Intuitive Surgical Inc Q1 FY2026 Earnings Call

Good day, and thank you for standing by. Welcome to the Intuitive First Quarter 2026 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Daniel Connally, Vice President, Investor Relations. Sir, please go ahead.

Good afternoon, and welcome to Intuitive's First Quarter Earnings Conference Call. Joining me today are Dave Rosa, our CEO; and Jamie Samath, our CFO. Before we begin, I would like to remind you that comments made on today's call may contain forward-looking statements. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are described in our Securities and Exchange Commission filings, including our most recent Form 10-K filed on February 3, 2026. Our SEC filings can be found through our website at intuitive.com. Investors are cautioned not to place undue reliance on such forward-looking statements. Please note that this conference call will be available for audio replay on our website in the Events section under our Investor Relations page. We are experiencing technical difficulties with distribution of today's press release. Note, you can find today's 8-K, including our press release, on our website. The Q1 2026 financial data tables have been posted to our website as well. Our format for this afternoon's earnings conference call is as follows: Dave will review business and operational highlights. Jamie will provide a review of our financial results and procedure highlights. I will review clinical highlights and discuss our updated financial outlook for 2026. And finally, we will host a question-and-answer session. With that, I will turn it over to Dave.

Good afternoon, and thank you for joining us. Q1 was a solid start to the year for Intuitive, driven by 17% total procedure growth and broad-based adoption across da Vinci and Ion as customers continue to advance minimally invasive care. In Q1, da Vinci procedures grew 16% to 847,000, and Ion procedures increased 39% to 43,000. Performance was strong in the U.S. and Europe, with mixed results in Asia. In the United States, da Vinci procedures grew 14% year-over-year, led by strength in general surgery. Growth was supported by a 31% increase in after-hours procedures and higher overall utilization. da Vinci 5 utilization continues to exceed that of da Vinci Xi, driving U.S. utilization growth to 4%. Outside the U.S., da Vinci procedures grew 19%, led by continued strength in general surgery and gynecology as adoption expands beyond urology. The lower growth rate relative to prior quarters reflects ongoing challenges in China and Japan. In China, the environment remains largely consistent with recent quarters reflecting relatively low tender activity across the category, domestic competition and policy-driven pricing pressure. Given our belief in the long-term opportunity, we continue to make investments to improve procedure growth, establish favorable patient charge codes and support other market access activities. In Japan, procedure growth improved sequentially, but remained below historical levels following fewer system placements in 2025. We are encouraged by recent policy developments, including incremental financial support for higher-volume robotic programs and new reimbursement for 7 additional procedures. Both policies to be effective starting in June 2026. Jamie will describe these changes in more detail shortly. I have confidence in our ability to execute our international strategy. Investments in our organizational capabilities, clinical trials and research, and market access efforts are yielding supportive robotic surgery policies and reimbursements in many of the countries we serve. The arc of progress is evident with OUS procedures now representing 38% of total da Vinci volume, up from 25% a decade ago. We are well positioned to expand access and drive deeper adoption in these countries with the addition of XiR to our system portfolio, and our overall ecosystem of technologies, training and services. Turning to capital, we placed 431 da Vinci systems in Q1, including 232 da Vinci 5 systems, 34 SP systems and 34 XiR systems. We also placed 52 Ion systems in the quarter. As da Vinci 5 moves into broader clinical use globally, customer adoption and feedback remain very encouraging. Customers are building experience with the da Vinci 5 ecosystem, resulting in increased clinical throughput and expanded access to da Vinci surgery. At the recent annual SAGES conference, several clinical abstracts demonstrated objectively lower tissue forces using da Vinci Force Feedback instrumentation across multiple procedure types. We continue to believe that objective knowledge of applied forces in surgery will lead to improved surgical outcomes and are investing to demonstrate this at scale. In March, we received FDA 510(k) clearance for additional uses of our Force Feedback instruments. Five of 6 instruments are now cleared for 15 uses, while our Mega SutureCut Needle Driver is cleared for 10 uses. Combined with multi-year investments in supply chain and manufacturing, this clearance supports broader availability in Q2 that will increase over the rest of the year. We expect adoption of Force Feedback instrumentation to progress steadily through 2026 and beyond. Turning to our digital ecosystem. We continue to invest in the data and digital infrastructure that underpins our longer-term innovation roadmap. da Vinci 5 captures real-world surgical data at greater scale and fidelity, enabling deeper insight into how procedures are performed in practice. That insight paired with clinical context from connected electronic medical records provides a better understanding of variation, workflow and outcomes, and informs current and planned digital and AI-enabled capabilities. My Intuitive+ continues to play an expanding role in training and program support, with growing adoption of Intuitive Telepresence capabilities that enable proctoring, mentoring and collaboration across surgeons and sites. Collectively, these efforts are foundational to our long-term digital and AI roadmap where we expect to add telesurgery, deeper decision support and augmented dexterity, including aspects of future automation, all in pursuit of advancing the Quintuple Aim. I'm excited by the progress our development teams are making. Turning to our Single Port Platform, SP momentum continued in the quarter with procedures growing 68% year-over-year. Growth was driven by expansion in Korea and the U.S. and ongoing early adoption across select international markets. Recently, U.S. surgeons performed the first non-IDE nipple-sparing mastectomy cases as we advance our measured rollout focused on training and support of our customers. We also moved our single-port stapler into broad launch, which will support deeper penetration in thoracic and colorectal procedures as customers expand their programs. Our teams are focused on new product and procedure launches, expanding our customer base and securing new geographic clearances. Over the midterm, SP will incorporate much of the da Vinci 5 ecosystem, including current and future digital and AI capabilities. We're excited about the potential of SP to drive meaningful improvement in the Quintuple Aim. Moving to Ion, we're pleased with the results and progress this quarter. Ion's North Star is to help physicians improve lung cancer patient survival. Clinical publications continue to reinforce progress here, including a recent Mayo Clinic publication of approximately 2,000 patients, which demonstrated that use of Ion supports earlier identification of malignancy with the potential to improve patient survival. Dan will walk through the study in more detail later in the call. Our teams are making progress on our rapid on-site tissue evaluation technology, or ROSE, and endobronchial ultrasound integration as we look to further streamline the time from detection to diagnosis. Looking ahead, our company priorities for 2026 are unchanged. First, the global expansion of our platforms, digital feature releases and ecosystem enhancements. Second, increased adoption for focused procedures by country through training, commercial activities and market access efforts. Third, building industrial scale, enhancing product quality and achieving manufacturing optimization. And finally, advancing innovation to reach more patients in current and new disease states. Before I turn the call over to Jamie, I want to recognize an important leadership transition at Intuitive. Dr. Myriam Curet is retiring this quarter after more than 20 years as Intuitive's Chief Medical Officer. I'd like to thank Myriam for all her efforts in advancing our mission as a physician, a patient advocate and a business leader. I'm also pleased to announce Dr. Jamie Wong's promotion to Chief Medical Officer and member of our executive leadership team. Jamie combines a deep clinical background as a practicing da Vinci urologist with over a decade at Intuitive, leading a variety of functions. As CMO, he will lead our global medical office, overseeing customer training, clinical evidence generation and research, and reimbursement and market access efforts. And with that, I'll turn the time over to Jamie to take you through our finances in greater detail.

Good afternoon. I will describe our performance on a non-GAAP basis, and I'll summarize our GAAP results later in my remarks. A reconciliation between our non-GAAP and GAAP results is available on our website. All references to total procedures and their related growth rates include both da Vinci and Ion procedures. Before detailing our quarterly results, I would like to briefly address the cyber incident that occurred during the first quarter, which resulted in unauthorized access to some customer business and contact information as well as certain Intuitive employee and corporate data contained in certain of our IT business applications. The incident did not disrupt our business or manufacturing operations and did not affect our products. It also did not have a significant impact on our first quarter financial results. We have contained the incident, notified customers and informed appropriate data privacy regulators. We are also taking additional steps to further strengthen our cybersecurity protocols. In Q1, total procedures grew 17%, reflecting 16% growth in da Vinci procedures and 39% growth in Ion procedures. Quarter 1 revenue increased 23% to $2.77 billion, with recurring revenue also higher by 23% to $2.4 billion, accounting for 86% of total revenue. On a constant currency basis, revenue growth was 22%. Non-GAAP operating margin was strong at 39%, primarily reflecting leverage of fixed costs. The strength of our financial results reflects the continuing global expansion and procedure adoption of our da Vinci 5, Ion and SP platforms. Turning to the clinical side of our business, in the U.S., total procedures increased 15%, reflecting 14% growth in da Vinci procedures and 37% growth in Ion procedures. For our da Vinci platforms, we continue to see strong growth in cholecystectomy and appendectomy procedures, which combined grew by 31%, driven in part by continued expansion of use of da Vinci during after-hours and on weekends. We are starting to see emerging evidence that a broad set of clinical outcomes for appendectomy are improved with da Vinci surgery as compared to laparoscopy. Over the last year, in the U.S. we've invested in incremental clinical support for surgeons performing benign gynecology procedures given the opportunity to improve patient outcomes. While total U.S. gynecology procedures grew 10% in Q1, investments in this area drove a 19% increase in non-hysterectomy benign procedures, including sacrocolpopexy, endometriosis, oophorectomy and myomectomy during the quarter. Da Vinci bariatrics procedures in the U.S. continue to be impacted by the growth in use of GLP-1s and declined approximately 10%. Da Vinci utilization in the U.S. increased 4% in Q1, higher than recent quarters, driven by a growing installed base of da Vinci 5 systems, where utilization is approximately 11% higher than Xi. With respect to the expiration of subsidies for enhanced premiums under ACA, while we did not see any significant impact on procedure volumes in Q1, we remain cautious about what the potential impact might be. Outside the U.S., total procedures grew 20% with da Vinci procedure growth of 19%, reflecting strong results in India, Canada, the U.K., Korea and Taiwan, and solid growth in distributor markets such as Italy and Germany. The market in China continued to be challenging. In Q1, procedure growth was below the corporate average, reflecting lower tenders and competitive pricing pressures. Ongoing discussions with provinces regarding potential new charge codes and reimbursement policies in China for robotic procedures are continuing. We are actively engaged with policymakers but do not expect clarity on the outcome of these matters until 2027. Procedure growth in Japan was also below the corporate average, reflecting lower capital placements over the last several quarters. In Q1, the Japanese Ministry of Health, Labor and Welfare, or MHLW, introduced incremental reimbursement for hospitals that exceed robotic procedure volumes of 200 qualifying cases per year. Additionally, 7 new procedures have been granted robotic reimbursements starting in June of 2026. Rectal resection has also received premium reimbursement when performed robotically. While we are encouraged by these steps, we remain cautious in our outlook for the Japanese market in the short term due to the financial position of public hospitals in recent periods. Globally, we continue to see healthy procedure growth for our SP platform at 68% for Q1, with strength in Korea and continuing robust early-stage growth in Europe, Japan and Taiwan. In the U.S., SP's average system utilization continued to accelerate following recent additional clearances, growing 22% compared to Q1 of last year. During the quarter, we moved our new SP stapler into broad launch in the U.S., where it was used in almost 40% of cases where we would expect a stapler to be used. We are planning to move the SP stapler into measured launch in Korea and Europe in Q2 as we expand manufacturing capacity. As a result of our clinical performance, total I&A revenue in Q1 grew 23% to $1.7 billion. Da Vinci I&A revenue per procedure was approximately $1,880 compared to $1,780 last year, driven by customer ordering patterns, a higher mix of SP and da Vinci 5 procedures, and FX factors, partially offset by lower bariatric and high cholecystectomy procedures. Turning to capital performance and starting with our da Vinci business. We placed 431 da Vinci systems in Q1, a 17% increase from the 367 systems placed in the same quarter last year. 232 of the 431 placements were da Vinci 5, including 40 in OUS markets. The installed base of da Vinci 5 is now almost 1,500 systems used by nearly 13,000 surgeons since launch. Customers acquired 34 refurbished Xi systems in Q1 compared to 2 in the year-ago period. 26 of the 34 placements were in OUS markets in segments where we see greater cost sensitivity. There were 119 trade-in transactions in Q1, up from 67 a year ago, primarily driven by U.S. customers upgrading to da Vinci 5. In the U.S., we placed 226 systems, up from 204 last year, driven by the adoption of da Vinci 5. Outside the U.S., we placed 205 systems, an increase of 26% compared to last year's 163 systems. OUS placements included 117 systems in Europe, 62 in Asia and 26 in the rest of the world compared to last year's respective placements of 88, 52 and 23. Relative strength in Europe was driven primarily by the U.K., where we placed 34 systems as the NHS closed out its budgetary year. We placed 13 systems in Japan and 4 systems in China, reflecting lower overall tender volumes. Within the 431 da Vinci placements, we placed 34 SP systems in Q1, higher than the 19 systems last year, driven primarily by increased placements in the U.S. and Taiwan. For our Ion platform, we placed 52 systems in Q1 compared to 49 systems last year. Q1 Ion placements included 13 systems in OUS markets. Given our capital performance, Q1 systems revenue grew 24% to $651 million. For our da Vinci business, leasing represented 56% of da Vinci placements as compared to 47% last quarter and 54% last year, driven primarily by customer preference. Da Vinci leasing revenue increased 28%, reflecting a 14% expansion of the installed base under operating lease arrangements and a 12% increase in lease revenue per system driven by a higher mix of da Vinci 5 systems and higher utilization for usage-based arrangements. The average selling price for purchased da Vinci 5 systems was $1.7 million in Q1 as compared to $1.6 million last year, driven both by a higher mix of da Vinci 5 systems and dual-console systems, partially offset by higher trade-ins. Lease buyout revenue was $51 million as compared to $39 million last quarter and last year. Q1 service revenue increased 19% to $434 million, reflecting an increase of the da Vinci installed base of 12% and the Ion installed base of 22%. Service revenue per system for our da Vinci installed base increased 6% year-over-year, primarily reflecting a higher mix of da Vinci 5 systems. Turning now to the rest of the P&L. Non-GAAP gross margin for the quarter was 67.8%, an increase from 66.4% in Q1 of last year. The year-over-year increase reflects product cost reductions and fixed overhead leverage, partly offset by the impact of tariffs. While Q1 results were not significantly impacted by higher oil and memory prices, we do expect those to have a greater unfavorable impact in the remainder of the year. During the quarter, our da Vinci 5 system achieved contribution margins comparable with our Xi system, and our Ion platform achieved contribution margins that are close to the corporate average, reflecting significant efforts by our engineering and operations teams. Continuing initiatives to further improve gross margins, excluding the impact of tariffs, are focused on leverage of fixed overhead, improving product and service margins for da Vinci 5 and additional reductions to product costs for our SP and Ion platforms. Future gross margins will reflect our execution on these initiatives, competitive pricing dynamics, global tariff rates and product, regional and trade-in mix. Q1 non-GAAP operating expenses increased 10% year-over-year, a little lower than our expectations due to the timing of certain expenses. The year-over-year increase was driven by higher headcount, increased variable compensation and higher facility costs, partially offset by lower legal expenses. We added 425 employees during the quarter, of which 230 were related to the acquisition of our distribution business in Italy, Spain and Portugal. Non-GAAP other income was $85 million for the quarter as compared to $86 million last quarter, reflecting lower interest income. Our non-GAAP effective tax rate for Q1 was 22%, consistent with our expectations. Non-GAAP net income for the first quarter was $901 million compared with $662 million last year. Non-GAAP earnings per share was $2.50 per share as compared to $1.81 per share in Q1 of last year. Now turning to our GAAP results. GAAP net income for the quarter was $822 million or $2.28 per share compared to $698 million or $1.92 per share in Q1 of last year. We ended the quarter with $8 billion in cash and investments, down from $9 billion last quarter, driven by stock repurchases of $1.1 billion, the acquisition of our distributor business in Italy, Spain and Portugal, and capital expenditures of $103 million, partially offset by cash generated from operating activities and proceeds from employee equity activity. Taking a moment to recap our recent financial performance, a core element of our strategy focuses on excellence in product innovation to launch highly differentiated products that drive the Quintuple Aim for the benefit of customers and patients. Revenue growth ahead of total procedure growth reflects, in large part, the differentiated value of da Vinci 5. As that new platform becomes a greater proportion of our business, revenue growth benefits from accretive pricing, higher levels of integration and incremental trade-in volumes. We see opportunities to continue to drive innovation-led revenue performance with our SP stapler, planned SP vessel sealer and growth in use of existing and planned AI and digital capabilities. We also have plans to increase the value of our Ion platform in the lung through our pursuit of a staging indication and the integration of AI-based ROSE technology. With that, I'll turn it over to Dan to discuss recent clinical publications and our updated outlook for 2026.

Thank you, Jamie. Earlier this month, Dr. Sebastian Fernandez-Bussy from Mayo Clinic in Jacksonville, along with co-authors across Mayo Clinic sites in Jacksonville, Phoenix, and Rochester, published a study in Mayo Clinic Proceedings titled, '2000 Peripheral Pulmonary Lesions Sampled by Shape-Sensing Robotic-Assisted Bronchoscopy and Mobile Cone-Beam Computed Tomography: The Mayo Clinic Experience.' In the study, which ran from July 2019 through August 2024, 12 proceduralists used Ion to biopsy 2,115 peripheral pulmonary lesions from 1,904 patients. Lesions biopsied were an average size of just under 18 millimeters, with more than half located in the upper lobes at a median distance of 17 millimeters from the chest wall. The diagnostic yield according to the recently published strict ATS/ACCP Consensus Statement definition was 79% with sensitivity of malignancy reported at 85%. Further, 74% of patients had concurrent endobronchial ultrasound lymph node staging with the authors noting, 'The ability to perform diagnosis and staging within the same anesthetic event reduces the risk of repeated interventions, facilitating lung cancer diagnosis and advanced disease management.' Additionally, results demonstrated a strong safety profile with a pneumothorax requiring intervention rate of 1.4% and severe bleeding defined as Nashville Grade 3 or higher of 0.3%. Notably, the rate of early-stage primary lung cancer diagnosis in the study increased by 23 percentage points from 46% in 2019 to 69% in 2024. The authors concluded, 'In this high-volume multi-center 5-year study, shape-sensing robotic-assisted bronchoscopy has shown a consistently optimal diagnostic yield with low complication rates. To our knowledge, this is the largest cohort assessing shape-sensing robotic-assisted bronchoscopy following the recent strict consensus on diagnostic yield. The ability to sample multiple peripheral pulmonary lesions and include hilar and mediastinal staging within the same anesthetic event positions shape-sensing robotic-assisted bronchoscopy as the preferred method of choice over CT-guided thoracic biopsy for assessing suspicious peripheral pulmonary lesions.' I will now turn to our updated financial outlook for 2026, starting with da Vinci procedures. In January, we forecast full year 2026 da Vinci procedure growth to be within a range of 13% to 15%. We are increasing our forecast and now expect full year da Vinci procedure growth within a range of 13.5% to 15.5%. We continue to expect primary growth drivers in 2026 to be generally consistent with those in 2025, including general surgery in the U.S. and procedures outside of urology internationally. Our updated range continues to consider the potential impact of changes to ACA premium subsidies and patient behavior in the U.S., capital pressure in parts of Europe related to macroeconomic impact and shifting governmental priorities, China's tender volumes and competitive intensity in that market, recent capital challenges in Japan and how long those persist in 2026, and pharmaceutical products for obesity management.

Our first question will come from Travis Steed with Bank of America.

Congrats on a good quarter. Maybe to start, I kind of want to talk a little bit about some of the future. You talked a lot about data and digital infrastructure, augmented dexterity. I'm just curious how you see the digital and data roadmap for Intuitive. And there's also some hints on biopsy and the ROSE acquisition. So I'd love to hear your big picture view of how that plays out and anything you can say on timing?

Yes, I'd be happy to address that, Travis. Thank you for your question. I'll focus on AI as it relates to our products and customers instead of the corporate side. AI is similar to other products in that we evaluate it through the lens of the Quintuple Aim: advancing outcomes, reducing variation, enhancing patient experiences, lowering total costs, and improving global access for patients. We believe AI will contribute to these goals. Our strategy involves building a layered set of capabilities starting with high-quality data, which includes video data from surgeries, robotic data streams like kinematic and force data, and connected electronic medical records that we are developing with customers. Once we have this quality data, our AI and data scientists will work to generate meaningful insights, which need to be delivered to customers in a consumable and timely manner. There are several ways this will reach customers: it could provide operational guidance for hospital robotic programs or assist surgeons and care teams in their learning. A significant application will occur in the operating room, such as AI-enabled anatomy identification, which highlights critical structures during surgery. Over time, we anticipate that the foundations established in the initial phase will facilitate advanced assistance, like augmented dexterity and automation, potentially controlling the camera while the surgeon focuses on the surgery. Throughout this process, clinical value, safety, and reliability remain essential, and we aim to implement these advancements at scale. As we assess our position within the AI ecosystem, we believe our differentiation comes from our widespread installed base of systems, including around 1,500 da Vinci 5 systems and over 3 million procedures conducted annually. This foundation will strengthen our differentiation over the next 3 to 5 years. While many capabilities like edge and cloud computing and training algorithms are broadly available, our unique advantage lies in the specialized data sets we have access to now, such as Force Feedback, and those we will develop with enhancements to da Vinci 5. Together, these elements create a flywheel that begins with data, leading to insights and actions that advance the Quintuple Aim. We have dedicated teams focused on this initiative and are investing in its future, and we look forward to sharing updates along the way.

That's exciting. Can't wait. Maybe my follow-up question, Jamie, on margin. You highlighted some macro stuff, but still raised gross margin 50 basis points and tariffs only came down 20 basis points. So I guess the contribution margin of dV5 comparable to Xi, a nice positive for margins. But kind of curious what you saw in the macro and what you kind of baked in on that front? And any color on kind of what percent of COGS you'd call chips and exposure to oil and resin?

Yes. I'd just say for oil prices and the derivative impact that has on input prices and logistics costs and memory, based on what we know today, in the gross margin guidance, it has an impact, but it's relatively small. I think what you see in Q1, in particular, is relatively significant leverage from the 23% revenue growth and a really nice contribution from the product cost reductions that we've described. So the macro is having an impact. And obviously, we're watching it carefully and you also have to watch the potential supply constraints. But the macro is baked in and relatively small, just given the components of our product costs.

So Travis, real quick, you had asked about ROSE and EBUS and just some color there. Both are known technologies. The timelines are more short term, but they won't be this year. We do believe that they are bringing truly significant differentiated value to the lung cancer detection and diagnosis journey and expect to share that value with customers. And so as that gets closer, we'll let you know more about it.

Our next question will come from Larry Biegelsen with Wells Fargo.

Congrats on a good start to the year here. I had one on procedures, and then I had one follow-up for Jamie. So I'd love to hear you talk about the appendectomy opportunity. It looks like about 300,000 per year. It's one of the first times I've heard you call that out on an earnings call, 300,000 per year in the U.S. And if you could size the incremental Japan opportunity from those new procedures, that would be great. And I had one follow-up.

Yes. We haven't sized appendectomy yet. I think there's a question of what makes sense in terms of the robotic portion of that overall TAM because we're so early in appendectomy, we're still kind of working through internally on what we think is the right opportunity. We called out the kind of emerging evidence on clinical outcomes just because over the quarter, we've had a couple of engagements with surgeons that have done work in their own institutions. We saw several of those come together. Across the set of functional outcomes in the work that they did, da Vinci was better on all comparison points, which we thought was encouraging. We'd like to see that show up in clinical studies that have larger data sets in terms of the number of patients, but we think that's super interesting for what is typically a relatively quick procedure with relatively low reimbursements.

On Japan, I think we noted MHLW added reimbursement coverage for 7 procedures across a couple of different categories. The largest of those is bilateral inguinal hernia repair. Reimbursement there is roughly $1,500 per procedure. I think in aggregate, it's too early for us to size the incremental procedure opportunity in Japan. But the impact is relatively modest, and like in prior periods where we've had incremental reimbursement, it will take time to develop.

Jamie, I'd like to explore more about what you meant by innovation-led revenue growth. This is the first time I've heard you mention it. Can you clarify how much faster revenues are expected to grow compared to procedures? In Q1, it was 23% versus 17%. Do you anticipate that difference will increase in the future? Please discuss the implications of this innovation-led revenue growth.

Yes. I really felt like it was worth describing because if we look back at last year, even revenue growth was 21%. Obviously, procedure growth was also lower than that last year. Then you see the numbers in Q1. The business framing we have is kind of what I described as a push and pull. We're very conscious about deploying our R&D to places where we can be differentiated and make a difference on the Quintuple Aim that's integrated in how we make R&D deployment decisions. Where you can be differentiated and make a resale difference for customers, then you get to share that value in the form of on the Intuitive side, accretive pricing or incremental pricing. We see that in da Vinci 5, you see that actually in SP I&A and other areas where we have that opportunity. On the other side of it, if you look at the totality of our business, there are, of course, procedures and geographies that are more cost sensitive. We also then look for opportunities to bring our costs down, particularly our manufacturing and product costs, and share that cost savings with our customers. We do that with an eye on what can be the elasticity response when it's cost sensitive. Therefore, that creates a mix dynamic between the two. In terms of how long this will sustain, I don't think I want to get into that since we don't guide revenue. It's really our attempt to just describe what's happened in recent periods with respect to the difference between revenue growth and procedure growth. We're just reemphasizing the fact that innovation is critical to our success.

Our next question comes from the line of Robbie Marcus with JPMorgan.

I'll add my congratulations on a really nice quarter as well. Two for me. First, the utilization continues to just be impressive, especially with the after-hours metrics and the utilization improvement on da Vinci 5, which is now becoming a pretty substantial part of the installed base. I was hoping you could just add a little more color there in terms of how much more is there to go? Because I think everyone knows that utilization and procedure volume growth ultimately is what drives placements. So how much more is there to go? And how do you think about that translating into unit growth down the road? How much and when, if you're willing to quantify?

That's a challenging question to answer for a few reasons. It’s important to consider the averages and examine the utilization distribution in each market, as well as the mix of systems present. From a broader perspective, we are aligned with customers who want to enhance robotic throughput, as we believe this is beneficial both for them and for Intuitive in the long run. Some markets, like Japan and certain European regions, show potential for improved utilization. In the U.S., utilization growth will largely depend on how quickly the existing installed base transitions to the da Vinci 5, which we believe has the capacity to achieve higher utilization levels thanks to its features. We aim to maintain growth in utilization because it is crucial for our differentiation from competitors. However, I can't predict how long this growth will continue or what its impact will be.

I know it's a hard question. That's why I'm asking you. I'm hoping you could do my job for me a little bit. Maybe just a follow-up. We have more and more competitors trying to enter the market here, some in the U.S. from big surgical competitors, some in China, others in Europe. You now have the opportunity to offer a tiered pricing strategy with refurbished Xis. It'd be great just to get a refresh on how you're thinking about global competition at different price points in different markets and how you're feeling about your positioning there?

Yes, Robbie. I believe that competition revolves around effectively meeting customer needs at the right price. It's truly about the value derived from establishing a robotic program that ensures effective patient treatment and achieving positive outcomes. Our focus should be on the overall value of the program rather than just the initial cost of the robot, which includes its presence in an operating room. We want to emphasize how patients are being treated, the improvements in outcomes, and any anticipated shifts from open surgery to minimally invasive robotic procedures tied to a customer's strategic initiatives. This is the approach we intend to take in our discussions with customers, guiding them on the critical questions to ask and the data to consider when evaluating robotic competitors globally. With our portfolio, especially now that we've added XiR, I believe we are well-positioned to lead in these values due to our proven clinical results, the reliability of our systems, and our comprehensive ecosystem of services and training to support customers on their journey. This encapsulates our global competitive strategy. Jamie, is there anything else you would like to add?

I would just say we're still selling X, and actually, we sold 41 X systems in the quarter, 34 refurbished Xis. And then, of course, we have dV5. I think the segmentation there is really appealing and, in some sense, is a competitive advantage for us to be able to tier feature the capability and economics for various segments of our customers. The refurbished Xi, like Dave said, is a very capable product. It has the full complete suite in the ecosystem, and the economics for customers are really attractive. So I think that's been a great kind of addition to the system portfolio.

Our next question will come from Rick Wise with Stifel.

Sorry for my scratchy voice. I have a specific question for Jamie and then a broader question for you, Dave. Jamie, can you help us understand what international factors drove I&A to grow at double the rate of procedure growth? It’s a significant difference of 40% OUS I&A compared to 19% OUS procedure growth. Was there anything one-time or specific to certain countries? Should we expect this dynamic to continue?

I have not looked at that deeply for OUS specifically, Rick. I do think the customer ordering pattern is likely a good chunk of that because all of our distributors obviously are international, and they can be pretty lumpy in terms of their ordering patterns. They can place orders for several quarters. So I'd imagine that the greatest impact is that. Given the strong capital placements, we probably had a bunch of stocking orders that also benefited Q1. Finally, there is a benefit from FX.

Got you. All right Jamie. Dave, for you, just as we get ready for some upcoming robotic meetings and reflect on some of the topics that are going to be discussed and presented. I was hoping you could sort of step back and looking longer term, talk about a couple of initiatives that others are focused on. To what degree is this important to Intuitive Surgical? Like telesurgery robotics. We saw the first promote procedure done recently. The value of robotics in stroke or minimally invasive cardiovascular disease. Again, at the highest level, your interest or passion or focus on areas like that that might be future drivers of growth for Intuitive.

I appreciate the question, Rick. When I consider adding new capabilities to our ecosystem, it's primarily about how we can advance the Quintuple Aim and ensuring that any additions will be better in our hands. For instance, regarding telesurgery, I'm a strong believer in the collaborative features of telestration and telecollaboration tools. We're experiencing significant utilization of our My Intuitive+ platform, with thousands of use cases each month, which shows the value and stickiness for our customers. As we enhance our capabilities, telesurgery will be part of that future roadmap and will likely represent a segment of those use cases. Just yesterday, I spoke with a customer about their expectations for how telesurgery will be implemented within their integrated delivery network and smaller hospitals. There’s notable value in this area, although we anticipate that most telecollaboration use cases will be addressed by existing tools that incorporate telestration and audio/video interactions, escalating to telesurgery when necessary. I view this as a crucial aspect of our future offerings that our customers will appreciate. Additionally, we have recently invested in cardiac and cardiac surgery, believing there will be patients who can benefit from minimally invasive cardiac surgery and those who will benefit from percutaneous transcatheter methods. Evidence suggests that sometimes surgery is the better option, while in other instances, an interventional method is preferable. When surgery is appropriate, I believe our investments in da Vinci 5 and training will yield significant benefits and enable surgeons to offer patients a minimally invasive approach to their cardiac conditions. You also mentioned stroke, which is indeed an intriguing area. There are many other domains where I see opportunities to enhance our capabilities and deliver value to both Intuitive and the patients our customers serve. I've always been fascinated by how surgeons leverage the core functionalities of platforms like da Vinci in innovative ways that we did not anticipate. This has happened repeatedly over time. I believe with the existing da Vinci 5 capabilities and future enhancements, we'll continue to observe this trend. Surgeons are already identifying value in areas that are currently underserved. I'm enthusiastic about exploring these opportunities, and we'll investigate whether they hold real value and can be scaled and taught effectively. I look forward to providing updates on our progress in this regard.

Our next question will come from David Roman with Goldman Sachs.

Maybe you could start on SP. It looks like a lot of pieces are coming together here to support further adoption of that technology, whether that's additional clearances from a procedure standpoint or additional instrumentation. Maybe just give us a sense of where we are in bringing SP to a point where that adoption curve can accelerate, whereby that becomes a more meaningful percentage of placements? And I guess, if you could also contextualize that, is that additive to the overall addressable procedure market? Or does it become a choice of a typical da Vinci 5 procedure or SP?

Yes. I guess I would say, if you look at the kind of procedure growth over the last year or so, it's been strong, 68% this last quarter. That strength has been in part driven by additional geographical clearances and additional procedure clearances, particularly in the U.S. I think that that continues over some period. It's not that it suddenly inflects and accelerates from where it is; I think we continue that progression on some reasonable pace. If you look at the question of long-term, what are the incremental opportunities that are different from multi-port, that multi-port is not going to serve and therefore, in effect, expands our total addressable market. I think those opportunities exist. Nipple-sparing mastectomy is a good example. Obviously, that's in an early stage. You have some work being done to see if SP is better than alternatives, including multi-port. Of course, that's been largely an exchange between one stream or one set of procedures that we have to another. There's work in our labs that's super interesting for additional disease states that aren't served today. That said, our current focus is on the opportunity we have. We have still a long way to go in each of the markets where we're cleared and for the new indications that we've added. The next year or two is where our focus is. But I think the long-term opportunity for SP is perhaps a little underestimated. Maybe I'd just add. In each of the markets, we take a localized approach to how we engage and what our strategy is there. Each of those markets has a strict strategic plan, and that results in us investing differentially in each of those markets. For OUS, as you've seen, we'll go direct in markets already where we think the opportunity makes sense for us. There may also be instances where we start to look at localized manufacturing, which is becoming increasingly important for some of those markets. The final thing I'd say is, we have ambitions internationally, just given we're earlier in penetration. There may be additional markets that we franchise with distributors that we don't do business in today.

Okay. That was our last question. Thank you for all the questions. In closing, we continue to believe there's a substantial and durable opportunity to fundamentally improve surgery and acute interventions. Our teams continue to work closely with hospitals, physicians and care teams in pursuit of what our customers have termed the Quintuple Aim: better and more predictable patient outcomes, better experiences for patients, better experiences for their care teams, lower total cost of care and finally, increased access to care. We believe value creation in surgery and acute care is foundationally human. It flows from respect for and understanding of patients and care teams and their needs and their environment. At Intuitive, we envision a future of care that is less invasive and profoundly better, where diseases are identified earlier and treated quickly so patients can get back to what matters most. Thank you for your support on this extraordinary journey. We look forward to talking with you again in 3 months.

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.