Is Intuitive Surgical's Dominance Safe? 10 Years of Healthcare Upside

Over the past 25 years, Intuitive Surgical (NASDAQ: ISRG) has experienced significant success thanks to its pioneering use of robotics in surgery. The healthcare leader now stands as the undisputed top player in the robotic-assisted surgery (RAS) market. However, things are changing, and Intuitive Surgical may face increased competition in the coming years that could disrupt its prospects.

Can the company maintain its leadership position while still delivering strong results and market-beating returns? Let's see how things might evolve for Intuitive Surgical over the next decade.

The first of several potential newcomers

Intuitive Surgical's da Vinci system is the company's best-known device. It has been approved across a range of procedures, and in many of them, it has little to no competition. But some healthcare giants are quickly looking to shake things up.

Image source: Getty Images.

First up, we have Medtronic, a medical device specialist. Medtronic completed clinical trials for its Hugo system in urologic procedures in the U.S. earlier this year. It is now awaiting regulatory clearance in that indication. And since announcing that win, Medtronic has also posted positive clinical trial results for the Hugo system in hernia repairs. The da Vinci system is approved for both urologic procedures and hernia repairs, so the two are heading straight for a collision.

Further, Medtronic is likely to seek additional indications that overlap with the da Vinci system. Meanwhile, another healthcare leader, Johnson & Johnson, is also developing an RAS system called Ottava. The device is currently in clinical trials for gastric bypass -- another one of the da Vinci system's indications -- in the U.S. It might be a few years before the Ottava hits the market, but it will add to Intuitive Surgical's competitive pressure.

Intuitive Surgical's advantages

Several factors could enable Intuitive Surgical to maintain its leadership position in the market. Let's consider two. First, its device not only has completed clinical trials and earned approvals across many indications, but it has also been in use in the real world for a long time. This first-mover advantage should give Intuitive Surgical an edge over newcomers in the field.

It has also allowed the company to get valuable feedback from healthcare professionals and modify its device as needed. The da Vinci system's fifth generation was launched just last year, with smashing success.

Second, Intuitive Surgical already has a large installed base. It ended the third quarter with 10,763 installed da Vinci systems, representing a 13% year-over-year increase. Most of these are likely to remain in place. Not only is the device expensive, but it also requires a learning curve for surgeons to master. Switching to a competitor after putting in all that money, time, and effort is too much work for most healthcare facilities. Intuitive Surgical's switching costs are a powerful reason it should remain a leader.

It also allows for a recurring source of revenue. The instruments and accessories it sells for procedures have a short lifespan and need to be replaced regularly. And as procedure volume grows, so does the volume of accessories it sells.

Why Intuitive Surgical can still beat the market

Competition will intensify over the next decade, but robot-assisted procedures also should. One reason is that the market is severely underpenetrated. More players could help grow awareness, increase demand for the minimally invasive procedures they facilitate, and prompt even more hospital systems to invest in these devices.

Furthermore, the world's population is aging. By 2035, projections indicate that adults aged 65 and older will outnumber minors aged 18 and younger in the U.S. for the first time. This demographic shift will have significant implications for healthcare spending, as the elderly require more medical care, including the types of procedures that Intuitive Surgical offers with its da Vinci system. These tailwinds should help boost the company's procedure volume.

Intuitive Surgical has long generated steady revenue and earnings growth. It is still at it. And investors can expect much of the same over the next decade. The company could still deliver superior returns to patient investors.

Prosper Junior Bakiny has positions in Intuitive Surgical and Johnson & Johnson. The Motley Fool has positions in and recommends Intuitive Surgical. The Motley Fool recommends Johnson & Johnson and Medtronic and recommends the following options: long January 2026 $75 calls on Medtronic and short January 2026 $85 calls on Medtronic. The Motley Fool has a disclosure policy.