Intuitive Surgical Faces Tariff and Rare-Earth Headwinds

Intuitive Surgical reported robust second-quarter revenue and solid international procedure growth, yet its shares have declined amid rising trade and supply concerns.

U.S. tariffs on Chinese components and China’s new restrictions on rare-earth exports threaten supply of neodymium, yttrium and similar elements used in high-performance motors, sensors and imaging systems. Those components are critical to the da Vinci platform and other robotic surgery hardware.

Management said tariffs trimmed roughly 60 basis points from gross margin in Q2 and expect tariff-related effects to reduce 2025 profitability by about 1% of revenue. Guidance points to adjusted gross margins of 66–67%, implying a 210–310 basis-point contraction, while operating expenses are projected to rise 10–14%.

To reduce exposure, the company is expanding manufacturing in Bulgaria, Germany and Mexico, but geographic diversification will take time and won’t immediately offset potential material shortages or cost inflation.

Peers such as Stryker and Globus Medical face similar vulnerabilities. With an elevated valuation multiple and mounting geopolitical headwinds, near-term earnings volatility and slower top-line acceleration are more likely, even as the company’s technology leadership remains intact.