 21% to $10.065 billion, with operating cash flow of $3.031 billion. Q2 2026 revenue grew 19% to $2.89 billion, and combined procedures grew about 16%: da Vinci about 15%, Ion about 36%. ## Free cash flow after stock compensation First-half 2026 operating cash flow was $1.973 billion and capex $215.9 million, so headline free cash flow was about $1.757 billion. Stock compensation was $419.4 million, about 24% of that. After deducting it, hard free cash flow was about **$1.338 billion**, and cash quality remains excellent. The DCF starts from about **$2.7 billion** of annual hard free cash flow. Buybacks, about $2.30 billion in 2025 and $1.44 billion in the first half of 2026, are treated separately from stock compensation. ## Balance sheet and shares Cash and investments are about $8.63 billion, with no meaningful debt. The DCF implies about 355 million shares. At $399.52, market value is about $142 billion. ## Primary valuation: 10-year two-stage DCF | Parameter | Bear | Base | Bull | | --- | --- | --- | --- | | Hard FCF growth, years 1 to 5 | 10% | 14% | 17% | | Growth fading linearly to year 10 | 6% | 8% | 10% | | Discount rate | 10.0% | 9.0% | 8.5% | | Terminal growth | 2.0% | 2.5% | 2.75% | | Value per share | $185.10 | $277.99 | $376.24 | Each scenario starts from $2.7 billion of hard free cash flow and adds $8.63 billion of cash and investments. The primary Base value is **$277.99**. ### Sensitivity: Base DCF value per share | Discount rate \ Terminal growth | 2.0% | 2.5% | 3.0% | | --- | --- | --- | --- | | 8.0% | $312.20 | $330.40 | $352.20 | | 9.0% | $265.90 | $278.00 | $292.10 | | 10.0% | $231.40 | $239.80 | $249.50 | No combination in the grid reaches today's price. ## Secondary valuation: forward free cash flow multiple Forward hard free cash flow of $3.0 to $3.3 billion at a premium 30x to 35x, plus excess cash, gives $278 to $349 per share. At the midpoints, $3.15 billion at 32.5x, the secondary value is **$312.34**. ## Historical cross-check Intuitive deserves a premium for recurring procedures and installed-base economics, but peak historical multiples are not intrinsic value. A normalized reference gives about **$300**. ## Valuation triangulation | Method | Base value | Weight | | --- | --- | --- | | Two-stage DCF | $277.99 | 60% | | Forward FCF multiple at 32.5x | $312.34 | 25% | | Historical reference | $300.00 | 15% | | Triangulated Base | $289.88 | 100% | The primary and secondary methods diverge by 11.6%, below the framework's 20% threshold. The Bear and Bull values come from the DCF alone. ## What is the market already pricing in? Keeping the Base discount rate of 9% and terminal growth of 2.5%, the $399.52 price requires hard free cash flow to grow about **19% a year for five years**, then fade to about 13% by year ten. That is faster than the Bull case. Keeping the Base growth instead, the price implies a discount rate of about **7.1%**, a low expected return for an equity. Either the business outgrows even an optimistic scenario for a decade, or buyers today accept modest future returns. ## Bear, base and bull scenarios | | Bear | Base | Bull | | --- | --- | --- | --- | | Probability | 20% | 55% | 25% | | Value per share | $185.10 | $289.88 | $376.24 | | vs $399.52 | -53.7% | -27.4% | -5.8% | **Bear:** procedure growth slows toward 10% and investors demand a higher return. **Base:** mid-teens growth for five years, fading gradually. **Bull:** da Vinci 5 and Ion sustain 17% growth and a lower required return. The probability-weighted value is **$290.51**, 27.3% below the price. ## How the buy price is set Confidence A allows a lower margin of safety than for the other companies in this series. Long-duration DCF sensitivity keeps it at 25%. A 25% discount to the $289.88 Base gives a **maximum buy price of $217.41**. ## Dividend Intuitive pays no dividend. Capital goes to R&D, capacity, investments and buybacks. ## Reasons to own ISRG - **An exceptional moat.** An installed base of more than 11,700 robots, surgeons trained on the platform and hospital workflows built around it. - **Recurring revenue.** 84% of 2025 revenue came from instruments, accessories, service and leases. - **Procedure growth.** Each procedure drives consumables and service. - **New products.** The da Vinci 5 upgrade cycle and Ion expand the market. - **A fortress balance sheet.** About $8.6 billion of cash and investments and strong free cash flow after stock compensation. ## What could go wrong? - **Valuation and duration.** Most of the value lies far in the future, so small changes in growth or discount rate move it a lot. - **Competition.** Other robotic surgery platforms are entering the market. - **Normalization.** A sustained slowdown in procedures or installed-base growth would weaken the recurring revenue flywheel. This is the main thesis breaker. - **Regulation and product.** Recalls or regulatory setbacks. - **Buybacks.** Repurchases at excessive prices destroy value. ## Management execution Strong execution on procedures, revenue and installed base, a disciplined balance sheet and consistent R&D investment. The watch item is buyback discipline at premium valuations. Management credibility scores **18/20**, excellent. ## Stock Analyza scorecard | Business quality | Score | | --- | --- | | Moat | 20/20 | | Economic return | 19/20 | | Balance sheet | 15/15 | | Cash quality | 14/15 | | Growth and runway | 14/15 | | Management | 8/10 | | Dilution and governance | 4/5 | | Total | 94/100 | The valuation score is **28/100**: the price sits above every scenario. | Economic classification | Points | | --- | --- | | Economic return | 2/2 | | Revenue growth | 2/2 | | FCF per share | 2/2 | | Balance sheet | 1/1 | | Franchise economics | 1/1 | | Recurring economics | 2/2 | | Runway | 1/2 | | Total: Compounder | 11/12 | ## Confidence score | Confidence | Score | | --- | --- | | Data quality | 5/5 | | Predictability | 5/5 | | Valuation robustness | 4/5 | | Accounting transparency | 5/5 | | Scenario dispersion | 4/5 | | Total | 23/25, grade A | ## What I would watch from here ### Green - Combined procedure growth of 15% or more - da Vinci procedures growing 14% or more, Ion 25% or more - da Vinci installed base growing 10% or more - Recurring revenue at 82% or more - Hard free cash flow growing more than 15% - Cash and investments above $8 billion - Stock compensation below 25% of headline free cash flow ### Yellow - Combined procedure growth of 10% to 15% - da Vinci procedures growing 10% to 14%, Ion 15% to 25% - Installed base growing 6% to 10% - Recurring revenue at 78% to 82% - Hard free cash flow growing 8% to 15% - Stock compensation at 25% to 35% of headline free cash flow ### Red - Combined procedure growth below 10% - Installed base growing less than 6% - Recurring revenue below 78% - Hard free cash flow growing less than 8% - Cash and investments below $6 billion - Stock compensation above 35% of headline free cash flow The next review point is Q3 2026 results. ## The three most important thesis breakers 1. Procedure growth persistently below 10%. 2. Installed-base growth below 6%. 3. Hard free cash flow growth below high single digits. ## Adversarial review The first draft's DCF scenarios reconciled exactly with its stated inputs, at about 355 million shares. Four things were corrected. Its sensitivity table did not match its own DCF: at an 8% discount rate and 3% terminal growth it showed $367, while the model gives $352. Its secondary value of $295 sat below the midpoint of its own ranges, which gives $312.34. Its Bull value was raised from the model's $376 to $390 during triangulation, without a method behind it. And the draft's twelve-month price-touch probabilities were dropped as not part of the framework. The Base moved from $285 to $289.88, the Bull from $390 to $376.24 and the maximum buy price from $213.75 to $217.41. Two of the corrections raised values and one lowered them; the verdict is unchanged. The strongest counter-argument is that the installed-base flywheel, recurring consumables, the da Vinci 5 upgrade cycle and Ion can sustain premium growth for much longer than the Base assumes. The Bull case models 17% growth, a slower fade and a lower discount rate, and even then fair value is slightly below the price. | Robustness test | Base value | | --- | --- | | Base | $289.88 | | The draft's secondary value of $295 | $285.54 | | Discount rate 8.5% | $304.26 | | First-stage growth 16%, fading to 9% | $310.95 | | First-stage growth 12%, fading to 7% | $271.28 | No reasonable test reaches the price. The publication gate status is PASS. ## Final verdict: hold at $399.52, do not add Intuitive Surgical is an exceptional compounder, but business quality and valuation are separate questions. At this price, the market already assumes better than Bull-case growth. **Verdict: HOLD at $399.52, do not add. Triangulated Base value $289.88, downside 27.4%, Confidence A (23/25). Required margin of safety 25%, maximum buy price $217.41.** For an existing holder, the quality of the business supports holding through a valuation that is rich but not absurd. New money waits for $217.41 or below, or for evidence that growth can stay near 19% for years. The main thesis breaker is a sustained slowdown in procedures and installed-base growth that weakens the recurring revenue flywheel. ## More analyses on Patreon This analysis is free. Premium members get every in-depth analysis, the full archive and a vote on which stocks get analyzed next: https://www.patreon.com/stockanalyza ## Sources Primary sources include Intuitive Surgical's Q2 2026 earnings release of July 16, 2026, the Form 10-Q for the quarter ended June 30, 2026, the 2025 Form 10-K and the company's preliminary 2025 operating metrics. The market price comes from a third-party data provider. The reference market price is $399.52, the September 24, 2026 regular session close. Balance sheet figures are as of June 30, 2026. DCF inputs are estimates. **Disclaimer.** This analysis is provided solely for research and educational purposes. It is not personalized investment, financial, legal or tax advice. Values are estimates, not forecasts or trading instructions. Intuitive Surgical is exposed to competition, procedure growth, regulatory and valuation risks. Investors can lose part or all of their invested capital. Framework: SF-09, medical devices with compounder override. Economic class: Compounder. Engine: two-stage DCF with FCF multiple cross-check. Confidence: A/23. Data status and adversarial gate: PASS. Version: Master v3.1.