The da Vinci Rally: Smart Hold or Time to Reap Profits?

Intuitive Surgical (NASDAQ: ISRG) shares surged over 30% in just one month, leaving the S&P 500’s modest 4% gain in the dust. But here’s the million-dollar question: Is this bounce-back from a major sell-off the beginning of a new leg up, or simply the time to lock in gains and move on?

The Business Case: More Than Just Robots

Intuitive Surgical operates in the medical device sector, dominating the surgical robotics market with its flagship da Vinci system—a technology that essentially redefined minimally invasive surgery globally. By the end of Q3 2025, the company had deployed 10,763 units worldwide, up from 9,539 the previous year—a solid 13% year-over-year expansion.

But here’s where it gets interesting: procedure volume grew even faster. A 20% jump in da Vinci-assisted surgical procedures year-over-year indicates that hospitals aren’t just buying these systems—they’re actually using them more intensively. This divergence tells you that demand for the technology remains robust, and hospitals are discovering new applications for the surgical saw-like precision that the da Vinci’s robotic arms provide.

The real money in this business, though, isn’t in selling hardware. Approximately 75% of Intuitive Surgical’s revenue comes from instruments, accessories, and service contracts—all recurring revenue streams. Every robot installed becomes a mini profit engine, continuously generating revenue through replaceable surgical instruments and ongoing maintenance. That’s the true growth flywheel most investors underestimate.

The Long Game: Massive Untapped Potential

From a business fundamentals perspective, Intuitive Surgical looks genuinely compelling. The da Vinci platform remains largely in early adoption globally. In developed markets, surgical robot penetration is still relatively low. Add in emerging possibilities—like AI-assisted procedures or telemedicine-enabled remote surgery where a surgeon in one continent could operate a system on another—and you’re looking at a total addressable market that could be genuinely transformative.

The benefits are real too: less tissue trauma, reduced recovery times, better patient outcomes. These aren’t marketing claims; they’re documented in medical literature. As more hospitals adopt the technology, positive outcomes translate into competitive advantages and higher adoption rates. It’s a virtuous cycle.

Here’s the Catch: Wall Street Has Already Priced This In

The problem with a great growth story is that once Wall Street discovers it, valuations get punchy fast. Intuitive Surgical’s current price-to-sales ratio sits at roughly 22x, while its price-to-earnings multiple has reached a lofty 76x. Both metrics exceed their five-year averages, and on an absolute basis, these are exceptionally high multiples—even by growth stock standards.

Translation: You’re paying a premium price for a premium product. The market has essentially given Intuitive Surgical permission to be expensive because investors believe in the narrative. But that also means the stock has limited margin for error.

A Pattern Worth Recognizing

Here’s something crucial that many traders miss: Intuitive Surgical has experienced eight major drawdowns of 30% or more. The current rally represents recovery from exactly such a sell-off. What triggered the rebound? A solid earnings report that confirmed the long-term growth thesis was still intact. One quarter of solid execution was enough to remind Wall Street that the da Vinci story remains compelling.

This pattern—boom, bust, recovery, repeat—isn’t a flaw in the stock; it’s inherent to the market. Nothing goes up in a straight line. Charts are perpetually jagged and sawteeth-like. If you’re uncomfortable with this kind of volatility, that’s important information about your own risk tolerance.

The Real Decision Framework

Your exit strategy should hinge on one thing: why did you buy it initially?

If your thesis was short-term: You were betting on a price rebound after the drawdown. Mission accomplished. Intuitive Surgical has recovered significantly, so locking in quick profits and reallocating capital elsewhere makes logical sense.

If your thesis was the long-term growth story: The fact that a good quarter rekindled Wall Street enthusiasm is actually validation, not a signal to sell. The underlying dynamics—increasing adoption, expanding procedure volumes, recurring revenue streams, untapped markets—haven’t changed. In that scenario, holding through inevitable future volatility is the appropriate posture.

The Bottom Line

Intuitive Surgical remains a fundamentally sound company executing on a credible growth narrative. Its valuation is objectively elevated, which means future returns will likely be measured rather than spectacular. But for investors with a multi-year time horizon who bought in because they believed the da Vinci platform would transform surgery over the coming decade, there’s little reason to abandon that thesis on the basis of a month-long rally.

The tougher question isn’t whether to hold or sell—it’s whether you have the psychological fortitude to sit through the inevitable 30%+ drawdowns that lie ahead. If not, that’s the real reason to exit.