ISRG Stock Falls Despite Q1 Earnings Beat, Gross Margin Contracts

Core Insights - Intuitive Surgical (ISRG) reported strong first-quarter 2025 results, with adjusted earnings per share (EPS) of $1.81, exceeding estimates by 5.9$2.25 billion, reflecting a 19.2% year-over-year increase and surpassing estimates by 3.3% [2] Revenue Details - The revenue growth was driven by an increase in installed systems and a rise in da Vinci procedure volume [2] - Revenue from the Instruments & Accessories segment was $1.37 billion, up 18$523 million in revenue, a 25% increase year over year, due to higher system placements and average selling prices [4] - Service revenues amounted to $363 million, reflecting a 15.8$1.5 billion, a 17% year-over-year increase, with a gross margin of 66.4%, down 120 basis points from the prior year [6] - Selling, general, and administrative expenses rose to $563.4 million, up 14.6$316.2 million, up 11.1% [6] Financial Position - The company ended the quarter with cash, cash equivalents, and investments totaling $9.1 billion, an increase from$8.83 billion in the previous quarter [8] - Total assets rose to $19.22 billion from$18.74 billion a year ago [8] Future Outlook - Intuitive Surgical expects gross margin to face a 170 basis points headwind in 2025 due to newly implemented global tariffs, particularly affecting components imported from China [11] - The company has lowered its pro forma gross margin guidance for the year to 65-66.5% from 67-68% [12] - Continued growth in da Vinci procedures and the launch of the da Vinci 5 system are anticipated to drive future revenues, although challenges in certain markets may slow adoption [14][16]