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Robotic surgery company Intuitive Surgical (ISRG) has been on the mend over the past couple of months and that strength is continuing today after the company issued upside Q4 revenue guidance on better-than-expected da Vinci system procedure growth.

Bolstered by a recovery of procedure volumes in China as the impact of COVID-19 has lessened, coupled with healthy growth in the U.S. market, Q4 da Vinci procedures grew by 21%, enabling FY23 procedure volume growth to come in at approximately 22%, the high end of ISRG's 21-22% guidance range.

• The improved Q4 outlook should help ease concerns that new weight-loss drugs are going to materially impact procedure volume growth. During the Q3 earnings call, ISRG acknowledged that bariatrics procedures in the U.S. have slowed a little due to the launch of new weight-loss treatments, but these procedures only account for approximately 4-5% of ISRG's total global procedures. 
• In the wake of the pandemic, people who put off procedures are now returning to the hospital to take care of those delayed treatments. This is a scenario that major health insurance companies, such as Humana (HUM) and UnitedHealth Group (UNH), have discussed in recent quarters, warning that their medical benefit ratios are rising due to elevated utilization trends.
• Another concern that weighed on ISRG during most of 2023 was that high interest rates would cut into demand for its pricey surgical systems. However, the company has expanded its equipment leasing program, easing affordability issues. In Q4, ISRG placed 415 da Vinci surgical systems, good for a 12% yr/yr increase, with about half of those systems placed under operating leases.
• The types of procedures that ISRG's da Vinci system can perform is also expanding. General surgery, colon resection, hernia repair, and gynecology are a few common procedures performed by the da Vinci system, but lung biopsies represent a significant area of growth with the recent launch of the Ion endoluminal system.

The main takeaway is that although business isn't necessarily booming for ISRG, it is healthy, and the company appears poised for a solid 2024 as the company expands into newer procedure types and as pent-up demand for elective procedures continues to unwind. Although ISRG is forecasting procedure volume growth to slow to 13-16% for 2024, the company could be taking a conservative approach again with its outlook.