ISRGIntuitive Surgical

In addition, the increasing concern over climate change has resulted, and may continue to result, in more legal and regulatory requirements designed to mitigate the effects of climate change on the environment, including regulating greenhouse gas emissions, alternative energy policies, and sustainability initiatives. If such laws or regulations are more stringent than current legal or regulatory requirements, we may experience increased compliance burdens and costs to meet our regulatory obligations. For example, under the EU’s Corporate Sustainability Reporting Directive (“CSRD”), we will be required to make certain disclosures in 2026 relating to our ESG impacts, risks, and opportunities for 2025, which may require that we change the processes by which we currently collect ESG-related data about our business. Furthermore, as ESG-related laws continue to evolve in scope and complexity, we may need to change the processes by which we currently operate our business and manage our supply chain to comply with these evolving legal and regulatory requirements, which, in turn, may have a material adverse effect on our business, financial condition, or results of operations. If such laws or regulations are more stringent than current legal or regulatory requirements, we may experience increased compliance burdens and costs to meet our regulatory obligations. For instance, changes example, policymakers in requirements may adversely affect raw material sourcing from suppliers, our manufacturing operations and those of our suppliers, various jurisdictions (including the EU and the distribution State of our products. Further, there may be increasing scrutiny California) have adopted or are considering adopting requirements for companies to make disclosures or take additional actions, including value chain diligence, related to various ESG matters. These laws are not always consistent, and, in some instances, other policymakers have taken actions to constrain companies’ consideration of such matters, which increases the complexity and changing expectations from the market cost of compliance. Advocates and other stakeholders with respect opponents of various ESG matters are increasingly turning to ESG practices. Any activism, including litigation or media campaigns, to advance their positions. Our approach to such regulatory changes or increased market expectations could also have a significant effect on our operating matters continues to evolve, and financial decisions, including those involving capital expenditures any failure to reduce emissions and comply with other successfully navigate regulatory requirements or stakeholder expectations. If we fail to comply with certain ESG-related laws, our products become non-compliant with such laws, or we fail to meet the expectations of our stakeholders on ESG-related matters, it could result in a loss of market access or a decline in our success in competitive bidding or public tender processes, reputational harm, fines and we could incur costs or face other sanctions, such as restrictions on or other adverse impacts to our products entering certain jurisdictions, fines, and/or civil or criminal sanctions. business.

System placements are driven by procedure growth in most geographic markets. In some markets, system placements are constrained by regulation. In geographies where da Vinci procedure adoption is in an early stage or system placements are constrained by regulation, system sales will precede procedure growth. System placements also vary due to seasonality, largely aligned with hospital budgeting cycles. On an annual basis, we typically place a higher proportion of systems in the fourth quarter and a lower proportion in the first quarter as many customer budgets are reset. Systems revenue is also affected by the proportion of 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 specified-price trade-in rights or upgrade rights at the time of a system purchase; however, we expect that the number of arrangements that may contain these specified-price trade-in rights will increase as we continue the phased launch of our next-generation multi-port platform, da Vinci 5. For trade-in activities involving operating lease upgrades, depending on the timing and terms of the upgrade transaction, the amount 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 and trade-in transaction would. Systems revenue increased 17% to $1.97 billion in 2024. Systems revenue remained flat at $1.68 billion in 2023. Systems revenue declined 1% to $1.68 billion in 2022.

On September 18, 2024, Restore Robotics Repairs (“Restore”) filed a complaint in the United States District Court there is an antitrust aftermarket for the Northern District of Florida alleging antitrust claims against the Company relating to the service repair and replacement of X/Xi EndoWrist instruments instruments, and that Intuitive holds monopoly power in that aftermarket. The Court denied summary judgment for use with plaintiffs on the da Vinci X issue of whether soft-tissue surgical robots constitute a relevant antitrust market or are part of a larger market that includes laparoscopic and Xi surgical systems. open surgery for antitrust purposes. On December 9, July 30, 2024, Intuitive filed the Court granted Intuitive’s motion for reconsideration, vacating those portions of the Court’s March 31, 2024 Order granting summary judgment as to the definition of a U.S. market for EndoWrist instrument repair and replacement and Intuitive’s market power in such a market. On March 31, 2025, the Court granted plaintiff’s motion to dismiss to which plaintiff responded by amending its complaint. Intuitive’s response to plaintiff’s first amended complaint is due to be filed on or before January 31, 2025. for class certification. No trial date has been scheduled for this matter. Based on currently available information, the Company is unable to make a reasonable estimate of loss or range of losses, if any, arising from this matter.

The Company has determined that certain sales incentives provided to the Company’s sales team are required to be capitalized when the Company expects to generate future economic benefits from the related revenue-generating contracts subsequent to the initial sales transaction. Capitalized contract acquisition costs are recorded within intangible and other assets, net and are amortized on a systematic basis based on the timing of when the Company expects to earn the related revenue. The sales incentives allocated to system sales and sales-type leases are expensed upon the transfer of control of the systems, and the amounts allocated to service and system operating leases are amortized over their economic life on a straight-line basis. When determining the economic life of the contract acquisition assets recognized, the Company considers historical contract renewal rates, expectations of future contract renewals, and other factors that could impact the economic benefits that the Company expects to generate from that arrangement. Capitalized contract acquisition costs are recorded within intangible and other assets, net and are amortized over their economic life on a straight-line basis. The amounts capitalized as contract acquisition costs were $110.9 $130 million and $89.3 $111 million as of December 31, 2025, and 2024, and 2023, respectively.