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1、UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q(Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31,2025ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF
2、 1934For the transition period from to Commission file number 000-30713 Intuitive Surgical,Inc.(Exact name of Registrant as specified in its Charter)Delaware 77-0416458(State or Other Jurisdiction of Incorporation or Organization)(I.R.S.Employer Identification No.)1020 Kifer RoadSunnyvale,California
3、 94086(Address of principal executive offices)(Zip Code)(408)523-2100(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock,par value$0.001 per shareISRGThe
4、Nasdaq Global Select MarketIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding12 months(or for such shorter period that the registrant was required to file such reports),and(2)has
5、 been subject to such filing requirements for the past 90days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for su
6、ch shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growthcompany.See definition of“large accelerated filer,”
7、“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has electe
8、d not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No The Registrant h
9、ad 358,418,255 shares of Common Stock,$0.001 par value per share,outstanding as of April 15,2025.INTUITIVE SURGICAL,INC.TABLE OF CONTENTS Page No.PART I.FINANCIAL INFORMATIONItem 1.Financial Statements(unaudited):Condensed Consolidated Balance Sheets as of March 31,2025,and December 31,20243Condense
10、d Consolidated Statements of Comprehensive Income for the three months ended March 31,2025,and 20244Condensed Consolidated Statements of Cash Flows for the three months ended March 31,2025,and 20245Notes to Condensed Consolidated Financial Statements6Item 2.Managements Discussion and Analysis of Fin
11、ancial Condition and Results of Operations22Item 3.Quantitative and Qualitative Disclosures About Market Risk43Item 4.Controls and Procedures43PART II.OTHER INFORMATIONItem 1.Legal Proceedings44Item 1A.Risk Factors44Item 2.Unregistered Sales of Equity Securities and Use of Proceeds44Item 3.Defaults
12、Upon Senior Securities44Item 4.Mine Safety Disclosures44Item 5.Other Information44Item 6.Exhibits45Signature462PART I FINANCIAL INFORMATIONITEM 1.FINANCIAL STATEMENTSINTUITIVE SURGICAL,INC.CONDENSED CONSOLIDATED BALANCE SHEETS(UNAUDITED)in millions(except par values)March 31,2025December 31,2024ASSE
13、TSCurrent assets:Cash and cash equivalents$2,573.8$2,027.4 Short-term investments1,937.5 1,985.9 Accounts receivable,net1,221.5 1,225.4 Inventory1,553.6 1,487.2 Prepaids and other current assets371.4 385.1 Total current assets7,657.8 7,111.0 Property,plant,and equipment,net4,799.0 4,646.6 Long-term
14、investments4,589.9 4,819.1 Deferred tax assets1,038.6 1,045.1 Intangible and other assets,net787.6 773.9 Goodwill347.5 347.5 Total assets$19,220.4$18,743.2 LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable$276.2$193.4 Accrued compensation and employee benefits309.7 535.6 Deferr
15、ed revenue496.3 468.8 Other accrued liabilities455.9 547.5 Total current liabilities1,538.1 1,745.3 Other long-term liabilities474.6 468.3 Total liabilities2,012.7 2,213.6 Contingencies(Note 8)Stockholders equity:Preferred stock,2.5 shares authorized,$0.001 par value,issuable in series;zero shares i
16、ssued and outstanding asof March 31,2025,and December 31,2024 Common stock,600.0 shares authorized,$0.001 par value,358.4 shares and 356.6 shares issued and outstandingas of March 31,2025,and December 31,2024,respectively0.4 0.4 Additional paid-in capital9,993.7 9,681.3 Retained earnings7,139.4 6,80
17、3.3 Accumulated other comprehensive loss(27.1)(51.3)Total Intuitive Surgical,Inc.stockholders equity17,106.4 16,433.7 Noncontrolling interest in joint venture101.3 95.9 Total stockholders equity17,207.7 16,529.6 Total liabilities and stockholders equity$19,220.4$18,743.2 The accompanying notes are a
18、n integral part of these Condensed Consolidated Financial Statements(Unaudited).3INTUITIVE SURGICAL,INC.CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(UNAUDITED)Three Months Ended March 31,in millions(except per share amounts)20252024Revenue:Product$1,890.4$1,577.1 Service363.0 313.5 Tota
19、l revenue2,253.4 1,890.6 Cost of revenue:Product670.7 554.4 Service125.0 90.8 Total cost of revenue795.7 645.2 Gross profit1,457.7 1,245.4 Operating expenses:Selling,general and administrative563.4 491.5 Research and development316.2 284.5 Total operating expenses879.6 776.0 Income from operations57
20、8.1 469.4 Interest and other income,net90.4 69.1 Income before taxes668.5 538.5 Income tax benefit(35.2)(8.9)Net income703.7 547.4 Less:net income attributable to noncontrolling interest in joint venture5.3 2.5 Net income attributable to Intuitive Surgical,Inc.$698.4$544.9 Net income per share attri
21、butable to Intuitive Surgical,Inc.:Basic$1.95$1.54 Diluted$1.92$1.51 Shares used in computing net income per share attributable to Intuitive Surgical,Inc.:Basic357.5 353.5 Diluted364.6 360.5 Other comprehensive income,net of tax:Unrealized gains(losses)on hedge instruments$(10.4)$5.6 Unrealized gain
22、s(losses)on available-for-sale securities29.1(4.2)Foreign currency translation gains5.5 1.8 Employee benefit plan adjustments0.1(0.1)Other comprehensive income24.3 3.1 Total comprehensive income728.0 550.5 Less:comprehensive income attributable to noncontrolling interest5.4 2.1 Total comprehensive i
23、ncome attributable to Intuitive Surgical,Inc.$722.6$548.4 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements(Unaudited).4INTUITIVE SURGICAL,INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)Three Months Ended March 31,in millions 20252024Oper
24、ating activities:Net income$703.7$547.4 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and loss on disposal of property,plant,and equipment137.5 104.2 Amortization of intangible assets3.4 5.1 Gain on investments,accretion of discounts,and amortization o
25、f premiums on investments,net(17.7)(5.9)Deferred income taxes0.1(7.2)Share-based compensation expense185.2 153.3 Amortization of contract acquisition assets8.7 8.5 Changes in operating assets and liabilities,net of effects of acquisitions:Accounts receivable3.6 2.2 Inventory(211.1)(179.6)Prepaids an
26、d other assets(7.8)(4.1)Accounts payable83.1(7.5)Accrued compensation and employee benefits(226.0)(271.2)Deferred revenue37.0(4.0)Other liabilities(118.1)(75.8)Net cash provided by operating activities581.6 265.4 Investing activities:Purchase of investments(519.8)(905.9)Proceeds from sales of invest
27、ments 100.2 Proceeds from maturities of investments849.9 919.1 Purchase of property,plant,and equipment(116.6)(241.9)Net cash provided by(used in)investing activities213.5(128.5)Financing activities:Proceeds from issuance of common stock relating to employee stock plans134.3 180.4 Taxes paid related
28、 to net share settlement of equity awards(370.1)(226.6)Payment of deferred purchase consideration(0.5)Net cash used in financing activities(235.8)(46.7)Effect of exchange rate changes on cash,cash equivalents,and restricted cash(4.5)6.8 Net increase in cash,cash equivalents,and restricted cash554.8
29、97.0 Cash,cash equivalents,and restricted cash,beginning of period2,062.4 2,770.1 Cash,cash equivalents,and restricted cash,end of period$2,617.2$2,867.1 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements(Unaudited).5INTUITIVE SURGICAL,INC.NOTES TO CONDE
30、NSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)In this report,“Intuitive,”the“Company,”“we,”“us,”and“our”refer to Intuitive Surgical,Inc.and its wholly and majority-owned subsidiaries.NOTE 1.DESCRIPTION OF THE BUSINESSIntuitive develops,manufactures,and markets da Vinci surgical systems and the Io
31、n endoluminal system.The Companys products and related servicesenable physicians and healthcare providers to improve the quality of and access to minimally invasive care.The da Vinci surgical system is designed to enablesurgeons to perform a wide range of surgical procedures within our targeted gene
32、ral surgery,urologic,gynecologic,cardiothoracic,and head and neck specialtiesand consists of a surgeon console or consoles,a patient-side cart,and a high-performance vision system.The Ion endoluminal system is a flexible,robotic-assisted,catheter-based platform for which the first cleared indication
33、 is minimally invasive biopsies in the lung and consists of a system cart,a controller,acatheter,and a vision probe.Both systems use software,instruments,and accessories.NOTE 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of PresentationThe unaudited Condensed Consolidated Financial Statements(“F
34、inancial Statements”)and accompanying notes have been prepared in accordance withaccounting principles generally accepted in the United States of America(“GAAP”)and pursuant to the rules and regulations of the Securities and ExchangeCommission(“SEC”)for interim financial reporting.In the opinion of
35、management,the accompanying Financial Statements of Intuitive Surgical,Inc.and itswholly and majority-owned subsidiaries have been prepared on a consistent basis with the audited Consolidated Financial Statements for the fiscal year endedDecember 31,2024,and include all adjustments,consisting of onl
36、y normal,recurring adjustments,necessary to fairly state the information set forth herein.Certain information and footnote disclosures typically included in the annual consolidated financial statements have been condensed or omitted.Accordingly,these Financial Statements should be read in conjunctio
37、n with the audited Consolidated Financial Statements and notes thereto included in the Companys AnnualReport on Form 10-K for the fiscal year ended December 31,2024,which was filed with the SEC on January 31,2025.The results of operations for the first threemonths of 2025 are not necessarily indicat
38、ive of the results to be expected for the entire fiscal year or any future periods.The Financial Statements include the results and balances of the Companys majority-owned joint ventures,Intuitive Surgical-Fosun Medical Technology(Shanghai)Co.,Ltd.and Intuitive Surgical-Fosun(HongKong)Co.,Ltd.(colle
39、ctively,the“Joint Venture”),with Shanghai Fosun Pharmaceutical(Group)Co.,Ltd.(“Fosun Pharma”).The Company holds a controlling financial interest in the Joint Venture,and the noncontrolling interest is reflected as a separatecomponent of the consolidated stockholders equity.The noncontrolling interes
40、ts share of the earnings in the Joint Venture is presented separately in theCondensed Consolidated Statements of Comprehensive Income.Risks and UncertaintiesThe Companys future results of operations and liquidity could be materially adversely affected by uncertainties surrounding macroeconomic and g
41、eopoliticalfactors in both the U.S.and globally.These uncertainties include any introduction or modification of tariffs or trade barriers,supply chain challenges,inflationarypressures,elevated interest rates,and disruptions in commodity markets stemming from conflicts,such as those between Russia an
42、d Ukraine and conflicts in theMiddle East,including Israel and Iran.Recent tariff changes imposed by the U.S.and other countries have created increased risks and uncertainties surrounding the Companys future results ofoperations.The impact of tariffs in the first quarter of 2025 was not material.How
43、ever,should universal tariffs be implemented as initially announced in April2025,the Company anticipates a significant adverse impact on its future costs of revenue,which will impact its results of operations.Particularly,the reciprocalimport tariffs imposed by China are expected to significantly in
44、crease the costs related to the Companys da Vinci Xi surgical system,potentially affecting itscompetitiveness for future tenders in the region.Additionally,the U.S.import tariffs,along with any reciprocal measures by other countries,are expected toincrease the Companys cost of raw materials and fini
45、shed goods imported from outside of the U.S.The Company anticipates that some of its suppliers will incurincremental tariff-related costs,which may be passed on to the Company.The ultimate impact of changes to tariffs or trade barriers will depend on various factors,including the timing,amount,scope
46、,and nature of any tariffs or trade barriers that are implemented.6Recently Issued Accounting PronouncementsIn December 2023,the FASB issued ASU 2023-09,Income Taxes(Topic 740):Improvements to Income Tax Disclosures(“ASU 2023-09”),which requiresenhanced income tax disclosures,including specific cate
47、gories and disaggregation of information in the effective tax rate reconciliation,disaggregated informationrelated to income taxes paid,income or loss from continuing operations before income tax expense or benefit,and income tax expense or benefit from continuingoperations.The requirements of the A
48、SU are effective for annual periods beginning after December 15,2024,with early adoption permitted.The Company iscurrently in the process of evaluating the impact of this pronouncement on its related disclosures.In November 2024,the FASB issued ASU 2024-03,Income StatementReporting Comprehensive Inc
49、omeExpense Disaggregation Disclosures(Subtopic220-40):Disaggregation of Income Statement Expenses(“ASU 2024-03”),which requires disclosure about the types of costs and expenses included in certainexpense captions presented on the income statement.The new disclosure requirements are effective for the
50、 Companys annual periods beginning after December15,2026,and interim periods beginning after December 15,2027,with early adoption permitted.The Company is currently in the process of evaluating the impactof this pronouncement on its related disclosures.The Company continues to monitor new accounting
51、 pronouncements issued by the FASB and does not believe any accounting pronouncements issuedthrough the date of this report will have a material impact on the Companys Financial Statements.Significant Accounting PoliciesThere have been no new or material changes to the significant accounting policie
52、s discussed in the Companys Annual Report on Form 10-K for the fiscalyear ended December 31,2024,that are of significance,or potential significance,to the Company.NOTE 3.FINANCIAL INSTRUMENTSCash,Cash Equivalents,and InvestmentsThe following tables summarize the Companys cash and available-for-sale
53、debt securities amortized cost,gross unrealized gains,gross unrealized losses,allowance for credit loss,and fair value by significant investment category reported as cash and cash equivalents,short-term investments,or long-terminvestments(in millions):As of March 31,2025Reported as:AmortizedCostGros
54、sUnrealized GainsGrossUnrealized LossesAllowance forCredit LossFairValueCash andCash EquivalentsShort-term InvestmentsLong-term InvestmentsCash$577.3$577.3$577.3$Level 1:Money market funds1,786.7 1,786.7 1,786.7 U.S.treasuries6,037.8 29.9(10.1)6,057.6 209.8 1,698.8 4,149.0 Subtotal7,824.5 29.9(10.1)
55、7,844.3 1,996.5 1,698.8 4,149.0 Level 2:Corporate debt securities168.7 (2.5)(0.1)166.1 120.3 45.8 U.S.government agencies510.7 2.3(0.9)512.1 117.0 395.1 Municipal securities1.4 1.4 1.4 Subtotal680.8 2.3(3.4)(0.1)679.6 238.7 440.9 Total assets measured at fairvalue$9,082.6$32.2$(13.5)$(0.1)$9,101.2$2
56、,573.8$1,937.5$4,589.9 7As of December 31,2024Reported as:AmortizedCostGrossUnrealized GainsGrossUnrealized LossesAllowance forCredit LossFairValueCash andCash EquivalentsShort-term InvestmentsLong-term InvestmentsCash$479.4$479.4$479.4$Level 1:Money market funds1,516.1 1,516.1 1,516.1 U.S.treasurie
57、s6,011.5 13.2(27.5)5,997.2 31.9 1,637.4 4,327.9 Subtotal7,527.6 13.2(27.5)7,513.3 1,548.0 1,637.4 4,327.9 Level 2:Corporate debt securities287.5 0.1(3.7)(0.1)283.8 189.7 94.1 U.S.government agencies552.2 1.5(2.4)551.3 154.2 397.1 Municipal securities4.7 (0.1)4.6 4.6 Subtotal844.4 1.6(6.2)(0.1)839.7
58、348.5 491.2 Total assets measured at fairvalue$8,851.4$14.8$(33.7)$(0.1)$8,832.4$2,027.4$1,985.9$4,819.1 The following table summarizes the contractual maturities of the Companys cash equivalents and available-for-sale debt securities,excluding money marketfunds(in millions):As of March 31,2025Amort
59、ized CostFair ValueMature in less than one year$2,148.1$2,147.2 Mature in one to five years4,570.4 4,589.9 Total$6,718.5$6,737.1 Actual maturities may differ from contractual maturities,because certain borrowers have the right to call or prepay certain obligations.Gross realized gainsand losses reco
60、gnized on the sale of investments were immaterial for the periods presented.The following tables present the breakdown of the available-for-sale debt securities with unrealized losses(in millions):As of March 31,2025Unrealized losses less than 12 monthsUnrealized losses 12 months or greaterTotalFair
61、 ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized LossesU.S.treasuries$1,731.9$(7.2)$118.5$(2.9)$1,850.4$(10.1)Corporate debt securities 122.6(2.5)122.6(2.5)U.S.government agencies74.4(0.3)47.1(0.6)121.5(0.9)Municipal securities 1.4 1.4 Total$1,806.3$(7.5)$289.6$(6.0)$2,095.9$(1
62、3.5)As of December 31,2024Unrealized losses less than 12 monthsUnrealized losses 12 months or greaterTotalFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized LossesU.S.treasuries$2,744.4$(23.3)$190.1$(4.2)$2,934.5$(27.5)Corporate debt securities 218.7(3.7)218.7(3.7)U.S.governm
63、ent agencies178.1(1.2)106.7(1.2)284.8(2.4)Municipal securities 4.6(0.1)4.6(0.1)Total$2,922.5$(24.5)$520.1$(9.2)$3,442.6$(33.7)8The Companys investments may,at any time,consist of money market funds,U.S.treasury and U.S.government agency securities,high-quality corporatenotes and bonds,commercial pap
64、er,non-U.S.government agency securities,and taxable and tax-exempt municipal notes.The Company regularly reviews thesecurities in an unrealized loss position and evaluates the current expected credit loss by considering factors such as historical experience,market data,financialcondition and near-te
65、rm prospects of the investee,the extent of the loss related to the credit of the issuer,and the expected cash flows from the security.TheCompany segments its portfolio based on the underlying risk profiles of the securities and has a zero-loss expectation for U.S.treasury and U.S.governmentagency se
66、curities.The basis for this assumption is that these securities have consistently high credit ratings by rating agencies,have a long history with no creditlosses,are explicitly guaranteed by a sovereign entity,which can print its own currency,and are denominated in a currency that is routinely held
67、by central banks,used in international commerce,and commonly viewed as a reserve currency.Additionally,all of the Companys investments in corporate debt securities andmunicipal securities are in securities with high-quality credit ratings,which have historically experienced low rates of default.The
68、current unrealized losses on the Companys available-for-sale debt securities were caused by interest rate increases.The contractual terms of thoseinvestments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments.As of March 31,2025,the Com
69、panydoes not intend to sell the investments in unrealized loss positions,and it is not more-likely-than-not that the Company will be required to sell any of theinvestments before recovery of their amortized cost basis,which may be at maturity.Therefore,the Company does not expect to realize any loss
70、es on theseavailable-for-sale debt securities.Additional factors considered in determining the treatment of unrealized losses include the financial condition and near-termprospects of the investee,the extent of the loss related to the credit of the issuer,and the expected cash flows from the securit
71、y.For the three months ended March 31,2025,and 2024,credit losses related to available-for-sales debt securities were not material.Equity InvestmentsThe Companys equity investments may,at any time,consist of equity investments with and without readily determinable fair values.The Company generallyre
72、cognizes equity investments that do not have readily determinable fair values at cost minus impairment,if any,plus or minus changes resulting from observableprice changes in orderly transactions for the identical or a similar investment of the same issuer.The following table is a summary of the acti
73、vity related to equity investments(in millions):Reported as:December 31,2024Carrying ValueChanges in FairValuePurchases/Sales/Other March 31,2025Carrying ValuePrepaids andother currentassetsIntangible andother assets,netEquity investments without readilydeterminable fair value(Level 2)$84.6$(0.6)$1.
74、1$85.1$85.1 Other includes foreign currency translation gains/(losses).For the three months ended March 31,2025,the Company did not hold any equity investments with readily determinable fair values(Level 1).For the three months ended March 31,2025,the Company recognized a net decrease in fair value
75、of$0.6 million,primarily due to impairments and netdecreases in observable price changes,which were recognized in interest and other income,net.Foreign Currency DerivativesThe objective of the Companys hedging program is to mitigate the impact of changes in currency exchange rates on net cash flow f
76、rom foreign currency-denominated sales,expenses,intercompany balances,and other monetary assets or liabilities denominated in currencies other than the U.S.dollar(“USD”).Theterms of the Companys derivative contracts are generally thirteen months or shorter.The derivative assets and liabilities are m
77、easured using Level 2 fair valueinputs.Cash Flow HedgesThe Company enters into currency forward contracts as cash flow hedges to hedge certain forecasted revenue transactions denominated in currencies otherthan the USD,primarily the Euro(“EUR”),the British Pound(“GBP”),the Japanese Yen(“JPY”),the Ko
78、rean Won(“KRW”),the New Taiwan Dollar(“TWD”),and the Indian Rupee(“INR”).The Company also enters into currency forward contracts as cash flow hedges to hedge certain forecasted expense transactionsdenominated in EUR and the Swiss Franc(“CHF”).(1)(1)9For these derivatives,the Company reports the unre
79、alized after-tax gain or loss from the hedge as a component of accumulated other comprehensive loss instockholders equity and reclassifies the amount into earnings in the same period in which the hedged transaction affects earnings.The amounts reclassified torevenue and expenses related to the hedge
80、d transactions and the ineffective portions of cash flow hedges were not material for the three months ended March 31,2025,and 2024.Other Derivatives Not Designated as Hedging InstrumentsOther derivatives not designated as hedging instruments consist primarily of forward contracts that the Company u
81、ses to hedge intercompany balances andother monetary assets or liabilities denominated in currencies other than the USD,primarily the EUR,GBP,JPY,KRW,CHF,TWD,INR,the Mexican Peso(“MXN”),and the Chinese Yuan(“CNY”).These derivative instruments are used to hedge against balance sheet foreign currency
82、exposures.The related gains and losses were as follows(in millions):Three Months Ended March 31,20252024Recognized gains(losses)in interest and other income,net$(10.5)$18.3 Foreign exchange gains(losses)related to balance sheet re-measurement$7.7$(19.4)The notional amounts for derivative instruments
83、 provide one measure of the transaction volume.Total gross notional amounts(in USD)for outstandingderivatives and the aggregate gross fair value at the end of each period were as follows(in millions):Derivatives Designated as Hedging InstrumentsDerivatives Not Designated as HedgingInstrumentsMarch 3
84、1,2025December 31,2024March 31,2025December 31,2024Notional amounts:Forward contracts$533.8$382.2$595.7$693.5 Gross fair value recorded in:Prepaids and other current assets$5.0$14.9$3.9$13.0 Other accrued liabilities$4.4$2.1$2.9$2.4 NOTE 4.BALANCE SHEET DETAILS AND OTHER FINANCIAL INFORMATIONBalance
85、 Sheet DetailsThe following tables provide details of selected Condensed Consolidated Balance Sheet line items(in millions):As ofAccounts receivable,netMarch 31,2025December 31,2024Trade accounts receivable,net$1,090.5$1,117.2 Unbilled accounts receivable and other155.0 138.7 Sales returns and allow
86、ances(24.0)(30.5)Total accounts receivable,net$1,221.5$1,225.4 As ofInventoryMarch 31,2025December 31,2024Raw materials$549.7$563.9 Work-in-process230.2 205.7 Finished goods773.7 717.6 Total inventory$1,553.6$1,487.2 10As ofPrepaids and other current assetsMarch 31,2025December 31,2024Net investment
87、 in sales-type leases short-term$127.9$131.4 Other prepaids and other current assets243.5 253.7 Total prepaids and other current assets$371.4$385.1 As ofOther accrued liabilities short-termMarch 31,2025December 31,2024Income and other taxes payable$58.0$154.4 Accrued construction-related capital exp
88、enditures78.2 57.2 Other accrued liabilities319.7 335.9 Total other accrued liabilities short-term$455.9$547.5 As ofOther long-term liabilitiesMarch 31,2025December 31,2024Income taxes long-term$231.8$239.0 Deferred revenue long-term63.6 54.1 Other long-term liabilities179.2 175.2 Total other long-t
89、erm liabilities$474.6$468.3 Supplemental Cash Flow InformationThe following table provides supplemental non-cash investing and financing activities(in millions):Three Months Ended March 31,20252024Equipment transfers,including operating lease assets,from inventory to property,plant,and equipment$165
90、.2$110.7 Acquisition of property,plant,and equipment in accounts payable and accrued liabilities$97.8$177.9 Restricted CashAmounts included in restricted cash primarily relate to the Companys insurance programs and certain employee-related benefits.The following tableprovides details of total cash,c
91、ash equivalents,and restricted cash as of the periods presented(in millions):As ofMarch 31,2025December 31,2024Cash and cash equivalents$2,573.8$2,027.4 Restricted cash within other current assets28.4 20.0 Restricted cash within other assets15.0 15.0 Total cash,cash equivalents,and restricted cash$2
92、,617.2$2,062.4 11NOTE 5.REVENUERevenue from external customers is attributed to individual countries based on customer location.The following table presents revenue disaggregated bygeography and type(in millions):Three Months Ended March 31,U.S.20252024Instruments and accessories$963.8$822.4 Systems
93、335.9 212.5 Service238.5 203.6 Total U.S.revenue$1,538.2$1,238.5 Outside of the U.S.(“OUS”)Instruments and accessories$403.9$336.5 Systems186.8 205.7 Service124.5 109.9 Total OUS revenue$715.2$652.1 TotalInstruments and accessories$1,367.7$1,158.9 Systems522.7 418.2 Service363.0 313.5 Total revenue$
94、2,253.4$1,890.6 Remaining Performance ObligationsThe transaction price allocated to remaining performance obligations relates to amounts allocated to products and services for which revenue has not yet beenrecognized.A significant portion of these performance obligations relate to service obligation
95、s in the Companys system sale and lease arrangements that will besatisfied and recognized as revenue in future periods.The transaction price allocated to the remaining performance obligations was$2.67 billion as of March 31,2025.The remaining performance obligations are expected to be satisfied over
96、 the term of the system sale,lease,and service arrangements.Approximately 44%of the remaining performance obligations are expected to be recognized in the next 12 months with the remainder recognized thereafter over the term of thesystem sale,lease,and service arrangements,which are generally up to
97、5 years.Contract Assets and LiabilitiesThe following information summarizes the Companys contract assets and liabilities(in millions):As of March 31,2025December 31,2024Contract assets$19.9$13.9 Deferred revenue$559.9$522.9 Contract assets for the periods presented primarily represent the difference
98、 between the revenue that was recognized based on the relative standalone sellingprice of the related performance obligations satisfied and the contractual billing terms in the arrangements.The Company did not have any significant impairmentlosses on its contract assets for the periods presented.The
99、 Company invoices its customers based on the billing schedules in its sales arrangements.Payments are generally due 30 to 60 days from the date ofinvoice.Deferred revenue for the periods presented primarily relates to service contracts where the service fees are billed up-front,generally quarterly o
100、r annually,prior to those services having been performed.The associated deferred revenue is generally recognized over the term of the service period.During the three months ended March 31,2025,the Company recognized$198 million of revenue that was included in the deferred revenue balance as ofDecemb
101、er 31,2024.During the three months ended March 31,2024,the Company recognized$189 million of revenue that was included in the deferred revenuebalance as of December 31,2023.12Intuitive System LeasingThe following table presents product revenue from Intuitive System Leasing arrangements(in millions):
102、Three Months Ended March 31,20252024Sales-type lease revenue$26.5$13.3 Operating lease revenue*$195.2$148.0*Variable lease revenue related to usage-based arrangements included within operating lease revenue$111.7$70.0 Trade Accounts ReceivableThe allowance for doubtful accounts is based on the Compa
103、nys assessment of the collectibility of customer accounts.The Company regularly reviews theallowance by considering factors such as historical experience,credit quality,age of the accounts receivable balances,and current economic conditions that mayaffect a customers ability to pay.For the three mon
104、ths ended March 31,2025,and 2024,bad debt expense was not material.The Companys exposure to credit losses may increase if its customers are adversely affected by changes in healthcare laws,procedure coverage andreimbursement,economic pressures or uncertainty associated with local or global economic
105、recessions,or other customer-specific factors.Although the Companyhas historically not experienced significant credit losses,it is possible that there could be a material adverse impact from potential adjustments of the carryingamount of lease and trade receivables as hospital cash flows are impacte
106、d by macroeconomic factors,including inflation,tariffs,high interest rates,and staffingshortages.NOTE 6.LEASESLessor Information related to Intuitive System LeasingSales-type Leases.Lease receivables relating to sales-type lease arrangements are presented on the Condensed Consolidated Balance Sheets
107、 as follows(inmillions):As ofMarch 31,2025December 31,2024Gross lease receivables$371.8$393.4 Unearned income(14.2)(13.9)Subtotal357.6 379.5 Allowance for credit loss(2.6)(2.6)Net investment in sales-type leases$355.0$376.9 Reported as:Prepaids and other current assets$127.9$131.4 Intangible and oth
108、er assets,net227.1 245.5 Net investment in sales-type leases$355.0$376.9 Contractual maturities of gross lease receivables as of March 31,2025,are as follows(in millions):Fiscal YearAmountRemainder of 2025$96.6 2026115.6 202777.7 202846.6 202929.1 2030 and thereafter6.2 Total$371.8 The Company enter
109、s into sales-type leases with certain qualified customers to purchase its systems.Sales-type leases have terms that generally range from 24to 84 months and are usually collateralized by a security interest in the underlying assets.13The allowance for loan loss is based on the Companys assessment of
110、the current expected lifetime loss on lease receivables.The Company regularly reviews theallowance by considering factors such as historical experience,credit quality,age of the lease receivable balances,and current economic conditions that may affecta customers ability to pay.Lease receivables are
111、considered past due 90 days after invoice.The Company manages the credit risk of the net investment in sales-type leases using a number of factors relating to its customers,including,but not limitedto,the following:size of operations;profitability,liquidity,and debt ratios;payment history;and past d
112、ue amounts.The Company also uses credit scores obtainedfrom external providers as a key indicator for the purposes of determining credit quality.The following table summarizes the amortized cost basis by year oforigination and by credit quality for the net investment in sales-type leases as of March
113、 31,2025(in millions):20252024202320222021PriorNet InvestmentCredit Rating:High$14.4$61.0$28.9$39.2$26.1$4.9$174.5 Moderate9.4 78.5 18.7 36.1 24.1 9.5 176.3 Low 2.9 0.8 1.2 1.2 0.7 6.8 Total$23.8$142.4$48.4$76.5$51.4$15.1$357.6 For the three months ended March 31,2025,and 2024,credit losses related
114、to the net investment in sales-type leases were not material.NOTE 7.GOODWILL AND INTANGIBLE ASSETSAcquisitionsThere were no material acquisitions in the three months ended March 31,2025,and 2024.Pending AcquisitionsOn January 21,2025,Intuitive announced that it has entered into a definitive agreemen
115、t with the current Intuitive technology distributors ab medica,Abex,Excelencia Robotica,and their affiliates to acquire the da Vinci and Ion distribution businesses in Italy,Spain,Portugal,Malta,and San Marino,and associatedterritories.The transaction consists of an upfront cash payment of approxima
116、tely EUR 290 million and up to an additional EUR 31 million in commercialmilestone cash payments,subject to certain closing adjustments.The Company expects to complete the transaction in the first half of 2026,subject to applicableregulatory approvals and customary closing conditions.GoodwillThe fol
117、lowing table summarizes the changes in the carrying amount of goodwill(in millions):AmountBalance as of December 31,2024$347.5 Acquisition activity Translation and other Balance as of March 31,2025$347.5 Intangible AssetsThe following table summarizes the components of gross intangible assets,accumu
118、lated amortization,and net intangible assets balances(in millions):As of March 31,2025As of December 31,2024Gross CarryingAmountAccumulatedAmortizationNet CarryingAmountGross CarryingAmountAccumulatedAmortizationNet CarryingAmountPatents and developed technology$203.3$(187.7)$15.6$203.3$(185.4)$17.9
119、 Customer relationships27.1(23.2)3.9 27.3(22.3)5.0 Distribution rights and others1.2(1.1)0.1 1.2(1.1)0.1 Total intangible assets$231.6$(212.0)$19.6$231.8$(208.8)$23.0 14Amortization expense related to intangible assets was$3.4 million and$5.1 million for the three months ended March 31,2025,and 2024
120、,respectively.The estimated future amortization expense related to intangible assets as of March 31,2025,is as follows(in millions):Fiscal YearAmountRemainder of 2025$8.8 20265.4 20273.0 20281.4 20290.6 2030 and thereafter0.4 Total$19.6 The preceding expected amortization expense is an estimate.Actu
121、al amounts of amortization expense may differ from estimated amounts due to additionalintangible asset acquisitions,measurement-period adjustments to intangible assets,changes in foreign currency exchange rates,impairments of intangible assets,accelerated amortization of intangible assets,and other
122、events.NOTE 8.CONTINGENCIESFrom time to time,the Company is involved in a variety of claims,lawsuits,investigations,and proceedings relating to securities laws,product liability,intellectual property,commercial,insurance,contract disputes,employment,and other matters.Certain of these lawsuits and cl
123、aims are described in further detailbelow.It is not possible to predict what the outcome of these matters will be,and the Company cannot guarantee that any resolution will be reached oncommercially reasonable terms,if at all.A liability and related charge to earnings are recorded in the Financial St
124、atements for legal contingencies when the loss is considered probable and the amountcan be reasonably estimated.The assessment is re-evaluated each accounting period and is based on all available information,including the impact ofnegotiations,settlements,rulings,advice of legal counsel,and other in
125、formation and events pertaining to each case.Nevertheless,it is possible that additionalfuture legal costs(including settlements,judgments,legal fees,and other related defense costs)could have a material adverse effect on the Companys business,financial condition,or future results of operations.Prod
126、uct Liability LitigationThe Company is currently named as a defendant in a number of individual product liability lawsuits filed in various state and federal courts.The plaintiffsgenerally allege that they or a family member underwent surgical procedures that utilized the da Vinci surgical system an
127、d sustained a variety of personal injuriesand,in some cases,death as a result of such surgery.Several of the filed cases have trial dates in the next 12 months.The cases raise a variety of allegations including,to varying degrees,that plaintiffs injuries resulted from purported defects in the da Vin
128、ci surgical systemand/or failure on the Companys part to provide adequate training resources to the healthcare professionals who performed plaintiffs surgeries.The cases furtherallege that the Company failed to adequately disclose and/or misrepresented the potential risks and/or benefits of the da V
129、inci surgical system.Plaintiffs also asserta variety of causes of action,including,for example,strict liability based on purported design defects,negligence,fraud,breach of express and implied warranties,unjust enrichment,and loss of consortium.Plaintiffs seek recovery for alleged personal injuries
130、and,in many cases,punitive damages.The Company disputesthese allegations and is defending against these claims.The Companys estimate of the anticipated cost of resolving the pending cases is based on negotiations with attorneys for the claimants.The final outcome ofthe pending lawsuits and claims,an
131、d others that might arise,is dependent on many variables that are difficult to predict,and the ultimate cost associated with theseproduct liability lawsuits and claims may be materially different than the amount of the current estimate and accruals and could have a material adverse effect onthe Comp
132、anys business,financial condition,or future results of operations.Although there is a reasonable possibility that a loss in excess of the amountrecognized exists,the Company is unable to estimate the possible loss or range of loss in excess of the amount recognized at this time.Patent LitigationOn O
133、ctober 19,2022,a jury rendered a verdict against the Company awarding$10 million in damages to Rex Medical,L.P.in a patent infringement lawsuit.On September 20,2023,the court granted the Companys post-trial motion and reduced the damages to Rex Medical L.P.to nominal damages of$1.On October18,2023,R
134、ex Medical filed a notice of appeal to the15United States Court of Appeals for the Federal Circuit and,on October 31,2023,Intuitive filed its notice of cross appeal.The parties have completed briefingbefore the Court of Appeals for the Federal Circuit.Based on currently available information,the Com
135、pany does not believe that any losses arising from thismatter would be material.Commercial LitigationOn May 10,2021,Surgical Instrument Service Company,Inc.(“SIS”)filed a complaint in the Northern District of California Court alleging antitrust claimsagainst the Company relating to EndoWrist service
136、,maintenance,and repair processes.The Court granted in part and denied in part the Companys Motion toDismiss,and discovery has commenced.The Company filed an answer denying the antitrust allegations and filed counterclaims against SIS.The counterclaimsallege that SIS violated the Federal Lanham Act,
137、Californias Unfair Competition Law,and Californias False Advertising Law and that SIS is also liable to theCompany for Unfair Competition and Tortious Interference with Contract.The parties filed summary judgment and Daubert motions,and the Court held a hearingon these motions on September 7,2023.On
138、 March 31,2024,the Court granted-in-part and denied-in-part both Intuitives and plaintiffs motions for summary judgment,and issued additional rulingsrelated to expert witnesses.Trial in this matter commenced on January 6,2025.On January 28,2025,after the close of both plaintiffs and Intuitives cases
139、 inchief,the Court found in Intuitives favor on all of SISs antitrust claims and stayed Intuitives counterclaims.On February 27,2025,SIS filed a Notice of Appealto the Ninth Circuit Court of Appeals.SISs brief is due May 22,2025,and Intuitives response is due June 23,2025.Based on currently availabl
140、e information,theCompany is unable to make a reasonable estimate of loss or range of losses,if any,arising from this matter.Three class action complaints were filed against the Company in the Northern District of California Court alleging antitrust allegations relating to the serviceand repair of ce
141、rtain instruments manufactured by the Company.A complaint by Larkin Community Hospital was filed on May 20,2021,a complaint byFranciscan Alliance,Inc.and King County Public Hospital District No.1 was filed on July 6,2021,and a complaint by Kaleida Health was filed on July 8,2021.The Court has consol
142、idated the Franciscan Alliance,Inc.and King County Public Hospital District No.1 and Kaleida Health cases with the Larkin CommunityHospital case,which is now captioned on the Larkin docket as“In Re:da Vinci Surgical Robot Antitrust Litigation.”A Consolidated Amended Class ActionComplaint has been fi
143、led on behalf of each plaintiff named in the earlier-filed cases.On January 14,2022,Kaleida Health voluntarily dismissed itself as a party tothis case.On January 18,2022,the Company filed an answer against the plaintiffs in this matter,and discovery has commenced.With regard to this class action cas
144、e,on September 7,2023,the Court heard argument on the parties respective motions for summary judgment and motionsrelated to expert testimony.On March 31,2024,the Court granted-in-part and denied-in-part plaintiffs motion for summary judgment on certain market definitionissues and denied Intuitives m
145、otion on the antitrust claims.In denying Intuitives motion,the Court declined to decide whether third-party companies wererequired to obtain 510(k)clearance for their services with respect to EndoWrist instruments,and in the absence of a formal ruling from the FDA on that questiondenied Intuitives m
146、otion for summary judgment challenging plaintiffs standing on that ground.There were additional rulings on the expert witness issues as well.In the summary judgment order,the Court ruled with plaintiffs that the da Vinci robot and EndoWrist instruments occupy separate product markets for antitrustpu
147、rposes.The Court also ruled that there is an antitrust aftermarket for the repair and replacement of EndoWrist instruments,and that Intuitive holds monopolypower in that aftermarket.The Court denied summary judgment for plaintiffs on the issue of whether soft-tissue surgical robots constitute a rele
148、vant antitrustmarket or are part of a larger market that includes laparoscopic and open surgery for antitrust purposes.On July 30,2024,the Court granted Intuitives motion forreconsideration,vacating those portions of the Courts March 31,2024 Order granting summary judgment as to the definition of a
149、U.S.market for EndoWristinstrument repair and replacement and Intuitives market power in such a market.On March 31,2025,the Court granted plaintiffs motion for class certification.No trial date has been scheduled for this matter.Based on currently available information,the Company is unable to make
150、a reasonable estimate of loss or range oflosses,if any,arising from this matter.On September 18,2024,Restore Robotics Repairs(“Restore”)filed a complaint in the United States District Court for the Northern District of Floridaalleging antitrust claims against the Company relating to the service and
151、replacement of X/Xi EndoWrist instruments for use with the da Vinci X and Xi surgicalsystems.On December 9,2024,Intuitive filed a motion to dismiss to which plaintiff responded by amending its complaint.Intuitive filed a motion to dismiss thefirst amended complaint on January 31,2025.Plaintiff filed
152、 an opposition to Intuitives motion to dismiss on February 14,2025,and Intuitive filed a reply onMarch 26,2025.The Court has not yet ruled on that motion.On April 7,2025,Plaintiff filed a motion for leave to file a second amended complaint.On April 21,2025,Intuitive filed an opposition to Plaintiffs
153、 motion for leave to file a second amended complaint.Based on currently available information,the Company isunable to make a reasonable estimate of loss or range of losses,if any,arising from this matter.16NOTE 9.STOCKHOLDERS EQUITYStockholders EquityThe following tables present the changes in stock
154、holders equity(in millions):Three Months Ended March 31,2025Common StockAdditional Paid-In CapitalRetainedEarningsAccumulated OtherComprehensive LossTotal IntuitiveSurgical,Inc.StockholdersEquityNoncontrollingInterest in JointVentureTotalStockholdersEquitySharesAmountBeginning balance356.6$0.4$9,681
155、.3$6,803.3$(51.3)$16,433.7$95.9$16,529.6 Issuance of common stock throughemployee stock plans2.4 134.3 134.3 134.3 Shares withheld related to net sharesettlement of equity awards(0.6)(7.8)(362.3)(370.1)(370.1)Share-based compensation expense relatedto employee stock plans 185.9 185.9 185.9 Net incom
156、e attributable to Intuitive Surgical,Inc.698.4 698.4 698.4 Other comprehensive income 24.2 24.2 0.1 24.3 Net income attributable to noncontrollinginterest in joint venture 5.3 5.3 Ending balance358.4$0.4$9,993.7$7,139.4$(27.1)$17,106.4$101.3$17,207.7 Three Months Ended March 31,2024Common StockAddit
157、ional Paid-In CapitalRetainedEarningsAccumulated OtherComprehensive LossTotal IntuitiveSurgical,Inc.StockholdersEquityNoncontrollingInterest in JointVentureTotalStockholdersEquitySharesAmountBeginning balance352.3$0.4$8,576.4$4,743.0$(12.2)$13,307.6$89.7$13,397.3 Issuance of common stock through emp
158、loyeestock plans3.0 180.4 180.4 180.4 Shares withheld related to net sharesettlement of equity awards(0.6)(6.6)(220.0)(226.6)(226.6)Share-based compensation expense related toemployee stock plans 152.8 152.8 152.8 Net income attributable to Intuitive Surgical,Inc.544.9 544.9 544.9 Other comprehensiv
159、e income(loss)3.5 3.5(0.4)3.1 Cash dividends declared and payable by jointventure (8.0)(8.0)Net income attributable to noncontrollinginterest in joint venture 2.5 2.5 Ending balance354.7$0.4$8,903.0$5,067.9$(8.7)$13,962.6$83.8$14,046.4 Stock Repurchase ProgramThe Companys Board of Directors(the“Boar
160、d”)has authorized an aggregate of$10.0 billion of funding for the Companys common stock repurchaseprogram(the“Repurchase Program”)since its establishment in March 2009.The most recent authorization occurred in July 2022,when the Board increased theauthorized amount available under the Repurchase Pro
161、gram to$3.5 billion,including amounts remaining under previous authorization.As of March 31,2025,theremaining amount of share repurchases authorized by the Board under the Repurchase Program was approximately$1.1 billion.The Company did not make any stock repurchases during the three months ended Ma
162、rch 31,2025,and 2024.17Accumulated Other Comprehensive Loss,Net of Tax,Attributable to Intuitive Surgical,Inc.The components of accumulated other comprehensive loss,net of tax,attributable to Intuitive Surgical,Inc.are as follows(in millions):Three Months Ended March 31,2025 Gains on HedgeInstrument
163、sUnrealized Gains(Losses)onAvailable-for-SaleSecuritiesForeign CurrencyTranslation LossesEmployee BenefitPlansTotalBeginning balance$11.0$(14.6)$(33.1)$(14.6)$(51.3)Other comprehensive income(loss)before reclassifications(16.0)29.1 5.4 18.5 Amounts reclassified from accumulated other comprehensivein
164、come5.6 0.1 5.7 Net current-period other comprehensive income(loss)(10.4)29.1 5.4 0.1 24.2 Ending balance$0.6$14.5$(27.7)$(14.5)$(27.1)Three Months Ended March 31,2024 Gains(Losses)on HedgeInstrumentsUnrealizedLosses on Available-for-Sale SecuritiesForeign CurrencyTranslation GainsEmployee BenefitPl
165、ansTotalBeginning balance$(2.5)$(29.7)$19.4$0.6$(12.2)Other comprehensive income(loss)before reclassifications4.1(4.3)2.2 2.0 Amounts reclassified from accumulated other comprehensiveincome(loss)1.5 0.1 (0.1)1.5 Net current-period other comprehensive income(loss)5.6(4.2)2.2(0.1)3.5 Ending balance$3.
166、1$(33.9)$21.6$0.5$(8.7)The tax impacts for amounts recognized in other comprehensive income before reclassifications and reclassified from accumulated other comprehensive lossrelating to hedge instruments,available-for-sale securities,foreign currency translation gains(losses),and employee benefit p
167、lans for the three months endedMarch 31,2025,and 2024,were not material to the Companys Financial Statements.NOTE 10.SHARE-BASED COMPENSATIONIn April 2024,the Companys shareholders approved an amended and restated 2010 Incentive Award Plan to provide for an increase in the number of sharesof common
168、stock reserved for issuance thereunder from 110,350,000 to 115,350,000.As of March 31,2025,approximately 17.1 million shares were reserved forfuture issuance under the Companys stock plans,and a maximum of approximately 7.4 million of these shares can be awarded as restricted stock units(“RSUs”).Res
169、tricted Stock UnitsRSU activity under all stock plans for the three months ended March 31,2025,was as follows(in millions,except per share amounts):SharesWeighted-Average Grant-Date Fair ValueUnvested balance as of December 31,20245.2$314.39 RSUs granted1.5$580.31 RSUs vested(1.6)$295.53 RSUs forfei
170、ted(0.1)$334.82 Unvested balance as of March 31,20255.0$401.13 18Stock OptionsStock option activity under all stock plans for the three months ended March 31,2025,was as follows(in millions,except per share amounts):Stock Options Outstanding NumberOutstandingWeighted-AverageExercise Price Per ShareB
171、alance as of December 31,20247.1$192.90 Options granted$Options exercised(0.5)$127.00 Options forfeited or expired$239.02 Balance as of March 31,20256.6$197.44 As of March 31,2025,options to purchase an aggregate of 5.8 million shares of common stock were exercisable at a weighted-average price of$1
172、88.13 pershare.Performance Stock UnitsIn 2022,the Company began granting performance stock units(“PSUs”)to officers and other key employees subject to three-year cliff vesting and pre-established,quantitative goals.Whether any PSUs vest,and the amount that do vest,is tied to completion of service ov
173、er three years and the achievement of threeequally-weighted,quantitative goals that directly align with or help drive the Companys strategy and long-term total shareholder return.In the first quarter of 2025,the Company had four types of PSU awards:the 2022 PSU awards,the 2023 PSU awards,the 2024 PS
174、U awards,and the 2025PSU awards.The 2022 PSU grant metrics were focused on relative total shareholder return(“TSR”),year-over-year da Vinci procedure growth for 2023,and two-year compound annual da Vinci procedure growth for 2024.The 2022 PSU awards vested in the first quarter of 2025.The 2023 PSU g
175、rant metrics are focused onrelative TSR,da Vinci and Ion procedure growth in 2024 compared to 2022,and da Vinci and Ion procedure growth in 2025 compared to 2022.The 2024 PSUgrant metrics are focused on relative TSR,da Vinci and Ion procedure growth in 2025 compared to 2023,and da Vinci and Ion proc
176、edure growth in 2026compared to 2023.The 2025 PSU grant metrics are focused on relative adjusted operating margin as compared to selected peers,da Vinci and Ion proceduregrowth in 2026 compared to 2024,and da Vinci and Ion procedure growth in 2027 compared to 2024.The TSR metric used in the 2022,202
177、3,and 2024 PSU awards is considered a market condition,and the expense is determined at the grant date.Theprocedure growth and relative adjusted operating margin metrics are considered performance conditions,and the expense is recorded based on the forecastedperformance,which is reassessed each repo
178、rting period based on the probability of achieving the performance conditions.The number of shares earned at the endof the three-year period will vary,based on actual performance,from 0%to 125%of the target number of PSUs granted.PSUs are subject to forfeiture ifemployment terminates prior to the ve
179、sting date.PSUs are not considered issued or outstanding shares of the Company.The Company calculates the fair value for each component of the PSUs individually.The fair value for the component with the TSR metric was determinedusing Monte Carlo simulation.The fair value per share for the components
180、 with the procedure growth metrics is equal to the closing stock price on the grant date.PSU activity for the three months ended March 31,2025,was as follows(in millions,except per share amounts):SharesWeighted-Average Grant Date Fair ValuePer ShareUnvested balance as of December 31,20240.3$306.94 G
181、ranted0.1$580.93 Vested(0.1)$299.32 Performance change$267.23 Forfeited$Unvested balance as of March 31,20250.3$367.92 Employee Stock Purchase PlanUnder the Employee Stock Purchase Plan(“ESPP”),employees purchased approximately 0.2 million shares for$75.5 million and approximately 0.3 millionshares
182、for$68.4 million during the three months ended March 31,2025,and 2024,respectively.19Share-Based Compensation ExpenseThe following table summarizes share-based compensation expense(in millions):Three Months Ended March 31,20252024Cost of revenue product(before capitalization)$30.9$22.8 Amounts capit
183、alized into inventory(28.5)(21.4)Amounts recognized in income for amounts previously capitalized in inventory27.8 21.3 Cost of revenue product$30.2$22.7 Cost of revenue service8.2 7.0 Total cost of revenue38.4 29.7 Selling,general and administrative82.3 68.2 Research and development69.0 57.7 Share-b
184、ased compensation expense before income taxes189.7 155.6 Income tax benefit37.0 32.4 Share-based compensation expense after income taxes$152.7$123.2 The fair value of each right to acquire stock granted under the ESPP was estimated using the Black-Scholes-Merton option-pricing model with the followi
185、ngweighted-average assumptions:Three Months Ended March 31,20252024ESPPRisk-free interest rate4.2%4.6%Expected term(in years)1.21.2Expected volatility30%32%Fair value at grant date$170.50$115.48NOTE 11.INCOME TAXESIncome tax benefit for the three months ended March 31,2025,was$35.2 million,or 5.3%of
186、 income before taxes,compared to$8.9 million,or 1.7%ofincome before taxes,for the three months ended March 31,2024.The effective tax rates for the three months ended March 31,2025,and 2024,differed from the U.S.federal statutory rate of 21%primarily due to the excesstax benefits associated with empl
187、oyee equity plans,the federal research and development credit benefit,and the effect of income earned by certain overseasentities being taxed at rates lower than the federal statutory rate,partially offset by state income taxes(net of the federal benefit)and U.S.tax on foreign earnings.The Companys
188、provision for income taxes for the three months ended March 31,2025,and 2024,included excess tax benefits associated with employeeequity plans of$145.4 million and$111.1 million,respectively,which reduced the Companys effective tax rate by 21.8 and 20.6 percentage points,respectively.The Company fil
189、es federal,state,and foreign income tax returns in many jurisdictions in the U.S.and OUS.Years before 2017 are considered closed forsignificant jurisdictions.Certain of the Companys unrecognized tax benefits could change due to activities of various tax authorities,including evolvinginterpretations
190、of existing tax laws in the jurisdictions in which the Company operates,potential assessment of additional tax,possible settlement of audits,orthrough normal expiration of various statutes of limitations,which could affect the Companys effective tax rate in the period in which they change.It isreaso
191、nably possible that our existing unrecognized tax benefits may decrease by up to$49 million as a result of expirations of the statute of limitations and auditconclusions in various jurisdictions within the next 12 months.The Company is subject to the examination of its income tax returns by the Inte
192、rnal Revenue Service and other tax authorities.The outcome of these auditscannot be predicted with certainty.The Companys management regularly assesses the likelihood of adverse outcomes resulting from these examinations todetermine the adequacy of the Companys provision for income taxes.If any issu
193、es addressed in the Companys tax audits are resolved in a manner not consistentwith managements expectations,the Company could be required to adjust its provision for income taxes in the period such resolution occurs.20NOTE 12.NET INCOME PER SHAREThe following table presents the computation of basic
194、 and diluted net income per share attributable to Intuitive Surgical,Inc.(in millions,except per shareamounts):Three Months Ended March 31,20252024Numerator:Net income attributable to Intuitive Surgical,Inc.$698.4$544.9 Denominator:Weighted-average shares outstanding used in basic calculation357.5 3
195、53.5 Add:dilutive effect of potential common shares7.1 7.0 Weighted-average shares outstanding used in diluted calculation364.6 360.5 Net income per share attributable to Intuitive Surgical,Inc.:Basic$1.95$1.54 Diluted$1.92$1.51 Share-based compensation awards of approximately 0.6 million and 0.9 mi
196、llion shares for the three months ended March 31,2025,and 2024,respectively,were outstanding but were not included in the computation of diluted net income per share attributable to Intuitive Surgical,Imon stockholders,becausethe effect of including such shares would have been anti-dilutive in the p
197、eriods presented.NOTE 13.SEGMENT INFORMATIONIntuitive is committed to advancing minimally invasive care through a comprehensive ecosystem of products and services.This connected ecosystem includessystems,instruments and accessories,learning,and services connected by a digital portfolio that enables
198、actionable digital insights across the care continuum.Thesystems,as well as the instruments and accessories,are primarily developed and manufactured by Intuitive.For the three months ended March 31,2025,and 2024,domestic revenue accounted for 68%and 66%,respectively,of total revenue,while revenue fr
199、om the Companys OUS markets accounted for 32%and 34%,respectively,of total revenue.The Company manages the business activities on a consolidated basis and operates in one reportable segment.Intuitives Chief Executive Officer is the Chief Operating Decision Maker(“CODM”).The CODM utilizes the Company
200、s long-range plan,which includesproduct development roadmaps and long-range financial models,as a key input to resource allocation.The CODM makes decisions on resource allocation,assesses performance of the business,and monitors budget versus actual results using income from operations.Net income is
201、 also a measure that is considered inmonitoring budget versus actual results.Significant expenses within income from operations,as well as within net income,include cost of revenue,research and development,and selling,general andadministrative expenses,which are each separately presented on the Comp
202、anys Consolidated Statements of Income.Other segment items within net incomeinclude interest and other income,net,and income tax expense.The Companys long-lived assets consist primarily of property,plant and equipment,net.As of March 31,2025,and December 31,2024,82%and 83%,respectively,of long-lived
203、 assets were in the U.S.As of March 31,2025,and December 31,2024,no individual country other than the U.S.accounted for 10%ormore of these assets.21ITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSManagements discussion and analysis of financial condition as
204、 of March 31,2025,and results of operations for the three months ended March 31,2025,and2024,should be read in conjunction with managements discussion and analysis of financial condition and results of operations included in our Annual Report onForm 10-K for the year ended December 31,2024.This repo
205、rt contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,as amended,and Section 21E of theSecurities Exchange Act of 1934,as amended(the“Exchange Act”).Forward-looking statements relate to expectations concerning matters that are not historicalfacts.Stat
206、ements using words such as“estimates,”“projects,”“believes,”“anticipates,”“plans,”“expects,”“intends,”“may,”“will,”“could,”“should,”“would,”“targeted,”and similar words and expressions are intended to identify forward-looking statements.These forward-looking statements include,but are not limitedto,
207、statements related to future results of operations,future financial condition,our financing plans and future capital requirements,our potential tax assets orliabilities,and statements based on current expectations,estimates,forecasts,and projections about the economies and geographic markets in whic
208、h we operateand our beliefs and assumptions regarding these economies and markets.These forward-looking statements are necessarily estimates reflecting the judgment ofour management and involve a number of risks and uncertainties that could cause actual results to differ materially from those sugges
209、ted by the forward-lookingstatements.These forward-looking statements should be considered in light of various important factors,including,but not limited to,the following:the overallmacroeconomic environment,which may impact customer spending and our costs,including tariffs,the levels of inflation,
210、and interest rates;the conflict betweenUkraine and Russia;conflicts in the Middle East;disruption to our supply chain,including difficulties in obtaining a sufficient supply of materials;curtailed ordelayed capital spending by hospitals;the impact of global and regional economic and credit market co
211、nditions on healthcare spending;delays in obtaining newproduct approvals,clearances,or certifications from the Food and Drug Administration(“FDA”),comparable regulatory authorities,or notified bodies;the risk ofour inability to comply with complex FDA and other regulations,which may result in signif
212、icant enforcement actions;regulatory approvals,clearances,certifications,and restrictions or any dispute that may occur with any regulatory body;healthcare reform legislation in the U.S.and its impact on hospitalspending,reimbursement,and fees levied on certain medical device revenues;changes in hos
213、pital admissions and actions by payers to limit or manage surgicalprocedures;the timing and success of product development and customer acceptance of developed products;the results of any collaborations,in-licensingarrangements,joint ventures,strategic alliances,or partnerships,including the joint v
214、enture with Shanghai Fosun Pharmaceutical(Group)Co.,Ltd.;ourcompletion of and ability to successfully integrate acquisitions;intellectual property positions and litigation;risks associated with our operations and anyexpansion outside of the U.S.;unanticipated manufacturing disruptions or the inabili
215、ty to meet demand for products;our reliance on sole-and single-sourcedsuppliers;the results of legal proceedings to which we are or may become a party;adverse publicity regarding us and the safety of our products and adequacy oftraining;the impact of changes to tax legislation,guidance,and interpret
216、ations;changes in tariffs,trade barriers,and regulatory requirements(including changes totariffs imposed by the U.S.on imports from various countries,including Mexico,where we currently manufacture a significant majority of our instruments andaccessories);and other risks and uncertainties,including
217、those listed under the caption“Risk Factors.”Readers are cautioned not to place undue reliance on theseforward-looking statements,which speak only as of the date of this report and which are based on current expectations and are subject to risks,uncertainties,andassumptions that are difficult to pre
218、dict,including those risk factors described throughout this filing and identified under the heading“Risk Factors”in our AnnualReport on Form 10-K for the year ended December 31,2024,as updated by our other filings with the Securities and Exchange Commission(“SEC”).Our actualresults may differ materi
219、ally and adversely from those expressed in any forward-looking statement,and we undertake no obligation to publicly update or releaseany revisions to these forward-looking statements,except as required by law.Product and brand names and logos,including Intuitive,da Vinci,and Ion,are trademarks or re
220、gistered trademarks of Intuitive Surgical,Inc.or one of itssubsidiaries or of their respective owners.Additional information about our trademarks can be found on our website at reference our trademarks located on our website,this list of trademarks and any other materials on our corporate website ar
221、e not incorporated by reference intothis Form 10-Q or any of our other filings under the Securities Act of 1933,as amended,or the Exchange Act.22OverviewAs part of our mission,we believe that minimally invasive care is life-enhancing care.Since our founding 30 years ago,we have been delivering on th
222、ismission by combining innovative technology with clinical expertise to advance minimally invasive care.We do so by providing a comprehensive ecosystem thatincludes robotic-assisted systems,instruments and accessories,customer learning,and support services all connected by a digital portfolio that e
223、nables actionableinsights across the care continuum.To assure continued alignment with the patients and healthcare community we serve,we have adopted the Quintuple Aim as our“north star.”Startingforemost with a focus on patients,we seek to demonstrate that our products can deliver better outcomes th
224、at are validated by rigorous peer-reviewed evidence.Second,we aim to work with clinicians and care teams to create better patient experiences that enable patients to more quickly get back to what matters most intheir lives,with fewer complications,less pain and discomfort,and greater predictability.
225、Third,we aim to enable the care teams who use our platforms andtechnology-enabled ecosystem to have better experiences that augment their skills while reducing fatigue and increasing efficiency and reliability.Fourth,we aimto help lower the total cost of care per patient episode when compared with e
226、xisting treatment alternatives,providing a return on investment for hospitals andhealthcare systems and value for payers.Lastly,we aim to expand access to high-quality minimally invasive care by partnering with hospitals,healthcare systems,and patient advocacy groups to address barriers to care.Whil
227、e surgery and acute interventions have improved significantly in the past few decades,there remains a significant need to improve across all aspects ofthe Quintuple Aim.Stakeholders continue to expect better clinical outcomes and decreased variability of outcomes across clinicians and care teams.Glo
228、bally,healthcare systems continue to be stressed and lacking in critical resources,including the professionals who staff care teams.At the same time,healthcareproviders,payers,and governments strain to cover the healthcare needs of their populations and demand lower total cost per patient to treat d
229、isease.In the face ofthese challenges,we continue to believe that we are well-positioned to synthesize scientific and technological advances in biology,computing,imaging,algorithms,and robotics to deliver meaningful and measurable value to all of our stakeholders.Open surgery remains a prevalent for
230、m of surgery and is used in almost every area of the body.However,the large incisions required for open surgery createtrauma to patients,typically resulting in longer hospitalization and recovery times,increased hospitalization costs,and additional pain and suffering relative tominimally invasive su
231、rgery(“MIS”),where MIS is available.For over four decades,MIS has reduced trauma to patients by allowing selected surgeries to beperformed through small ports rather than large incisions.MIS has been widely adopted for certain surgical procedures.Da Vinci surgical systems enable surgeons to extend t
232、he benefits of MIS to many patients who would otherwise undergo a more invasive surgery by usingcomputational,robotic,and imaging technologies to overcome many of the limitations of traditional open surgery or conventional MIS.Surgeons using a da Vincisurgical system operate while seated comfortably
233、 at a console viewing a 3D,high-definition image of the surgical field.This immersive console connects surgeonsto the surgical field and their instruments.While seated at the console,the surgeon manipulates instrument controls in a natural manner,similar to open surgicaltechnique.Our technology is d
234、esigned to provide surgeons with a range of articulation of the surgical instruments used in the surgical field analogous to themotions of a human wrist,while filtering out the tremor inherent in a surgeons hand.In designing our products,we focus on making our technology easy and safeto use.Our da V
235、inci products fall into five broad categories:da Vinci surgical systems,da Vinci instruments and accessories,da Vinci stapling,da Vinci energy,andda Vinci vision,including Firefly fluorescence imaging systems and da Vinci endoscopes.We provide a comprehensive suite of systems,learning,and servicesof
236、ferings.Digitally enabled for nearly three decades,these three offerings aim to decrease variability by providing dependable,consistent functionality and anintegrated user experience.Our systems category includes robotic platforms,software,vision,energy,and instruments and accessories.Our learning c
237、ategoryincludes learning and enabling technology,such as simulation and telepresence,as well as technical training programs and personalized peer-to-peer learningopportunities.We have a global network of field service engineers and distributors through which we deliver a suite of services,including
238、installation,repair,maintenance,around-the-clock technical support,and system monitoring.We also offer customized analytics and consultation to hospitals for programoptimization.We have commercialized the following da Vinci surgical systems:the da Vinci standard surgical system in 1999,the da Vinci
239、S surgical system in 2006,theda Vinci Si surgical system in 2009,the fourth-generation da Vinci Xi surgical system in 2014,and the fifth-generation da Vinci 5 surgical system in 2024.Weextended our fourth-generation platform by adding the da Vinci X surgical system,commercialized in 2017,and the da
240、Vinci SP surgical system,commercializedin 2018.The da Vinci SP surgical system accesses the body through a single incision,while the other da Vinci surgical systems access the body through multipleincisions.All da Vinci systems include a surgeons console(or consoles),imaging electronics,a patient-si
241、de cart,and computational hardware and software.We are in the early stages of launching our da Vinci SP surgical system and have an installed base of 291 da Vinci SP surgical systems as of March 31,2025.We have received FDA clearance for the da Vinci SP surgical system for urologic,23colorectal,gene
242、ral thoracoscopic,and certain transoral procedures.Additionally,the da Vinci SP surgical system has received regulatory clearance in South Koreafor a broad set of procedures.The da Vinci SP surgical system has also received regulatory clearance in Japan for the same set of procedures that are curren
243、tlyallowed with the da Vinci Xi surgical system in Japan.In January 2024,the da Vinci SP surgical system received European certification in accordance withRegulation(EU)2017/745 of the European Parliament and of the Council of 5 April 2017 on medical devices(the“EU MDR”)for use in endoscopicabdomino
244、pelvic,thoracoscopic,transoral otolaryngology,transanal colorectal,and breast surgical procedures,and we are commercializing the da Vinci SPsurgical system in select major European countries as part of a measured rollout.In August 2024,we obtained regulatory clearance in Taiwan for our da Vinci SPsu
245、rgical system for use in endoscopic abdominopelvic,thoracoscopic,transoral otolaryngology,transanal colorectal,transanal total mesorectal excision,and breastsurgical procedures.We plan to seek FDA clearances for additional indications for the da Vinci SP surgical system and expand the systems regula
246、tory approvals(including for additional indications)in other outside of the U.S.(“OUS”)markets over time.The success of the da Vinci SP surgical system is dependent onpositive experiences and improved clinical outcomes for the procedures for which it has been cleared as well as securing additional c
247、linical clearances.In March 2024,we obtained FDA clearance for our da Vinci 5 surgical system,our next-generation multi-port robotic system,for use in all surgical specialtiesand procedures indicated for da Vinci Xi,except for cardiac and pediatric indications.In October 2024,we obtained regulatory
248、clearance in South Korea for the daVinci 5 surgical system for use in urologic,general,gynecologic,thoracoscopic,thoracoscopically-assisted cardiotomy,and transoral otolaryngology surgicalprocedures.We are in the midst of a phased launch of our da Vinci 5 surgical system,which we expect to extend ov
249、er several quarters,giving us time to matureour supply and manufacturing processes for the new system.As of March 31,2025,we have an installed base of 509 da Vinci 5 surgical systems.Additionally,weare in the regulatory processes in Japan and Europe for our da Vinci 5 surgical system.We offer approx
250、imately 70 different multi-port da Vinci instruments to provide surgeons with flexibility in choosing the types of tools needed to perform aparticular surgery.These multi-port instruments are generally robotically controlled and provide end effectors(tips)that are similar to those used in either ope
251、n orlaparoscopic surgery.We offer advanced instrumentation for the da Vinci 5,da Vinci X,and da Vinci Xi surgical systems,including da Vinci energy and da Vincistapler products,to provide surgeons with sophisticated,computer-aided tools to precisely and efficiently interact with tissue.The da Vinci
252、5,da Vinci X,and daVinci Xi surgical systems generally share the same instruments,whereas the da Vinci Si surgical system uses instruments that are not compatible with the da Vinci5,da Vinci X,and da Vinci Xi systems.Additionally,we have introduced a unique set of force feedback instruments that are
253、 only compatible with our da Vinci 5surgical system.We also currently offer 14 core instruments on our da Vinci SP surgical system.We plan to expand our da Vinci SP instrument offering over time.Our learning and enabling technology offerings facilitate access to education and training on our product
254、s.Our enabling technologies include telepresence andAdvanced Insights Suite(which includes Case Insights and Insights Engine),and our learning technology solutions include Intuitive Learning,SimNow,customized training models,remote case observations,and remote proctoring.In 2019,we commercialized ou
255、r Ion endoluminal system,which is a flexible,robotic-assisted,catheter-based platform that utilizes instruments andaccessories for which the first cleared indication is minimally invasive biopsies in the lung.Our Ion system extends our commercial offering beyond surgery intodiagnostic,endoluminal pr
256、ocedures.The system features an ultra-thin,ultra-maneuverable catheter that can articulate 180 degrees in all directions and allowsnavigation far into the peripheral lung and provides the stability necessary for precision in a biopsy.Many suspicious lesions found in the lung may be small anddifficul
257、t to access,which can make diagnosis challenging,and Ion helps physicians obtain tissue samples from deep within the lung,which could help enableearlier diagnosis.Our Ion endoluminal system has received FDA clearance,and OUS regulatory clearances include European certification in accordance with the
258、EU MDR,regulatory clearance in South Korea,and National Medical Products Administration(“NMPA”)regulatory clearance in China.We plan to seekadditional clearances,approvals,and certifications for our Ion endoluminal system in OUS markets over time.The success of new product introductions depends on a
259、 number of factors including,but not limited to,pricing,competition,geographic market and consumeracceptance,the effective forecasting and management of product demand,inventory levels,the management of manufacturing and supply costs,and the risk thatnew products may have quality or other defects in
260、 the early stages of introduction.Tariff UpdateOn February 1,2025,the U.S.imposed 25%tariffs on imports from Mexico and Canada,with several subsequent changes related to exemptions and effectivedates,including an exemption for any goods that are within the scope of the United States-Mexico-Canada Ag
261、reement(“USMCA”).We currently manufacture asignificant majority of our instruments and accessories in Mexicali,Mexico,most of which are certified under the requirements of USMCA and,therefore,havenot been subject to the recently imposed tariffs.As a result,the impact of tariffs on us was not materia
262、l in the first quarter of 2025.24On April 2,2025,the U.S.imposed a 10%universal tariff on all imports that are not subject to the USMCA.The U.S.announced additional tariffs that varyby country,which are currently paused for 90 days.We import some raw materials and finished goods from outside of the
263、U.S.,which are subject to these tariffs,including our endoscopes,a majority of which are manufactured in Germany.We anticipate that some of our suppliers will incur incremental tariffs and may passon those additional costs to us.On April 7,2025,the U.S.imposed a tariff on all imports from China,curr
264、ently up to 145%.Our operations involve importing certain raw materials andfinished goods from China,which are subject to the U.S.tariff.Concurrently,China has imposed a 125%tariff on all imports from the U.S.We import sub-assemblies to support our local da Vinci Xi surgical system manufacturing.Add
265、itionally,we sell U.S.-manufactured da Vinci Xi surgical systems into China.Bothimports are subject to the Chinese tariff.We expect these tariffs to have a significant impact on the product cost of our da Vinci Xi surgical system in China,potentially hindering our competitiveness in securing future
266、tenders in the region.Based on these recently announced and implemented global tariffs,and assuming such tariffs remain in place,we anticipate a significant increase in our costof revenues for the second half of 2025,which will impact our results of operation.The ultimate impact of changes to tariff
267、s and trade barriers will depend onvarious factors,including the timing,amount,scope,and nature of any tariffs and trade barriers that are implemented.Macroeconomic EnvironmentOur future results of operations and liquidity could be materially adversely affected by uncertainties surrounding macroecon
268、omic and geopolitical factors bothin the U.S.and globally.These uncertainties include any introduction or modification of tariffs or trade barriers,supply chain challenges,inflationary pressures,elevated interest rates,and disruptions in commodity markets stemming from conflicts,such as those betwee
269、n Russia and Ukraine and conflicts in the MiddleEast,including Israel and Iran.During the first quarter of 2025,we continued to experience isolated stresses to supply,particularly for specific component materials and at certainsubcontract suppliers that were operationally challenged to meet our prod
270、uction requirements.These isolated instances did not have a material impact on ourbusiness during the first quarter of 2025.As a result of the escalation in tariffs,import restrictions,and retaliatory measures between major economies,we mayexperience tariff-related inflation in raw materials costs a
271、s well as supply shortages as companies seek alternative sources of supply of critical materials andnavigate adjustments in logistics and transportation routes.Elevated interest rates have made access to credit more difficult,and the ability of certain suppliers to fund investments in capacity and i
272、nfrastructure as wellas any insolvency of certain suppliers,including sole-and single-sourced suppliers,may present heightened continuity risks.Additionally,although incidents ofcybersecurity breaches have not significantly impacted our supply chain to date,they continue to be actively monitored to
273、protect supply continuity.We areactively engaged in activities that seek to mitigate the impact of any supply chain risks and disruptions on our operations.Some hospitals continue to experience challenges with staffing and cost pressures that could affect their ability to provide patient care.Additi
274、onally,certainhospitals are facing significant financial pressure as supply chain constraints and inflation have driven up operating costs and elevated interest rates have madeaccess to credit more expensive.Hospitals may also be adversely affected by the liquidity concerns as a result of the broade
275、r macroeconomic environment.Any orall of these factors could negatively impact the number of da Vinci procedures performed or surgical systems placed and have a material adverse effect on ourbusiness,financial condition,or results of operations.Business ModelOverviewWe generate up-front revenue from
276、 the placement of da Vinci surgical systems through sales or sales-type lease arrangements and recurring revenue over timethrough fixed-payment or usage-based operating lease arrangements.We also earn recurring revenue from the sales of instruments,accessories,and services.The da Vinci surgical syst
277、em generally sells for between$0.7 million and$3.1 million,depending on the model,configuration,and geography,and representsa significant capital equipment investment for our customers when purchased.Our instruments and accessories have limited lives and will either expire or wearout as they are use
278、d in surgery,at which point they need to be replaced.We generally earn between$1,000 and$3,600 of instruments and accessories revenue persurgical procedure performed,depending on the type and complexity of the specific procedures performed and the number and type of instruments used.Wetypically ente
279、r into service contracts at the time systems are sold or leased at an annual fee between$100,000 and$225,000,depending on the configuration of theunderlying system and the composition of the services offered under the contract.Our system sale arrangements generally include a five-year period of serv
280、ice,with the first year of service provided for free.These service contracts have generally been renewed at the end of the initial contractual service periods.25We generate revenue from our Ion endoluminal system in a business model consistent with the da Vinci surgical system model described above.
281、We generateup-front revenue from the placement of Ion systems through sales or sales-type lease arrangements and recurring revenue over time through fixed-payment orusage-based operating lease arrangements.We also earn recurring revenue from the sales of instruments,accessories,and services.The Ion
282、endoluminal systemgenerally sells for between$500,000 and$815,000.Our instruments and accessories have limited lives and will either expire or wear out as they are used inprocedures,at which point they need to be replaced.We typically enter into service contracts at the time systems are sold or leas
283、ed at an annual fee between$55,000 and$80,000.Additionally,as part of our ecosystem of products and services,we provide a portfolio of learning offerings and digital solutions.We do not currently generatematerial revenue from these offerings.Recurring RevenueRecurring revenue consists of instruments
284、 and accessories revenue,service revenue,and operating lease revenue.Recurring revenue increased to$7.04billion,or 84%of total revenue in 2024,compared to$5.94 billion,or 83%of total revenue in 2023,and$4.92 billion,or 79%of total revenue in 2022.Instruments and accessories revenue has grown at a fa
285、ster rate than systems revenue over time.Instruments and accessories revenue increased to$5.08 billionin 2024,compared to$4.28 billion in 2023 and$3.52 billion in 2022.The increase in instruments and accessories revenue largely reflects continued procedureadoption.Service revenue was$1.31 billion in
286、 2024,compared to$1.17 billion in 2023 and$1.02 billion in 2022.The increase in service revenue was primarily drivenby the growth of the base of installed da Vinci surgical systems producing service revenue.The installed base of da Vinci surgical systems grew 15%toapproximately 9,902 as of December
287、31,2024;14%to approximately 8,606 as of December 31,2023;and 12%to approximately 7,544 as of December 31,2022.We use the installed base,number of placements,and utilization of systems as metrics for financial and operational decision-making and as a means toevaluate period-to-period comparisons.Mana
288、gement believes that the installed base,number of placements,and utilization of systems provide meaningfulsupplemental information regarding our performance,as management believes that the installed base,number of placements,and utilization of systems areindicators of the rate of adoption of our rob
289、otic-assisted medical procedures as well as an indicator of future recurring revenue.Management believes that both itand investors benefit from referring to the installed base,number of placements,and utilization of systems in assessing our performance and when planning,forecasting,and analyzing fut
290、ure periods.The installed base,number of placements,and utilization of systems also facilitate managements internal comparisonsof our historical performance.We believe that the installed base,number of placements,and utilization of systems are useful to investors as metrics,because(1)they allow for
291、greater transparency with respect to key metrics used by management in its financial and operational decision-making,and(2)they are used byinstitutional investors and the analyst community to help them analyze the performance of our business.The vast majority of our installed systems are connectedvi
292、a the internet.System logs can also be accessed by field engineers for systems that are not connected to the internet.We utilize this information as well as otherinformation from agreements and discussions with our customers that involve estimates and judgments,which are,by their nature,subject to s
293、ubstantialuncertainties and assumptions.Estimates and judgments for determining the installed base,number of placements,and utilization of systems may be impactedover time by various factors,including system internet connectivity,hospital and distributor reporting behavior,and inherent complexities
294、in new agreements.Such estimates and judgments are also susceptible to technical errors.In addition,the relationship between the installed base,number of placements,andutilization of systems and our revenues may fluctuate from period to period,and growth in the installed base,number of placements,an
295、d utilization of systemsmay not correspond to an increase in revenue.The installed base,number of placements,and utilization of systems are not intended to be considered in isolationor as a substitute for,or superior to,revenue or other financial information prepared and presented in accordance with
296、 U.S.generally accepted accountingprinciples(“GAAP”).Intuitive System LeasingSince 2013,we have entered into sales-type and fixed-payment operating lease arrangements directly with certain qualified customers as a way to offercustomers flexibility in how they acquire systems and expand their robotic
297、-assisted programs while leveraging our balance sheet.These leases generally havecommercially competitive terms as compared to other third-party entities that offer equipment leasing.We also enter into usage-based operating leasearrangements with qualified customers that have committed da Vinci prog
298、rams where we charge for the system and service as procedures are performed,offeringgreater predictability in costs for customers.We believe that all of these alternative financing structures have been effective and well-received,and we are willingto expand the proportion of any of these structures
299、based on customer needs and demand.We include systems placed under fixed-payment and usage-based operating lease arrangements,as well as sales-type lease arrangements,in our systemplacement and installed base disclosures.We exclude operating lease-related revenue,including usage-based revenue,and Io
300、n system revenue from our da Vincisurgical system average selling price(“ASP”)computations.26The following table summarizes our system placements under leasing arrangements:Year Ended December 31,202420232022Da Vinci System Placements under Leasing ArrangementsFixed-payment operating lease arrangeme
301、nts309 304 276 Usage-based operating lease arrangements467 355 216 Total da Vinci system placements under operating lease arrangements776 659 492%of Total da Vinci system placements51%48%39%Sales-type lease arrangements88 45 99 Total da Vinci system placements under leasing arrangements864 704 591 I
302、on System Placements under Leasing ArrangementsFixed-payment operating lease arrangements85 63 61 Usage-based operating lease arrangements68 54 40 Total Ion system placements under operating lease arrangements153 117 101%of Total Ion system placements56%55%53%Sales-type lease arrangements4 5 11 Tota
303、l Ion system placements under leasing arrangements157 122 112 Operating lease revenue has grown at a faster rate than overall systems revenue and was$654 million,$501 million,and$377 million for the years endedDecember 31,2024,2023,and 2022,respectively,of which$338 million,$217 million,and$133 mill
304、ion,respectively,was variable lease revenue related to ourusage-based operating lease arrangements.Variable lease revenue related to our usage-based operating lease arrangements has been included in our operating leasemetrics herein.Revenue for systems sold or placed under a sales-type lease arrange
305、ment is recognized upfront whereas revenue for fixed-payment operating leasearrangements is recognized on a straight-line basis over time.Therefore,in a period when the number of operating lease placements increases as a proportion oftotal system placements,total systems revenue is reduced,which can
306、 create volatility in the systems revenue recognized in any given period.We generally setfixed-payment and usage-based operating lease arrangements pricing at a modest premium relative to purchased systems reflecting the time value of money and,in the case of usage-based operating lease arrangements
307、,the risk that system utilization may fall short of anticipated levels.Revenue for usage-based operating lease arrangements is recognized as the system is used to perform procedures.Variable usage-based arrangements createbetter matching of reimbursements and cost for our customers.They also reduce
308、our customers overall risk and need for capital outlay.However,because thenumber of procedures performed in any given period can vary significantly for many reasons,including but not limited to healthcare emergencies,alternativetreatment options,and patient preferences,revenue recognized from these
309、arrangements can be highly volatile.Customers generally do not have the right to exit or terminate a fixed-payment lease without incurring a penalty.Generally,lease transactions generate similargross profit margins as our sale transactions.However,because of the variability in revenue recognized for
310、 usage-based lease arrangements,including ourcustomers ability to exit or cancel those arrangements prior to the end of the lease term,there is no guarantee that we will recuperate the cost of the leased system,which,in turn,could adversely impact our gross profit margins if utilization of those sys
311、tems are different than our expectations.27The following table summarizes our systems installed at customers under operating leasing arrangements:Year Ended December 31,202420232022Da Vinci System Installed Base under Operating Leasing ArrangementsFixed-payment operating lease arrangements1,307 1,20
312、4 1,018 Usage-based operating lease arrangements1,492 1,023 665 Total da Vinci system installed base under operating lease arrangements2,799 2,227 1,683 Ion System Installed Base under Operating Leasing ArrangementsFixed-payment operating lease arrangements126 96 72 Usage-based operating lease arran
313、gements193 118 60 Total Ion system installed base under operating lease arrangements319 214 132 Our exposure to the credit risks relating to our lease financing arrangements may increase if our customers are adversely affected by economic pressures oruncertainty,changes in healthcare laws,coverage a
314、nd reimbursement,or other customer-specific factors.As a result of these macroeconomic factors impacting ourcustomers,we may be exposed to defaults under our lease financing arrangements.Moreover,usage-based operating lease arrangements generally contain nominimum payments;therefore,customers may ex
315、it such arrangements without paying a financial penalty to us.For some operating lease arrangements,our customers are provided with the right to purchase the leased system at certain points during and/or at the end ofthe lease term.Revenue generated from customer purchases of systems under operating
316、 lease arrangements(“Lease Buyouts”)was$109 million,$74 million,and$72 million for the years ended December 31,2024,2023,and 2022,respectively.We expect that revenue recognized from customer exercises of buyout optionswill fluctuate based on the timing of when,and if,customers choose to exercise suc
317、h buyout options.Systems RevenueSystem placements are driven by procedure growth in most geographic markets.In some markets,system placements are constrained by regulation.Ingeographies where da Vinci procedure adoption is in an early stage or system placements are constrained by regulation,system s
318、ales will precede proceduregrowth.System placements also vary due to seasonality,largely aligned with hospital budgeting cycles.On an annual basis,we typically place a higher proportionof systems in the fourth quarter and a lower proportion in the first quarter as many customer budgets are reset.Sys
319、tems revenue is also affected by the proportionof system placements under operating lease arrangements,recurring fixed-payment and usage-based operating lease revenue,Lease Buyouts,product mix,ASPs,trade-in activities,customer mix,and specified-price trade-in rights.We generally do not provide speci
320、fied-price trade-in rights or upgrade rights at the time of asystem purchase;however,as we continue the phased launch of our next-generation da Vinci 5 surgical system,specified-price trade-in rights will continue to beincluded in certain arrangements.For trade-in activities involving operating leas
321、e upgrades,depending on the timing and terms of the upgrade transaction,theamount of revenue generated on the initial and new lease arrangements may not,in the aggregate,generate the same amount of revenue that a traditional sale andtrade-in transaction would.Systems revenue increased 17%to$1.97 bil
322、lion in 2024.Systems revenue remained flat at$1.68 billion in 2023.Systems revenuedeclined 1%to$1.68 billion in 2022.Procedure Mix/ProductsOur da Vinci surgical systems are generally used for soft tissue surgery for areas of the body between the pelvis and the neck,primarily in general,gynecologic,u
323、rologic,cardiothoracic,and head and neck surgical procedures.Within these categories,procedures range in complexity from cancer and otherhighly complex procedures to less complex procedures for benign conditions.Cancer and other highly complex procedures tend to be reimbursed at higher ratesthan les
324、s complex procedures for benign conditions.Thus,hospitals are more sensitive to the costs associated with treating less complex,benign conditions.Ourstrategy is to provide hospitals with attractive clinical and economical solutions across the spectrum of procedure complexity.Our fully featured da Vi
325、nci 5 and daVinci Xi surgical systems with advanced instruments(including da Vinci energy and da Vinci stapler products)and our Integrated Table Motion product target themore complex procedure segment.Our da Vinci X surgical system is targeted toward price-sensitive geographic markets and procedures
326、.Our da Vinci SP surgicalsystem complements the da Vinci 5,da Vinci X,and da Vinci Xi surgical systems by enabling surgeons to access narrow workspaces.28Procedure and Placement SeasonalityMore than half of the da Vinci procedures performed are for benign conditions,most notably hernia repairs,hyste
327、rectomies,and cholecystectomies.Thesebenign procedures and other short-term elective procedures tend to be more seasonal than cancer operations and surgeries for other life-threatening conditions.Seasonality in the U.S.for procedures for benign conditions typically results in higher fourth quarter p
328、rocedure volume when more patients have met annualdeductibles and lower first quarter procedure volume when deductibles are reset.Seasonality outside of the U.S.varies and is more pronounced around localholidays and vacation periods,which have lower procedure volume.In addition,historically,placemen
329、ts of our da Vinci surgical systems have tended to be heavier in the fourth quarter and lighter in the first quarter,as hospitalbudgets are reset.Distribution ChannelsWe provide our products through direct sales organizations in the U.S.,Europe(excluding Italy,Spain,Portugal,Greece,and Eastern Europ
330、ean countries),China(through our majority-owned joint ventures,Intuitive Surgical-Fosun Medical Technology(Shanghai)Co.,Ltd.and Intuitive Surgical-Fosun(HongKong)Co.,Ltd.(collectively,the“Joint Venture”),with Shanghai Fosun Pharmaceutical(Group)Co.,Ltd.(“Fosun Pharma”),Japan,South Korea,India,Taiwan
331、,andCanada.In the remainder of our OUS markets,we provide our products through distributors.Regulatory ActivitiesOverviewOur products must meet the requirements of a large and growing body of international regulations and standards that govern the product safety,efficacy,advertising,labeling,safety
332、reporting design,manufacture,materials content and sourcing,testing,certification,packaging,installation,use,and disposal of ourproducts.Examples of such standards include electrical safety standards,such as those of the International Electrotechnical Commission,and compositionstandards,such as the
333、Reduction of Hazardous Substances and the Waste Electrical and Electronic Equipment Directives in the European Union(“EU”).Failure tomeet these standards could limit our ability to market our products in those regions that require compliance with such standards.Our products and operations are also subject to increasingly stringent medical device,privacy,and other regulations by national,regional,f
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