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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number 000-30713 
Intuitive Surgical, Inc.
(Exact name of Registrant as specified in its Charter)
Delaware 77-0416458
(State or Other Jurisdiction of
Incorporation or Organization)		 (I.R.S. Employer
Identification No.)
1020 Kifer Road
Sunnyvale, California 94086
(Address of principal executive offices) (Zip Code)
(408) 523-2100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareISRGThe Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filer¨
Non-accelerated filer¨Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  x
The Registrant had 354,705,822 shares of Common Stock, $0.001 par value per share, outstanding as of April 15, 2024.



INTUITIVE SURGICAL, INC.
TABLE OF CONTENTS

  Page No.
PART I. FINANCIAL INFORMATION
PART II. OTHER INFORMATION

2

PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTUITIVE SURGICAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
in millions (except par values)March 31,
2024		December 31,
2023
ASSETS
Current assets:
Cash and cash equivalents$2,839.5 $2,750.1 
Short-term investments1,960.6 2,473.1 
Accounts receivable, net1,127.9 1,130.2 
Inventory1,299.3 1,220.6 
Prepaids and other current assets405.4 314.0 
Total current assets7,632.7 7,888.0 
Property, plant, and equipment, net3,799.6 3,537.6 
Long-term investments2,522.6 2,120.0 
Deferred tax assets917.8 910.5 
Intangible and other assets, net607.1 636.7 
Goodwill348.2 348.7 
Total assets$15,828.0 $15,441.5 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$194.4 $188.7 
Accrued compensation and employee benefits238.4 436.4 
Deferred revenue437.5 446.1 
Other accrued liabilities504.8 587.5 
Total current liabilities1,375.1 1,658.7 
Other long-term liabilities406.5 385.5 
Total liabilities1,781.6 2,044.2 
Contingencies (Note 8)
Stockholders’ equity:
Preferred stock, 2.5 shares authorized, $0.001 par value, issuable in series; zero shares issued and outstanding as of March 31, 2024, and December 31, 2023
— — 
Common stock, 600.0 shares authorized, $0.001 par value, 354.7 shares and 352.3 shares issued and outstanding as of March 31, 2024, and December 31, 2023, respectively
0.4 0.4 
Additional paid-in capital8,903.0 8,576.4 
Retained earnings5,067.9 4,743.0 
Accumulated other comprehensive loss(8.7)(12.2)
Total Intuitive Surgical, Inc. stockholders’ equity13,962.6 13,307.6 
Noncontrolling interest in joint venture83.8 89.7 
Total stockholders’ equity14,046.4 13,397.3 
Total liabilities and stockholders’ equity$15,828.0 $15,441.5 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).
3
INTUITIVE SURGICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended March 31,
in millions (except per share amounts)20242023
Revenue:
Product$1,577.1 $1,413.0 
Service313.5 283.2 
Total revenue1,890.6 1,696.2 
Cost of revenue:
Product554.4 493.0 
Service90.8 90.2 
Total cost of revenue645.2 583.2 
Gross profit1,245.4 1,113.0 
Operating expenses:
Selling, general and administrative491.5 480.5 
Research and development284.5 244.9 
Total operating expenses776.0 725.4 
Income from operations469.4 387.6 
Interest and other income, net69.1 34.2 
Income before taxes538.5 421.8 
Income tax expense (benefit)(8.9)61.0 
Net income547.4 360.8 
Less: net income attributable to noncontrolling interest in joint venture2.5 5.5 
Net income attributable to Intuitive Surgical, Inc.$544.9 $355.3 
Net income per share attributable to Intuitive Surgical, Inc.:
Basic$1.54 $1.01 
Diluted$1.51 $1.00 
Shares used in computing net income per share attributable to Intuitive Surgical, Inc.:
Basic353.5 350.2 
Diluted360.5 356.0 
Other comprehensive income, net of tax:
Unrealized gains on hedge instruments$5.6 $2.5 
Unrealized gains (losses) on available-for-sale securities(4.2)37.6 
Foreign currency translation gains1.8 14.2 
Prior service cost for employee benefit plans(0.1)— 
Other comprehensive income3.1 54.3 
Total comprehensive income550.5 415.1 
Less: comprehensive income attributable to noncontrolling interest2.1 5.8 
Total comprehensive income attributable to Intuitive Surgical, Inc.$548.4 $409.3 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).
4
INTUITIVE SURGICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31,
in millions 20242023
Operating activities:
Net income$547.4 $360.8 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and loss on disposal of property, plant, and equipment104.2 87.7 
Amortization of intangible assets5.1 5.0 
Loss (gain) on investments, accretion of discounts, and amortization of premiums on investments, net(5.9)4.9 
Deferred income taxes(7.2)9.3 
Share-based compensation expense153.3 139.8 
Amortization of contract acquisition assets8.5 7.4 
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable2.2 16.9 
Inventory(179.6)(127.1)
Prepaids and other assets(4.1)(27.3)
Accounts payable(7.5)16.9 
Accrued compensation and employee benefits(271.2)(140.6)
Deferred revenue(4.0)24.2 
Other liabilities(75.8)(6.5)
Net cash provided by operating activities265.4 371.4 
Investing activities:
Purchase of investments(905.9)(3.5)
Proceeds from sales of investments100.2 26.3 
Proceeds from maturities of investments919.1 744.4 
Purchase of property, plant, and equipment(241.9)(194.1)
Net cash provided by (used in) investing activities(128.5)573.1 
Financing activities:
Proceeds from issuance of common stock relating to employee stock plans180.4 100.2 
Taxes paid related to net share settlement of equity awards(226.6)(129.7)
Repurchase of common stock— (350.0)
Payment of deferred purchase consideration(0.5)(1.7)
Net cash used in financing activities(46.7)(381.2)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash6.8 1.8 
Net increase in cash, cash equivalents, and restricted cash97.0 565.1 
Cash, cash equivalents, and restricted cash, beginning of period2,770.1 1,600.7 
Cash, cash equivalents, and restricted cash, end of period$2,867.1 $2,165.8 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).
5
INTUITIVE SURGICAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)




In this report, “Intuitive,” the “Company,” “we,” “us,” and “our” refer to Intuitive Surgical, Inc. and its wholly and majority-owned subsidiaries.
NOTE 1.    DESCRIPTION OF THE BUSINESS
Intuitive Surgical, Inc. (“Intuitive” or the “Company”) develops, manufactures, and markets da Vinci® surgical systems and the Ion® endoluminal system. The Company’s products and related services enable physicians and healthcare providers to improve the quality of and access to minimally invasive care. The da Vinci surgical system consists of a surgeon console or consoles, a patient-side cart, and a high-performance vision system. The Ion endoluminal system consists of a system cart, a controller, a catheter, and a vision probe. Both systems use software, instruments, and accessories.
NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements (“Financial Statements”) of Intuitive Surgical, Inc. and its wholly and majority-owned subsidiaries have been prepared on a consistent basis with the audited Consolidated Financial Statements for the fiscal year ended December 31, 2023, and include all adjustments, consisting of only normal, recurring adjustments, necessary to fairly state the information set forth herein. The Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, omit certain information and footnote disclosure necessary to present the Financial Statements in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”). These Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on January 31, 2024. The results of operations for the first three months of 2024 are not necessarily indicative of the results to be expected for the entire fiscal year or any future periods.
The Financial Statements include the results and balances of the Company’s majority-owned joint ventures, Intuitive Surgical-Fosun Medical Technology (Shanghai) Co., Ltd. and Intuitive Surgical-Fosun (HongKong) Co., Ltd. (collectively, the “Joint Venture”), with Shanghai Fosun Pharmaceutical (Group) Co., Ltd. (“Fosun Pharma”). The Company holds a controlling financial interest in the Joint Venture, and the noncontrolling interest is reflected as a separate component of the consolidated stockholders’ equity. The noncontrolling interest’s share of the earnings in the Joint Venture is presented separately in the Condensed Consolidated Statements of Comprehensive Income.
Risks and Uncertainties
The Company’s future results of operations and liquidity could be materially adversely affected by uncertainty surrounding macroeconomic and geopolitical factors in the U.S. and globally characterized by the supply chain environment, inflationary pressure, higher interest rates, instability in the global financial markets, significant disruptions in the commodities’ markets as a result of the conflict between Russia and Ukraine and conflicts in the Middle East, including Israel, and the introduction of or changes in tariffs or trade barriers may result in a recession, which could have a material adverse effect on the Company’s business.
Supply chain constraints eased but did not fully recover in the first quarter of 2024, despite improvements in the market conditions initially faced in 2022. Notably, the supply of semiconductor materials, packaging materials, and plastics materials remained stable, while certain residual stresses remain, particularly for engineered materials and related mechanical components. Additionally, prices of materials remain elevated from historical levels due to market demand or production-related cost inflation. With higher interest rates, access to credit is more difficult, and any insolvency of certain suppliers, including sole- and single-sourced suppliers, may have heightened continuity risks. The Company is actively engaged in activities to seek to mitigate the impact of any supply chain disruptions on its operations.
Supply of engineered materials and general market stress, particularly on labor- or capital-intensive manufacturing operations that produce the Company’s materials, have resulted in, and will continue to cause, inflationary cost pressure in the Company’s supply chain. To date, these supply chain challenges have not materially impacted the Company’s results of operations or ability to deliver products and services to its customers. However, supply constraints with certain materials, which may be unavoidable, could delay the timing of finished product deliveries, which could result in deferred or canceled procedures. Additionally, if inflationary pressures in component costs persist, the Company may not be able to quickly or easily adjust pricing, reduce costs, or implement countermeasures.
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Fluctuations in labor availability globally, including labor shortages and staff burnout and attrition, could also impact the Company’s ability to hire and retain personnel critical to its manufacturing, logistics, and commercial operations. The Company is also highly dependent on the principal members of its management and scientific staff. The loss of critical members of the Company’s team, or its inability to attract and retain qualified personnel, could significantly harm its operations, business, and ability to compete.
A number of hospitals continue to experience challenges with staffing and cost pressures that could affect their ability to provide patient care. Additionally, hospitals are facing significant financial pressure as supply chain constraints and inflation drive up operating costs, higher interest rates make access to credit more expensive, and fiscal stimulus programs enacted during the COVID-19 pandemic have ended. Hospitals may also be adversely affected by the liquidity concerns in the broader financial services industry. In addition, as overall competition for medical technologies, including robotic-assisted devices and treatment options, progresses in various markets, the Company will likely experience longer selling cycles and pricing pressures. Any or all of these factors could negatively impact the number of da Vinci procedures performed or the number of system placements and have a material adverse effect on the Company’s business, financial condition, or results of operations.
Recently Issued Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires all public entities, including public entities with a single reportable segment, to provide in interim and annual periods one or more measures of segment profit or loss used by the chief operating decision maker to allocate resources and assess performance. Additionally, the standard requires disclosures of significant segment expenses and other segment items as well as incremental qualitative disclosures. The guidance in this update is effective for fiscal years beginning after December 15, 2023, and interim periods after December 15, 2024. The Company is currently in the process of evaluating the effects of this pronouncement on its related disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires enhanced income tax disclosures, including specific categories and disaggregation of information in the effective tax rate reconciliation, disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. The requirements of the ASU are effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently in the process of evaluating the impact of this pronouncement on its related disclosures.
The Company continues to monitor new accounting pronouncements issued by the FASB and does not believe any accounting pronouncements issued through the date of this report will have a material impact on the Company’s Financial Statements.
Significant Accounting Policies
There have been no new or material changes to the significant accounting policies discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, that are of significance, or potential significance, to the Company.
NOTE 3.    FINANCIAL INSTRUMENTS
Cash, Cash Equivalents, and Investments
The following tables summarize the Company’s cash and available-for-sale debt securities’ amortized cost, gross unrealized gains, gross unrealized losses, allowance for credit loss, and fair value by significant investment category reported as
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cash and cash equivalents, short-term investments, or long-term investments as of March 31, 2024, and December 31, 2023 (in millions):
Reported as:
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Allowance for Credit LossFair
Value		Cash and
Cash
Equivalents		Short-
term
Investments		Long-
term
Investments
March 31, 2024
Cash$608.9 $— $— $— $608.9 $608.9 $— $— 
Level 1:
Money market funds2,153.9 — — — 2,153.9 2,153.9 — — 
U.S. treasuries3,164.7 6.3 (25.5)— 3,145.5 76.7 962.5 2,106.3 
Subtotal5,318.6 6.3 (25.5)— 5,299.4 2,230.6 962.5 2,106.3 
Level 2:
Corporate debt securities938.5 — (17.6)(1.1)919.8 — 731.2 188.6 
U.S. government agencies431.0 0.7 (6.5)— 425.2 — 198.8 226.4 
Municipal securities70.6 — (1.2)— 69.4 — 68.1 1.3 
Subtotal1,440.1 0.7 (25.3)(1.1)1,414.4 — 998.1 416.3 
Total assets measured at fair value$7,367.6 $7.0 $(50.8)$(1.1)$7,322.7 $2,839.5 $1,960.6 $2,522.6 
Reported as:
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Allowance for Credit LossFair
Value		Cash and
Cash
Equivalents		Short-
term
Investments		Long-
term
Investments
December 31, 2023
Cash$526.2 $— $— $— $526.2 $526.2 $— $— 
Level 1:
Money market funds2,223.9 — — — 2,223.9 2,223.9 — — 
U.S. treasuries2,850.2 20.1 (25.4)— 2,844.9 — 1,276.0 1,568.9 
Subtotal5,074.1 20.1 (25.4)— 5,068.8 2,223.9 1,276.0 1,568.9 
Level 2:
Corporate debt securities1,300.4 — (25.8)(1.1)1,273.5 — 974.6 298.9 
U.S. government agencies402.6 2.0 (7.3)— 397.3 — 149.5 247.8 
Municipal securities79.4 — (2.0)— 77.4 — 73.0 4.4 
Subtotal1,782.4 2.0 (35.1)(1.1)1,748.2 — 1,197.1 551.1 
Total assets measured at fair value$7,382.7 $22.1 $(60.5)$(1.1)$7,343.2 $2,750.1 $2,473.1 $2,120.0 
The following table summarizes the contractual maturities of the Company’s cash equivalents and available-for-sale debt securities (excluding money market funds), as of March 31, 2024 (in millions):
Amortized
Cost		Fair
Value
Mature in less than one year$2,063.3 $2,037.3 
Mature in one to five years2,541.5 2,522.6 
Total$4,604.8 $4,559.9 
Actual maturities may differ from contractual maturities, because certain borrowers have the right to call or prepay certain obligations. Gross realized gains and losses recognized on the sale of investments were immaterial for the periods presented.
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As of March 31, 2024, and December 31, 2023, net unrealized losses on available-for-sale debt securities, net of tax, of $33.9 million and $29.7 million, respectively, were included in accumulated other comprehensive loss in the accompanying Consolidated Balance Sheets.
The following tables present the breakdown of the available-for-sale debt securities with unrealized losses as of March 31, 2024, and December 31, 2023 (in millions):
March 31, 2024
Unrealized losses less than 12 monthsUnrealized losses 12 months or greaterTotal
Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
U.S. treasuries$1,214.8 $(7.5)$705.5 $(18.0)$1,920.3 $(25.5)
Corporate debt securities16.0 — 828.8 (17.6)844.8 (17.6)
U.S. government agencies92.7 (0.4)179.4 (6.1)272.1 (6.5)
Municipal securities— — 69.4 (1.2)69.4 (1.2)
Total$1,323.5 $(7.9)$1,783.1 $(42.9)$3,106.6 $(50.8)
December 31, 2023
Unrealized losses less than 12 monthsUnrealized losses 12 months or greaterTotal
Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
U.S. treasuries$48.5 $— $1,112.9 $(25.4)$1,161.4 $(25.4)
Corporate debt securities54.2 (0.1)1,219.2 (25.8)1,273.4 (25.9)
U.S. government agencies29.8 — 185.6 (7.3)215.4 (7.3)
Municipal securities— — 77.4 (1.9)77.4 (1.9)
Total$132.5 $(0.1)$2,595.1 $(60.4)$2,727.6 $(60.5)
The Company’s investments may, at any time, consist of money market funds, U.S. treasury and U.S. government agency securities, high-quality corporate notes and bonds, commercial paper, non-U.S. government agency securities, and taxable and tax-exempt municipal notes. The Company regularly reviews its securities in an unrealized loss position and evaluates the current expected credit loss by considering factors such as historical experience, market data, financial condition and near-term prospects of the investee, the extent of the loss related to the credit of the issuer, and the expected cash flows from the security. The Company segments its portfolio based on the underlying risk profiles of the securities and has a zero-loss expectation for U.S. treasury and U.S. government agency securities. The basis for this assumption is that these securities have consistently high credit ratings by rating agencies, have a long history with no credit losses, are explicitly guaranteed by a sovereign entity, which can print its own currency, and are denominated in a currency that is routinely held by central banks, used in international commerce, and commonly viewed as a reserve currency. Additionally, all of the Company’s investments in corporate debt securities and municipal securities are in securities with high-quality credit ratings, which have historically experienced low rates of default.
The current unrealized losses on the Company’s available-for-sale debt securities were caused by interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. As of March 31, 2024, the Company does not intend to sell the investments in unrealized loss positions, and it is not more-likely-than-not that the Company will be required to sell any of the investments before recovery of their amortized cost basis, which may be at maturity. Therefore, the Company does not expect to realize any losses on these available-for-sale debt securities. Additional factors considered in determining the treatment of unrealized losses include the financial condition and near-term prospects of the investee, the extent of the loss related to the credit of the issuer, and the expected cash flows from the security.
For the three months ended March 31, 2024, and 2023, credit losses related to available-for-sales debt securities were not material.
Equity Investments
The Company’s equity investments may, at any time, consist of equity investments with and without readily determinable fair values. The Company generally recognizes equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
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The following table is a summary of the activity related to equity investments (in millions):
Reported as:
December 31, 2023
Carrying Value
Changes in Fair Value (1)
Purchases / Sales / Other (2)
March 31, 2024
Carrying Value
Prepaids and other current assetsIntangible and other assets, net
Equity investments without readily determinable value (Level 2)$74.5 $(3.4)$0.2 $71.3 $— $71.3 
(1) Recorded in interest and other income, net.
(2) Other includes foreign currency translation gains/(losses).
For the three months ended March 31, 2024, the Company did not hold any equity investments with readily determinable market values (Level 1).
For the three months ended March 31, 2024, the Company recognized a net decrease in fair value of $3.4 million, primarily due to impairments of certain equity investments that lack readily determinable market values (Level 2), which was reflected in interest and other income, net.
Foreign Currency Derivatives
The objective of the Company’s hedging program is to mitigate the impact of changes in currency exchange rates on net cash flow from foreign currency-denominated sales, expenses, intercompany balances, and other monetary assets or liabilities denominated in currencies other than the U.S. dollar (“USD”). The terms of the Company’s derivative contracts are generally thirteen months or shorter. The derivative assets and liabilities are measured using Level 2 fair value inputs.
Cash Flow Hedges
The Company enters into currency forward contracts as cash flow hedges to hedge certain forecasted revenue transactions denominated in currencies other than the USD, primarily the Euro (“EUR”), the British Pound (“GBP”), the Japanese Yen (“JPY”), the Korean Won (“KRW”), and the New Taiwan Dollar (“TWD”). The Company also enters into currency forward contracts as cash flow hedges to hedge certain forecasted expense transactions denominated in EUR and the Swiss Franc (“CHF”).
For these derivatives, the Company reports the unrealized after-tax gain or loss from the hedge as a component of accumulated other comprehensive loss in stockholders’ equity and reclassifies the amount into earnings in the same period in which the hedged transaction affects earnings. The amounts reclassified to revenue and expenses related to the hedged transactions and the ineffective portions of cash flow hedges were not material for the periods presented.
Other Derivatives Not Designated as Hedging Instruments
Other derivatives not designated as hedging instruments consist primarily of forward contracts that the Company uses to hedge intercompany balances and other monetary assets or liabilities denominated in currencies other than the USD, primarily the EUR, GBP, JPY, KRW, CHF, TWD, Indian Rupee (“INR”), Mexican Peso (“MXN”), Chinese Yuan (“CNY”), and Canadian Dollar (“CAD”).
These derivative instruments are used to hedge against balance sheet foreign currency exposures. The related gains and losses were as follows (in millions):
Three Months Ended March 31,
20242023
Recognized gains (losses) in interest and other income, net$18.3 $(3.3)
Foreign exchange gains (losses) related to balance sheet re-measurement$(19.4)$5.4 
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The notional amounts for derivative instruments provide one measure of the transaction volume. Total gross notional amounts (in USD) for outstanding derivatives and the aggregate gross fair value at the end of each period were as follows (in millions):
Derivatives Designated as Hedging InstrumentsDerivatives Not Designated as Hedging Instruments
March 31,
2024		December 31,
2023		March 31,
2024		December 31,
2023
Notional amounts:
Forward contracts$343.9 $292.1 $643.7 $699.7 
Gross fair value recorded in:
Prepaids and other current assets$5.0 $3.1 $6.2 $5.0 
Other accrued liabilities$1.5 $5.9 $1.9 $6.6 
NOTE 4.    BALANCE SHEET DETAILS AND OTHER FINANCIAL INFORMATION
Balance Sheet Details
The following tables provide details of selected Condensed Consolidated Balance Sheet line items (in millions):
 As of
Accounts receivable, netMarch 31,
2024		December 31,
2023
Trade accounts receivable, net$1,028.6 $1,042.2 
Unbilled accounts receivable and other115.5 105.0 
Sales returns and allowances(16.2)(17.0)
Total accounts receivable, net$1,127.9 $1,130.2 
As of
InventoryMarch 31,
2024		December 31,
2023
Raw materials$469.8 $454.7 
Work-in-process181.3 159.9 
Finished goods648.2 606.0 
Total inventory$1,299.3 $1,220.6 
As of
Prepaids and other current assetsMarch 31,
2024		December 31,
2023
Net investment in sales-type leases – short-term$132.5 $137.3 
Other prepaids and other current assets272.9 176.7 
Total prepaids and other current assets$405.4 $314.0 
As of
Other accrued liabilities – short-termMarch 31,
2024		December 31,
2023
Income and other taxes payable$51.8 $111.4 
Accrued construction-related capital expenditures163.1 143.3 
Other accrued liabilities289.9 332.8 
Total other accrued liabilities – short-term$504.8 $587.5 
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As of
Other long-term liabilitiesMarch 31,
2024		December 31,
2023
Income taxes – long-term$250.5 $233.8 
Deferred revenue – long-term50.2 45.6 
Other long-term liabilities105.8 106.1 
Total other long-term liabilities$406.5 $385.5 
Supplemental Cash Flow Information
The following table provides supplemental non-cash investing and financing activities (in millions):
Three Months Ended March 31,
20242023
Equipment transfers, including operating lease assets, from inventory to property, plant, and equipment$110.7 $89.6 
Acquisition of property, plant, and equipment in accounts payable and accrued liabilities$177.9 $80.2 
NOTE 5.    REVENUE AND CONTRACT ACQUISITION COSTS
The following table presents revenue disaggregated by type and geography (in millions):
Three Months Ended March 31,
U.S.20242023
Instruments and accessories$822.4 $701.4 
Systems212.5 221.8 
Services203.6 186.7 
Total U.S. revenue
$1,238.5 $1,109.9 
OUS
Instruments and accessories$336.5 $284.2 
Systems205.7 205.6 
Services109.9 96.5 
Total OUS revenue
$652.1 $586.3 
Total
Instruments and accessories$1,158.9 $985.6 
Systems418.2 427.4 
Services313.5 283.2 
Total revenue
$1,890.6 $1,696.2 
Remaining Performance Obligations
The transaction price allocated to remaining performance obligations relates to amounts allocated to products and services for which revenue has not yet been recognized. A significant portion of these performance obligations relate to service obligations in the Company’s system sale and lease arrangements that will be satisfied and recognized as revenue in future periods. The transaction price allocated to the remaining performance obligations was $2.34 billion as of March 31, 2024. The remaining performance obligations are expected to be satisfied over the term of the system sale, lease, and service arrangements. Approximately 44% of the remaining performance obligations are expected to be recognized in the next 12 months with the remainder recognized thereafter over the term of the system sale, lease, and service arrangements, which are generally up to 5 years.
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Contract Assets and Liabilities
The following information summarizes the Company’s contract assets and liabilities (in millions):
As of
 March 31, 2024December 31, 2023
Contract assets$17.4 $20.2 
Deferred revenue$487.7 $491.7 
The Company invoices its customers based on the billing schedules in its sales arrangements. Payments are generally due 30 to 60 days from the date of invoice. Contract assets for the periods presented primarily represent the difference between the revenue that was recognized based on the relative standalone selling price of the related performance obligations satisfied and the contractual billing terms in the arrangements. Deferred revenue for the periods presented primarily relates to service contracts where the service fees are billed up-front, generally quarterly or annually, prior to those services having been performed. The associated deferred revenue is generally recognized over the term of the service period. The Company did not have any significant impairment losses on its contract assets for the periods presented.
During the three months ended March 31, 2024, the Company recognized $189 million of revenue that was included in the deferred revenue balance as of December 31, 2023. During the three months ended March 31, 2023, the Company recognized $185 million of revenue that was included in the deferred revenue balance as of December 31, 2022.
Intuitive System Leasing
The following table presents product revenue from Intuitive System Leasing arrangements (in millions):
Three Months Ended March 31,
20242023
Sales-type lease revenue$13.3 $23.0 
Operating lease revenue*$148.0 $112.0 
*Variable lease revenue related to usage-based arrangements included within operating lease revenue
$70.0 $46.0 
Trade Accounts Receivable
The allowance for doubtful accounts is based on the Company’s assessment of the collectibility of customer accounts. The Company regularly reviews the allowance by considering factors such as historical experience, credit quality, age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. For the three months ended March 31, 2024, and 2023, bad debt expense was not material.
The Company’s exposure to credit losses may increase if its customers are adversely affected by changes in healthcare laws, procedure coverage and reimbursement, economic pressures or uncertainty associated with local or global economic recessions, or other customer-specific factors. Although the Company has historically not experienced significant credit losses, it is possible that there could be a material adverse impact from potential adjustments of the carrying amount of lease and trade receivables as hospital cash flows are impacted by macroeconomic factors, including inflation, high interest rates, and staffing shortages.
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NOTE 6.    LEASES
Lessor Information related to Intuitive System Leasing
Sales-type Leases. Lease receivables relating to sales-type lease arrangements are presented on the Condensed Consolidated Balance Sheets as follows (in millions):
As of
March 31, 2024December 31, 2023
Gross lease receivables$356.6 $384.5 
Unearned income(12.2)(12.9)
Subtotal344.4 371.6 
Allowance for credit loss(2.6)(2.7)
Net investment in sales-type leases$341.8 $368.9 
Reported as:
Prepaids and other current assets$132.5 $137.3 
Intangible and other assets, net209.3 231.6 
 Net investment in sales-type leases$341.8 $368.9 
Contractual maturities of gross lease receivables as of March 31, 2024, are as follows (in millions):
Fiscal YearAmount
Remainder of 2024
$107.9 
2025114.3 
202676.9 
202741.4 
202812.5 
2029 and thereafter3.6 
Total$356.6 
The Company enters into sales-type leases with certain qualified customers to purchase its systems. Sales-type leases have terms that generally range from 24 to 84 months and are usually collateralized by a security interest in the underlying assets. The allowance for loan loss is based on the Company’s assessment of the current expected lifetime loss on lease receivables. The Company regularly reviews the allowance by considering factors such as historical experience, credit quality, age of the lease receivable balances, and current economic conditions that may affect a customer’s ability to pay. Lease receivables are considered past due 90 days after invoice.
The Company manages the credit risk of the net investment in sales-type leases using a number of factors relating to its customers, including, but not limited to, the following: size of operations; profitability, liquidity, and debt ratios; payment history; and past due amounts. The Company also uses credit scores obtained from external providers as a key indicator for the purposes of determining credit quality. The following table summarizes the amortized cost basis by year of origination and by credit quality for the net investment in sales-type leases as of March 31, 2024 (in millions):
20242023202220212020PriorNet Investment
Credit Rating:
High$5.4 $35.9 $56.6 $55.3 $19.7 $6.1 $179.0 
Moderate7.7 34.8 53.2 36.9 20.1 3.3 156.0 
Low— 1.4 5.5 2.3 0.2 — 9.4 
Total$13.1 $72.1 $115.3 $94.5 $40.0 $9.4 $344.4 
For the three months ended March 31, 2024, and 2023, credit losses related to the net investment in sales-type leases were not material.
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NOTE 7.    GOODWILL AND INTANGIBLE ASSETS
Acquisitions
There were no material acquisitions in the three months ended March 31, 2024, and 2023.
Goodwill
The following table summarizes the changes in the carrying amount of goodwill (in millions):
Amount
Balance as of December 31, 2023
$348.7 
Acquisition activity— 
Translation and other(0.5)
Balance as of March 31, 2024
$348.2 
Intangible Assets
The following table summarizes the components of gross intangible assets, accumulated amortization, and net intangible assets balances as of March 31, 2024, and December 31, 2023 (in millions):
March 31, 2024December 31, 2023
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Patents and developed technology$206.3 $(181.8)$24.5 $206.3 $(178.4)$27.9 
Distribution rights and others10.8 (9.7)1.1 10.8 (9.2)1.6 
Customer relationships31.8 (23.6)8.2 32.5 (22.9)9.6 
Total intangible assets$248.9 $(215.1)$33.8 $249.6 $(210.5)$39.1 
Amortization expense related to intangible assets was $5.1 million and $5.0 million for the three months ended March 31, 2024, and 2023, respectively.
The estimated future amortization expense related to intangible assets as of March 31, 2024, is as follows (in millions):
Fiscal YearAmount
Remainder of 2024
$11.8 
202511.9 
20265.3 
20272.8 
20281.3 
2029 and thereafter0.7 
Total$33.8 
The preceding expected amortization expense is an estimate. Actual amounts of amortization expense may differ from estimated amounts due to additional intangible asset acquisitions, measurement-period adjustments to intangible assets, changes in foreign currency exchange rates, impairments of intangible assets, accelerated amortization of intangible assets, and other events.
NOTE 8.    CONTINGENCIES
From time to time, the Company is involved in a variety of claims, lawsuits, investigations, and proceedings relating to securities laws, product liability, intellectual property, commercial, insurance, contract disputes, employment, and other matters. Certain of these lawsuits and claims are described in further detail below. It is not possible to predict what the outcome of these matters will be, and the Company cannot guarantee that any resolution will be reached on commercially reasonable terms, if at all.
A liability and related charge to earnings are recorded in the Financial Statements for legal contingencies when the loss is considered probable and the amount can be reasonably estimated. The assessment is re-evaluated each accounting period and is based on all available information, including the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to each case. Nevertheless, it is possible that additional future legal costs (including
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settlements, judgments, legal fees, and other related defense costs) could have a material adverse effect on the Company’s business, financial condition, or future results of operations.
Product Liability Litigation
The Company is currently named as a defendant in a number of individual product liability lawsuits filed in various state and federal courts. The plaintiffs generally allege that they or a family member underwent surgical procedures that utilized the da Vinci surgical system and sustained a variety of personal injuries and, in some cases, death as a result of such surgery. Several of the filed cases have trial dates in the next 12 months.
The cases raise a variety of allegations including, to varying degrees, that plaintiffs’ injuries resulted from purported defects in the da Vinci surgical system and/or failure on the Company’s part to provide adequate training resources to the healthcare professionals who performed plaintiffs’ surgeries. The cases further allege that the Company failed to adequately disclose and/or misrepresented the potential risks and/or benefits of the da Vinci surgical system. Plaintiffs also assert a variety of causes of action, including, for example, strict liability based on purported design defects, negligence, fraud, breach of express and implied warranties, unjust enrichment, and loss of consortium. Plaintiffs seek recovery for alleged personal injuries and, in many cases, punitive damages. The Company disputes these allegations and is defending against these claims.
The Company’s estimate of the anticipated cost of resolving the pending cases is based on negotiations with attorneys for the claimants. The final outcome of the pending lawsuits and claims, and others that might arise, is dependent on many variables that are difficult to predict, and the ultimate cost associated with these product liability lawsuits and claims may be materially different than the amount of the current estimate and accruals and could have a material adverse effect on the Company’s business, financial condition, or future results of operations. Although there is a reasonable possibility that a loss in excess of the amount recognized exists, the Company is unable to estimate the possible loss or range of loss in excess of the amount recognized at this time.
Patent Litigation
On June 30, 2017, Ethicon LLC, Ethicon Endo-Surgery, Inc., and Ethicon US LLC (collectively, “Ethicon”) filed a complaint for patent infringement against the Company in the U.S. District Court for the District of Delaware. The complaint, which was served on the Company on July 12, 2017, alleges that the Company’s EndoWrist Stapler instruments infringe several of Ethicon’s patents. Ethicon asserts infringement of U.S. Patent Nos. 9,585,658 (“’658”); 8,479,969 (“’969”); 9,113,874 (“’874”); 8,998,058 (“’058”); 8,991,677 (“’677”); 9,084,601 (“’601”); and 8,616,431 (“’431”). A claim construction hearing occurred on October 1, 2018, and the Court issued a scheduling order on December 28, 2018. On March 20, 2019, the Court granted the Company’s Motion to Stay pending an Inter Partes Review to be held at the Patent Trademark and Appeals Board (“PTAB”) to review patentability of six of the seven patents noted above and vacated the trial date. On August 1, 2019, the Court granted the parties’ joint stipulation to modify the stay in light of Ethicon’s U.S. International Trade Commission (“USITC”) complaint against Intuitive involving U.S. Patent Nos. 8,479,969 and 9,113,874. The PTAB has issued final written decisions finding the asserted claims of Patent Nos. ’658, ’058, ’677, ’601, and ’431 unpatentable. On October 3, 2023, Ethicon confirmed that it would not further appeal the decisions by the USITC in that proceeding that claim 24 of the ’969 Patent and claim 19 of the ’874 Patent were not infringed by the asserted Intuitive products and that those patents were invalid. Outside of the above USITC proceeding, on October 4, 2023, the parties filed a Joint Status Report in the district court in which Ethicon stated that it was prepared to proceed in this case with respect to its allegations that the accused EndoWrist Stapler instruments infringe asserted claim 24 of the ’969 Patent and asserted claim 20 of the ’874 Patent. The parties completed briefing on the issue of whether the trial court will supplement the record with evidence and arguments from the USITC proceeding and are awaiting a ruling from the district court. 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.
On October 19, 2022, a jury rendered a verdict against the Company awarding $10 million in damages to Rex Medical, L.P. in a patent infringement lawsuit. On September 20, 2023, the court granted the Company’s post-trial motion and reduced the damages to Rex Medical L.P. to nominal damages of $1. On October 18, 2023, Rex Medical filed a notice of appeal to the United States Court of Appeals for the Federal Circuit and, on October 31, 2023, Intuitive filed its notice of cross appeal. Based on currently available information, the Company does not believe that any losses arising from this matter would be material.
Commercial Litigation
On May 10, 2021, Surgical Instrument Service Company, Inc. (“SIS”) filed a complaint in the Northern District of California Court alleging antitrust claims against the Company relating to EndoWrist service, maintenance, and repair processes. The Court granted in part and denied in part the Company’s Motion to Dismiss, and discovery has commenced. The Company filed an answer denying the antitrust allegations and filed counterclaims against SIS. The counterclaims allege that SIS violated the Federal Lanham Act, California’s Unfair Competition Law, and California’s False Advertising Law and that SIS is also liable to the Company for Unfair Competition and Tortious Interference with Contract. The parties have filed summary judgment and Daubert motions, and the court held a hearing on these motions on September 7, 2023.
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On March 31, 2024, the Court granted-in-part and denied-in-part both Intuitive’s and plaintiff’s motions for summary judgment, and issued additional rulings related to expert witnesses. The Court did not rule in favor of either party with respect to whether the U.S. Food and Drug Administration (“FDA”) requires 510(k) clearance for plaintiff’s services with respect to EndoWrists. In conjunction with this finding, the Court denied Intuitive’s motion for summary judgment on plaintiff’s antitrust claims and found that these claims could proceed to trial. In addition, the Court ruled with Intuitive in dismissing plaintiff’s false statement claims against Intuitive, and the Court ruled with plaintiff in dismissing certain of Intuitive’s counterclaims against plaintiff. The Court has set a case management conference for May 30, 2024. Intuitive expects scheduling issues to be discussed at the May 30 conference. 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, and no trial date has been set for this matter at this time.
Three class action complaints were filed against the Company in the Northern District of California Court alleging antitrust allegations relating to the service and repair of certain instruments manufactured by the Company. A complaint by Larkin Community Hospital was filed on May 20, 2021, a complaint by Franciscan Alliance, Inc. and King County Public Hospital District No. 1 was filed on July 6, 2021, and a complaint by Kaleida Health was filed on July 8, 2021. The Court has consolidated the Franciscan Alliance, Inc. and King County Public Hospital District No. 1 and Kaleida Health cases with the Larkin Community Hospital case, which is now captioned on the Larkin docket as “In Re: da Vinci Surgical Robot Antitrust Litigation.” A Consolidated Amended Class Action Complaint has been filed on behalf of each plaintiff named in the earlier-filed cases. On January 14, 2022, Kaleida Health voluntarily dismissed itself as a party to this case. On January 18, 2022, the Company filed an answer against the plaintiffs in this matter, and discovery has commenced.
With regard to this class action case, on September 7, 2023, the Court heard argument on the parties’ respective motions for summary judgment and motions related to expert testimony. On March 31, 2024, the Court granted-in-part and denied-in-part plaintiffs’ motion for summary judgment on certain market definition issues, and denied Intuitive’s motion on the antitrust claims. In denying Intuitive’s motion, the Court declined to decide whether third-party companies were required to obtain 510(k) clearance for their services with respect to EndoWrists, and in the absence of a formal ruling from the FDA on that question denied Intuitive’s motion for summary judgment challenging plaintiffs’ standing on that ground. There were additional rulings on the expert witness issues as well. In the summary judgment order, the Court ruled with plaintiffs that the da Vinci robot and EndoWrist instruments occupy separate product markets for antitrust purposes. The Court also ruled that there is an antitrust aftermarket for the repair and replacement of EndoWrist instruments, and that Intuitive holds monopoly power in that aftermarket. The Court denied summary judgment for plaintiffs on the issue of whether soft-tissue surgical robots constitute a relevant antitrust market or are part of a larger market that includes laparoscopic and open surgery for antitrust purposes. The Court has set a case management conference for May 30, 2024, and a class certification hearing for October 10, 2024. Intuitive expects scheduling issues to be discussed at the May 30 conference. 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, and no trial date has been set for this matter at this time.
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NOTE 9.    STOCKHOLDERS’ EQUITY
Stockholders’ Equity
The following tables present the changes in stockholders’ equity (in millions):
Three Months Ended March 31, 2024
Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Intuitive Surgical, Inc. Stockholders’ EquityNoncontrolling Interest in Joint VentureTotal Stockholders’ Equity
SharesAmount
Beginning balance352.3 $0.4 $8,576.4 $4,743.0 $(12.2)$13,307.6 $89.7 $13,397.3 
Issuance of common stock through employee stock plans3.0 — 180.4 — — 180.4 — 180.4 
Shares withheld related to net share settlement of equity awards(0.6)— (6.6)(220.0)— (226.6)— (226.6)
Share-based compensation expense related to employee stock plans— — 152.8 — — 152.8 — 152.8 
Net income attributable to Intuitive Surgical, Inc.— — — 544.9 — 544.9 — 544.9 
Other comprehensive income (loss)— — — — 3.5 3.5 (0.4)3.1 
Cash dividends declared and payable by joint venture
— — — — — — (8.0)(8.0)
Net income attributable to noncontrolling interest in joint venture— — — — — — 2.5 2.5 
Ending balance354.7 $0.4 $8,903.0 $5,067.9 $(8.7)$13,962.6 $83.8 $14,046.4 
Three Months Ended March 31, 2023
Common StockAdditional
Paid-In
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Total Intuitive Surgical, Inc. Stockholders’ EquityNoncontrolling Interest in Joint VentureTotal Stockholders’ Equity
SharesAmount
Beginning balance
350.0 $0.4 $7,703.9 $3,500.1 $(162.5)$11,041.9 $70.7 $11,112.6 
Issuance of common stock through employee stock plans2.4 — 100.2 — — 100.2 — 100.2 
Shares withheld related to net share settlement of equity awards(0.5)— (5.9)(123.8)— (129.7)— (129.7)
Share-based compensation expense related to employee stock plans— — 146.0 — — 146.0 — 146.0 
Repurchase and retirement of common stock(1.5)— (15.8)(334.2)— (350.0)— (350.0)
Net income attributable to Intuitive Surgical, Inc.— — — 355.3 — 355.3 — 355.3 
Other comprehensive income (loss)
— — — — 54.0 54.0 0.3 54.3 
Net income attributable to noncontrolling interest in joint venture— — — — — — 5.5 5.5 
Ending balance
350.4 $0.4 $7,928.4 $3,397.4 $(108.5)$11,217.7 $76.5 $11,294.2 
Stock Repurchase Program
The Company’s Board of Directors (the “Board”) has authorized an aggregate of $10.0 billion of funding for the Company’s common stock repurchase program (the “Repurchase Program”) since its establishment in March 2009. The most recent authorization occurred in July 2022, when the Board increased the authorized amount available under the Repurchase Program to $3.5 billion, including amounts remaining under previous authorization. As of March 31, 2024, the remaining amount of share repurchases authorized by the Board under the Repurchase Program was approximately $1.1 billion.
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The following table summarizes stock repurchase activities (in millions, except per share amounts):
 Three Months Ended March 31,
 20242023
Shares repurchased— 1.5 
Average price per share$— $238.1 
Value of shares repurchased$— $350.0 
Accumulated Other Comprehensive Loss, Net of Tax, Attributable to Intuitive Surgical, Inc.
The components of accumulated other comprehensive loss, net of tax, attributable to Intuitive Surgical, Inc. are as follows (in millions):
 Three Months Ended March 31, 2024
 Gains (Losses)
on Hedge
Instruments		Unrealized Gains
(Losses) on Available-for-Sale Securities		Foreign
Currency
Translation
Gains (Losses)		Employee Benefit PlansTotal
Beginning balance$(2.5)$(29.7)$19.4 $0.6 $(12.2)
Other comprehensive income (loss) before reclassifications4.1 (4.3)2.2 — 2.0 
Amounts reclassified from accumulated other comprehensive income (loss)1.5 0.1 — (0.1)1.5 
Net current-period other comprehensive income (loss)5.6 (4.2)2.2 (0.1)3.5 
Ending balance$3.1 $(33.9)$21.6 $0.5 $(8.7)
 Three Months Ended March 31, 2023
 Gains (Losses)
on Hedge
Instruments		Unrealized Gains
(Losses) on Available-for-Sale Securities		Foreign
Currency
Translation
Gains (Losses)		Employee Benefit PlansTotal
Beginning balance$(2.9)$(154.2)$(6.6)$1.2 $(162.5)
Other comprehensive income (loss) before reclassifications3.7 37.8 13.9 — 55.4 
Amounts reclassified from accumulated other comprehensive income (loss)(1.2)(0.2)— — (1.4)
Net current-period other comprehensive income (loss)2.5 37.6 13.9 — 54.0 
Ending balance$(0.4)$(116.6)$7.3 $1.2 $(108.5)
The tax impacts for amounts recognized in other comprehensive income before reclassifications were as follows (in millions):
Three Months Ended March 31,
Available-for-sale securities20242023
Income tax benefit (expense) for net gains (losses) recorded in other comprehensive income
$1.3 $(10.9)
The tax impacts for amounts recognized in other comprehensive income before reclassifications for hedge instruments, foreign currency translation gains (losses), and employee benefit plans for the three months ended March 31, 2024, and 2023, were not material to the Company’s Financial Statements. The tax impacts for amounts reclassified from accumulated other comprehensive loss relating to hedge instruments, available-for-sale securities, foreign currency translation gains (losses), and employee benefit plans for the three months ended March 31, 2024, and 2023, were not material to the Company’s Financial Statements.
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NOTE 10.    SHARE-BASED COMPENSATION
As of March 31, 2024, the total number of shares of common stock reserved for issuance under the 2010 Incentive Award Plan was 110,350,000. Approximately 15.4 million shares were reserved for future issuance under the Company’s stock plans, and a maximum of approximately 6.7 million of these shares can be awarded as restricted stock units (“RSUs”).
Restricted Stock Units
A summary of RSU activity under all stock plans for the three months ended March 31, 2024, is presented as follows (in millions, except per share amounts):
 SharesWeighted-Average
Grant-Date Fair Value
Unvested balance as of December 31, 2023
5.0 $245.75 
RSUs granted2.2 $388.09 
RSUs vested(1.6)$234.60 
RSUs forfeited(0.1)$262.23 
Unvested balance as of March 31, 2024
5.5 $305.87 
Stock Options
A summary of stock option activity under all stock plans for the three months ended March 31, 2024, is presented as follows (in millions, except per share amounts):
 Stock Options Outstanding
 Number
Outstanding		Weighted-Average
Exercise Price Per
Share
Balance as of December 31, 2023
9.8 $174.90 
Options granted— $— 
Options exercised(1.1)$107.06 
Options forfeited/expired— $250.01 
Balance as of March 31, 2024
8.7 $182.70 
As of March 31, 2024, options to purchase an aggregate of 7.0 million shares of common stock were exercisable at a weighted-average price of $162.35 per share.
Performance Stock Units
In 2022, the Company began granting performance stock units (“PSUs”) to officers and other key employees subject to three-year cliff vesting and pre-established, quantitative goals. Whether any PSUs vest, and the amount that do vest, is tied to completion of service over three years and the achievement of three equally-weighted, quantitative goals that directly align with or help drive the Company’s strategy and long-term total shareholder return.
The 2022 PSU grant metrics are focused on relative total shareholder return (“TSR”), year-over-year da Vinci procedure growth for 2023, and two-year compound annual da Vinci procedure growth for 2024. The 2023 PSU grant metrics are focused on relative TSR, da Vinci and Ion procedure growth in 2024 compared to 2022, and da Vinci and Ion procedure growth in 2025 compared to 2022. The 2024 PSU grant metrics are focused on relative TSR, da Vinci and Ion procedure growth in 2025 compared to 2023, and da Vinci and Ion procedure growth in 2026 compared to 2023. The TSR metric is considered a market condition, and the expense is determined at the grant date. The procedure growth metrics are considered performance conditions, and the expense is recorded based on the forecasted performance, which is reassessed each reporting period based on the probability of achieving the performance conditions. The number of shares earned at the end of the three-year period will vary, based on actual performance, from 0% to 125% of the target number of PSUs granted. PSUs are subject to forfeiture if employment terminates prior to the vesting date. PSUs are not considered issued or outstanding shares of the Company.
The Company calculates the fair value for each component of the PSUs individually. The fair value for the component with the TSR metric was determined using Monte Carlo simulation. The fair value per share for the components with the procedure growth metrics is equal to the closing stock price on the grant date.
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A summary of PSU activity for the three months ended March 31, 2024, is presented as follows (in millions, except per share amounts):
 
Shares		Weighted-Average
Grant Date Fair Value Per Share
Unvested balance as of December 31, 20230.2 $259.60 
Granted0.1 $395.92 
Vested— $271.58 
Performance change— $290.33 
Forfeited— $251.44 
Unvested balance as of March 31, 20240.3 $306.93 
Employee Stock Purchase Plan
Under the Employee Stock Purchase Plan (“ESPP”), employees purchased approximately 0.3 million shares for $68.4 million and approximately 0.3 million shares for $59.9 million during the three months ended March 31, 2024, and 2023, respectively.
Share-Based Compensation Expense
The following table summarizes share-based compensation expense for the three months ended March 31, 2024, and 2023 (in millions):
 Three Months Ended March 31,
 20242023
Cost of revenue – products (before capitalization)
$22.8 $23.0 
Amounts capitalized into inventory
(21.4)(18.8)
Amounts recognized in income for amounts previously capitalized in inventory21.3 12.6 
Cost of revenue – products
$22.7 $16.8 
Cost of revenue – services
7.0 7.0 
Total cost of revenue
29.7 23.8 
Selling, general, and administrative68.2 66.7 
Research and development57.7 50.1 
Share-based compensation expense before income taxes155.6 140.6 
Income tax benefit32.4 28.0 
Share-based compensation expense after income taxes$123.2 $112.6 
The Black-Scholes-Merton option pricing model is used to estimate the fair value of stock options granted under the Company’s share-based compensation plans and the rights to acquire stock granted under the ESPP. The weighted-average estimated fair values of stock options and the rights to acquire stock under the ESPP, as well as the weighted-average assumptions used in calculating the fair values of stock options and the rights to acquire stock under the ESPP that were granted during the three months ended March 31, 2024, and 2023, were as follows:
 Three Months Ended March 31,
 20242023
Stock Options
Risk-free interest rate—4.8%
Expected term (in years)—3.4
Expected volatility—34%
Fair value at grant date—$72.13
ESPP
Risk-free interest rate4.6%4.7%
Expected term (in years)1.21.2
Expected volatility32%35%
Fair value at grant date$115.48$79.33
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NOTE 11.    INCOME TAXES
Income tax expense (benefit) for the three months ended March 31, 2024, was $(8.9) million, or (1.7)% of income before taxes, compared to $61.0 million, or 14.5% of income before taxes, for the three months ended March 31, 2023.
The effective tax rates for the three months ended March 31, 2024, and 2023, differed from the U.S. federal statutory rate of 21% primarily due to the excess tax benefits associated with employee equity plans, the federal research and development credit benefit, and the effect of income earned by certain overseas entities being taxed at rates lower than the federal statutory rate, partially offset by U.S. tax on foreign earnings and state income taxes (net of the federal benefit).
The lower effective tax rate for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, was primarily due to a higher tax rate benefit from excess tax benefits, as discussed below, and higher federal research and development credit benefits, partially offset by a less favorable jurisdictional earnings mix.
The Company’s provision for income taxes for the three months ended March 31, 2024, and 2023, included excess tax benefits associated with employee equity plans of $111.1 million and $22.5 million, respectively, which reduced the Company’s effective tax rate by 20.6 and 5.3 percentage points, respectively. The amount of excess tax benefits or deficiencies will fluctuate from period to period based on the price of the Company’s stock, the volume of share-based awards settled or vested, and the value assigned to employee equity awards under GAAP, which results in increased income tax expense volatility.
The Company files federal, state, and foreign income tax returns in many jurisdictions in the U.S. and OUS. Years before 2016 are considered closed for significant jurisdictions. Certain of the Company’s unrecognized tax benefits could change due to activities of various tax authorities, including evolving interpretations of existing tax laws in the jurisdictions in which the Company operates, potential assessment of additional tax, possible settlement of audits, or through normal expiration of various statutes of limitations, which could affect the Company’s effective tax rate in the period in which they change. Due to the uncertainty related to the timing and potential outcome of audits, the Company cannot estimate the range of reasonably possible changes in unrecognized tax benefits that may occur in the next 12 months.
The Company is subject to the examination of its income tax returns by the Internal Revenue Service and other tax authorities. The outcome of these audits cannot be predicted with certainty. The Company’s management regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of the Company’s provision for income taxes. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.
NOTE 12.    NET INCOME PER SHARE
The following table presents the computation of basic and diluted net income per share attributable to Intuitive Surgical, Inc. (in millions, except per share amounts):
 Three Months Ended March 31,
 20242023
Numerator:
Net income attributable to Intuitive Surgical, Inc.$544.9 $355.3 
Denominator:
Weighted-average shares outstanding used in basic calculation353.5