Why Intuitive Surgical beats Palantir as a tech investment

While Palantir Technologies has captured headlines with its meteoric 300% stock surge over the past year, investors seeking sustainable growth backed by proven fundamentals might find a better opportunity in an unexpected place: medical robotics.

Intuitive Surgical, the pioneer of robotic-assisted surgery, recently delivered third-quarter results that sent its stock soaring and reminded investors why established technology companies with durable competitive advantages often outperform flashier alternatives. The company’s da Vinci surgical robots—which enable surgeons to perform minimally invasive procedures with enhanced precision—continue expanding their foothold in operating rooms worldwide, creating a compelling investment case that combines rapid growth with financial stability.

For context, Palantir specializes in data analytics and artificial intelligence platforms primarily serving government agencies and large corporations, while Intuitive Surgical dominates the robotic surgery market through its sophisticated surgical systems and the consumable instruments that generate recurring revenue with each procedure. Though Palantir’s 48% revenue growth outpaces Intuitive Surgical’s 23% expansion, the medical device company offers superior valuation metrics and a more predictable business model.

Here are five key factors that demonstrate why Intuitive Surgical represents a more attractive long-term investment opportunity than the AI darling capturing so much attention.

1. Procedure growth accelerates across all platforms

The heartbeat of Intuitive Surgical’s business model lies in procedure volume—each surgery performed using their systems generates revenue through consumable instruments and accessories. Third-quarter results showed this engine firing on all cylinders, with global procedures across the company’s platforms surging approximately 20% year-over-year.

The company’s flagship da Vinci systems, which assist surgeons in performing complex procedures through small incisions, recorded 19% procedure growth. Meanwhile, Ion systems—specialized platforms designed for lung procedures—delivered explosive 52% growth as hospitals increasingly adopted this newer technology.

This acceleration matters because it exceeded the company’s full-year 2024 da Vinci growth rate of 17% and directly translates into higher-margin recurring revenue. Management responded by raising their 2025 outlook for worldwide da Vinci procedure growth to 17%-17.5%, up significantly from the previous forecast of 15.5%-17%.

The procedure growth demonstrates expanding surgeon adoption and patient acceptance of robotic-assisted surgery, validating the company’s long-term thesis that minimally invasive techniques will continue displacing traditional open surgeries.

2. System installations surge with next-generation technology

Hospitals and surgery centers continue investing heavily in Intuitive Surgical’s platforms, with the company placing 427 da Vinci systems during the quarter compared to 379 systems in the prior year. More importantly, 240 of these installations were the advanced da Vinci 5 model, representing a substantial increase from just 110 units in the previous year.

The da Vinci 5 represents the latest evolution of surgical robotics, featuring enhanced imaging capabilities, improved ergonomics, and advanced software that enables more precise surgical techniques. This newer system typically commands higher prices and generates increased procedure volumes as surgeons become proficient with its expanded capabilities.

The company’s installed base now totals 10,763 da Vinci systems worldwide, representing 13% growth that expands the foundation for future recurring revenue. Each installed system creates an annuity-like revenue stream through instrument and accessory sales that typically last throughout the system’s operational lifetime.

Interestingly, while Ion system placements decreased slightly to 50 units from 58 in the prior year, Ion procedures grew more than 50%. This pattern suggests existing customers are maximizing utilization of their installed systems—a positive indicator for both customer satisfaction and future demand as hospitals recognize the technology’s value.

3. High-margin recurring revenue compounds predictably

Intuitive Surgical operates what’s known as a “razor-and-blade” business model, where the initial system sale is followed by ongoing revenue from consumable instruments and accessories required for each procedure. This approach creates predictable, high-margin income that grows alongside procedure volumes.

Instruments and accessories revenue increased approximately 20% to roughly $1.5 billion during the quarter, moving in lockstep with procedure growth. This recurring revenue stream typically generates gross margins exceeding 70%, significantly higher than the initial system sales, making it the most profitable component of the business.

The beauty of this model lies in its compounding nature—as more systems are installed and procedure volumes increase, the recurring revenue base expands exponentially. Unlike software companies that might face customer churn or competitive displacement, surgical systems represent long-term commitments by hospitals, creating revenue visibility that extends years into the future.

4. Management raises guidance despite external pressures

Beyond increasing procedure growth forecasts, management also lifted its non-GAAP gross margin outlook to 67%-67.5%, compared to the previous forecast of 66%-67%. While these adjustments appear modest, they signal strong operational execution and pricing power.

Particularly impressive is that these improved margins include an estimated tariff impact of roughly 0.7% of revenue, down from about 1% previously. This reduction suggests that higher-than-expected sales growth and operational leverage are helping offset external cost pressures—a testament to the company’s pricing power and operational efficiency.

The guidance raises reflect management’s confidence in both near-term execution and long-term market dynamics. In an environment where many technology companies are tempering expectations due to economic uncertainty, Intuitive Surgical’s ability to raise forecasts demonstrates the resilient nature of healthcare technology investments.

5. Aggressive share repurchases signal confidence

Capital allocation decisions often reveal management’s true confidence in their business prospects, and Intuitive Surgical’s recent actions speak volumes. The company repurchased 4 million shares for $1.92 billion during the third quarter, a dramatic increase from the second quarter’s 350,000 shares for approximately $181 million.

This acceleration in both share count reduction and dollar investment represents one of the strongest signals management can send about long-term value creation potential. Rather than pursuing acquisitions or other growth initiatives, leadership is betting that their own stock represents the best available investment opportunity.

The repurchase program also demonstrates the cash-generative nature of the business model, as the company can simultaneously fund growth investments, return capital to shareholders, and maintain a strong balance sheet for future opportunities.

The investment case against Palantir

While Palantir’s 48% revenue growth impressively outpaces Intuitive Surgical’s 23% expansion, two critical factors make the medical device company a superior investment choice: valuation and business durability.

From a valuation perspective, Intuitive Surgical trades at a forward price-to-earnings ratio of 48 and a price-to-sales ratio of 18. These metrics reflect premium pricing but remain grounded in profitable operations and cash generation. Palantir, by contrast, trades at a forward P/E ratio of 217 and a price-to-sales ratio of 137—valuations that require perfect execution and sustained hypergrowth to justify.

More fundamentally, Intuitive Surgical’s competitive advantages appear more durable and defensible. The company has maintained market leadership in robotic surgery since launching the first da Vinci system in 2000, building an ecosystem that includes proprietary technology, extensive surgeon training programs, and recurring revenue relationships that create switching costs for customers.

Palantir operates in the highly competitive data analytics space where technological advantages can erode quickly, customer relationships may prove less sticky, and new entrants regularly emerge with innovative approaches. While the company has secured important government contracts, the commercial market remains intensely competitive with established players like Microsoft, Amazon, and Google competing aggressively.

Risk considerations and investment outlook

Intuitive Surgical faces legitimate risks that investors should consider. Hospital capital spending can fluctuate based on economic conditions, potentially slowing system sales during downturns. Trade policy uncertainties could pressure margins if tariffs increase significantly. Additionally, competition continues intensifying as other medical device companies develop competing robotic platforms.

However, the company’s strong competitive position, proven business model, and expanding market opportunity suggest these risks are manageable. The global shift toward minimally invasive surgery continues gaining momentum, driven by better patient outcomes, shorter recovery times, and cost efficiencies that benefit both patients and healthcare systems.

For investors seeking exposure to transformative technology with sustainable competitive advantages, Intuitive Surgical offers a compelling alternative to speculative AI plays like Palantir. While the medical device company may not generate headlines with triple-digit stock gains, its combination of consistent growth, predictable cash flows, and reasonable valuation creates a foundation for long-term wealth creation that appears far more sustainable than the current AI euphoria driving Palantir’s meteoric rise.