Intuitive Surgical Inc. (NASDAQ:ISRG)

The analysis of the financial ratios over the five-year period reveals several notable trends and shifts within the company’s revenue composition, cost structure, and profitability.

Revenue Composition

The proportion of revenue derived from Product sales consistently dominates, rising marginally from 83.39% in 2020 to 84.35% in 2024. Conversely, Service revenue displays a slight declining trend, decreasing from 16.61% to 15.65% over the same period.

Cost of Revenue

The cost of Product revenue as a percentage of total revenue exhibits some volatility but remains within a narrow range, fluctuating between -28.66% and -25.64%. Service-related cost of revenue shows a modest reduction in its share, moving from -6.12% in 2020 to -4.85% in 2024. Aggregate cost of revenue as a percentage of total revenue decreases from -34.35% in 2020 to -32.54% in 2024, indicating a slight improvement in cost efficiency.

Gross Profit

Gross profit margins demonstrate some fluctuation, peaking at 69.32% in 2021 before dipping during subsequent years and stabilizing around 67% by 2024. Overall, gross margins remain strong and reflect effective cost management despite revenue composition shifts.

Operating Expenses

Selling, general and administrative (SG&A) expenses as a percentage of revenue show a declining trend, moving from -27.91% in 2020 to -25.62% in 2024, which contributes positively to overall profitability. Research and development (R&D) expenses vary but remain roughly stable, fluctuating between -11.75% and -14.13%, ending the period close to initial levels at -13.71%. Combined operating expenses thus decrease from -41.56% to -39.34%, demonstrating improved operational leverage.

Profitability

Income from operations experiences an increase from 24.09% in 2020 to a peak of 31.89% in 2021, followed by a decline and subsequent recovery to 28.12% in 2024. This suggests some operational challenges post-2021 but an eventual improvement in operational efficiency. Interest and other income fluctuate, with a significant dip in 2022 but recovery to a higher level (3.89%) by 2024.

Income Before Taxes and Tax Expense

Income before taxes follows a similar pattern to operating income, rising from 27.69% in 2020 to 33.1% in 2021, declining thereafter, then increasing again to 32.01% in 2024. The income tax expense shows variability and lacks a clear trend, moving from -3.22% to -4.03%, with a low point at -1.99% in 2023, reflecting potential fluctuations in tax rates or tax strategies over the years.

Net Income

Net income attributable to the company reflects the broader trend in profitability, increasing from 24.33% in 2020 to a high of 29.85% in 2021, then dropping to 21.25% in 2022 before recovering to 27.81% in 2024. The net income attributable to noncontrolling interests remains minimal but shows slight fluctuations.

In summary, the company demonstrates strong and relatively stable profitability margins despite modest fluctuations in certain operational areas. The slight increase in Product revenue share combined with a reduction in Service revenue share, gradual improvements in cost efficiency, and controlled operating expenses contribute to effective margin management. The trends in tax expenses and interest income warrant further examination to clarify their impacts on net profitability. Overall, the financial metrics suggest resilience and efficient operational performance with ongoing opportunities for margin enhancement.