Intuitive Surgical Placed 546 da Vinci Systems Last Quarter. Why Wall Street's Sell-Off Misses the Point.

Intuitive Surgical (NASDAQ: ISRG) sold off after it reported third-quarter 2026 earnings. And despite the stock starting to bounce back from that drop, it remains down roughly 20% from its 52-week high as of this writing. To be fair, the stock is richly valued, but investors may be missing the long-term story, which is driven not by the sale of the company's da Vinci surgical robot, but by the parts and services sold to support those robots. Here's what you need to know.

Intuitive Surgical is only cheap relative to itself

Intuitive Surgical's price-to-sales ratio is roughly 14.5x, while its price-to-earnings ratio is over 56x. Those are both very large numbers, which suggest the stock is expensive. So, on an absolute basis, it makes sense that investors are a bit leery of any news perceived as negative. However, the five-year average P/S ratio is 17.2x, with the five-year average P/E at 66x. Thus, relative to the company's own history, it looks cheap and, for more aggressive growth investors, it is probably worth a deep dive.

Image source: Getty Images.

Recently, investors have been watching Intuitive Surgical like a hawk as competitors enter the market, including medical device giants such as Medtronic (NYSE: MDT) and Johnson & Johnson (NYSE: JNJ). It seems highly likely that Intuitive Surgical's sales of new da Vinci surgical robot systems could slow down. Any hint of a slowdown is likely to be greeted with a stock decline. That's the big-picture story around the stock drop highlighted above.

Intuitive Surgical is still growing the funnel

Long-term growth investors need to think more deeply about Intuitive Surgical's business. For starters, it sold 546 da Vinci surgical systems in the third quarter of 2026, up from 427 a year ago. So growth hasn't stopped. But the real story shows up in the total number of da Vinci systems in use globally: 12,094, up 12% year over year. The number of da Vinci systems is the top of the funnel.

That's because the sale of new da Vinci systems accounts for only about 25% of the company's revenue. The rest comes from services, Instruments, and accessories. In other words, Intuitive Surgical makes more money from supporting its installed base than it does from selling new robots. Which is why you'll want to monitor the number of surgeries performed, as well. In the third quarter of 2026, the number of procedures performed increased by 15%, even though the number of installed da Vinci systems increased by only 12%. The more Intuitive Surgical's robots are used, the more opportunity it has to sell parts and services.

Make sure you watch the right flywheel

It is easy to see why investors would view Intuitive Surgical as a manufacturing company driven by the sale of its da Vinci robots. In fact, the sale of new robots is important, but it just may not be as important as you think. The real business driver, the flywheel, is the company's sales of parts and services in support of its already large installed base of robots.

Adding more robots to the installed base is vital, but you shouldn't be so focused on what is at the top of the funnel that you miss the big-picture story. While conservative investors and those with a value focus should probably avoid Intuitive Surgical, growth-oriented investors should probably take a deep dive while the stock is 20% below its 52-week high (and relatively cheap by its own valuation history). Indeed, 75% of the top line suggests the business remains on very solid ground. That's doubly true when you consider that surgical robotics is still in the early stages of adoption worldwide.

Reuben Gregg Brewer has positions in Medtronic. The Motley Fool has positions in and recommends Intuitive Surgical and Medtronic. The Motley Fool recommends Johnson & Johnson and recommends the following options: long January 2028 $520 calls on Intuitive Surgical and short January 2028 $530 calls on Intuitive Surgical. The Motley Fool has a disclosure policy.