Intuitive Surgical Inc. (NASDAQ:ISRG)

The income tax expense exhibited fluctuating behavior over the five-year period. Current income tax expense generally increased from 2021 to 2022, then decreased in 2023, followed by an increase in 2024, and a slight decrease in 2025. Deferred income tax expense (benefit) demonstrated a more pronounced shift, moving from a benefit in 2021 to increasingly larger benefits in 2022 and 2023, before becoming a smaller benefit in 2024 and ultimately transitioning to an expense in 2025. The overall income tax expense mirrored the combined effect of these two components, showing an initial increase, a significant decrease in 2023, a subsequent increase in 2024, and a further increase in 2025.

Current Income Tax Expense

Current income tax expense increased substantially from US$226.2 million in 2021 to US$447.7 million in 2022, indicating a rise in taxable income. A decrease to US$422.4 million was observed in 2023, potentially due to changes in taxable income or applicable tax rates. This was followed by a further increase to US$471.6 million in 2024, and a slight decrease to US$415.7 million in 2025. The fluctuations suggest a sensitivity to underlying profitability and potential tax planning strategies.

Deferred Income Tax Expense (Benefit)

The deferred income tax component experienced a significant shift. Beginning as a benefit of US$64.0 million in 2021, the benefit increased in magnitude to US$185.3 million in 2022 and US$280.8 million in 2023. This suggests the recognition of increasing deferred tax assets. In 2024, the benefit decreased to US$135.3 million, and in 2025, it reversed to an expense of US$19.1 million. This reversal could be attributable to changes in temporary differences, valuation allowances, or enacted tax rate changes.

Overall Income Tax Expense

The total income tax expense increased from US$162.2 million in 2021 to US$262.4 million in 2022, driven by the increase in current tax expense. A substantial decrease occurred in 2023, with income tax expense falling to US$141.6 million, largely due to the larger deferred tax benefit. The expense then rose to US$336.3 million in 2024 and continued to increase to US$434.8 million in 2025, reflecting the combined impact of current tax expense and the shift in deferred tax from benefit to expense.

The effective income tax rate exhibited considerable fluctuation over the five-year period. While the statutory federal income tax rate remained constant at 21.00%, the effective income tax rate demonstrated variability, suggesting influences beyond the standard corporate tax rate.

Effective Income Tax Rate - Overall Trend

The effective income tax rate began at 8.58% in 2021, increased significantly to 16.33% in 2022, then decreased to 7.23% in 2023. A subsequent rise was observed in 2024, reaching 12.58%, followed by a further increase to 13.10% in 2025. This pattern indicates that the company’s tax burden is not solely determined by the statutory rate and is subject to change year-over-year.

Year-over-Year Changes

The largest year-over-year increase in the effective income tax rate occurred between 2021 and 2022, with an increase of 7.75 percentage points. The most substantial decrease was observed between 2022 and 2023, with a decline of 9.10 percentage points. The changes in 2024 and 2025 were more moderate, increasing by 5.35 and 0.52 percentage points respectively.

Potential Drivers of Variation

The differences between the effective and statutory rates likely stem from various factors. These could include tax credits, deductions, changes in the mix of income earned in different tax jurisdictions, the impact of deferred tax assets and liabilities, and items related to stock-based compensation. Further investigation into the company’s tax footnotes would be necessary to pinpoint the specific drivers of these fluctuations.

The observed volatility in the effective income tax rate warrants continued monitoring to assess potential impacts on future earnings and cash flow.

The composition of deferred tax assets and liabilities demonstrates a significant evolution over the five-year period. Gross deferred tax assets increased substantially from $651.9 million in 2021 to $1,552.6 million in 2025, while deferred tax liabilities also increased, though at a slower pace, from -$106.5 million to -$172.5 million. This resulted in a net deferred tax asset position that grew from $440.8 million to $1,018.6 million over the same timeframe.

Key Drivers of Deferred Tax Assets

Capitalized research and development expenditures represent the most significant component of gross deferred tax assets, increasing dramatically from $4.8 million in 2021 to $562.5 million in 2025. This suggests a substantial and growing investment in research and development activities. Research and development credits also contribute significantly, rising from $98.5 million to $288.8 million. Share-based compensation expense consistently contributes a notable amount, increasing from $110.9 million to $178.4 million. A new component, Swiss tax credits, emerged in 2023 and contributed $122.4 million initially, declining to $84.1 million by 2025. Expenses deducted in later years for tax purposes also show a steady increase, from $38.4 million to $76.1 million.

Valuation Allowance

The valuation allowance against deferred tax assets has increased consistently throughout the period, from -$104.6 million in 2021 to -$361.5 million in 2025. This increase, while occurring alongside the growth in deferred tax assets, indicates a growing uncertainty regarding the realization of those assets. The increasing valuation allowance partially offsets the growth in gross deferred tax assets, resulting in a more moderate increase in net deferred tax assets.

Components of Deferred Tax Liabilities

Property, plant, and equipment consistently represent the largest component of deferred tax liabilities, though the amount fluctuates, increasing from -$79.4 million in 2021 to -$140.4 million in 2025. Right-of-use assets also contribute to deferred tax liabilities, increasing from -$12.3 million to -$16.9 million. Intangible assets and other deferred tax liabilities remain relatively stable, fluctuating between -$10.3 million and -$15.2 million.

The overall trend indicates a growing investment in research and development, coupled with an increasing need to recognize a valuation allowance against the resulting deferred tax assets. The net effect is a substantial increase in the company’s net deferred tax asset position, though the growing valuation allowance suggests caution regarding the ultimate realization of these benefits.

The deferred tax assets exhibited a consistent upward trend over the observed period. Beginning at US$441.4 million in 2021, the balance increased to US$664.6 million in 2022, and continued to rise to US$910.5 million in 2023. This growth continued into 2024, reaching US$1,045.1 million, before experiencing a slight decrease to US$1,018.6 million in 2025. Deferred tax liabilities were minimal throughout the period, decreasing from US$0.6 million in 2021 to US$0.1 million in 2022, and subsequently becoming unreported in 2023, 2024, and 2025.

Deferred Tax Assets Trend

A substantial increase in deferred tax assets is apparent from 2021 to 2024. The rate of increase slowed between 2024 and 2025, with a modest decline observed. This suggests a potential shift in the factors contributing to the creation of these assets, or a realization of some portion of the previously deferred amounts.

Deferred Tax Liabilities Trend

Deferred tax liabilities were consistently low and diminished rapidly between 2021 and 2022. The subsequent absence of reported values suggests these liabilities are either immaterial or have been offset by deferred tax assets, or have been fully realized.

Net Deferred Tax Position

The company maintains a net deferred tax asset position throughout the period. The significant difference between the deferred tax assets and liabilities indicates a future tax benefit is anticipated, contingent upon the realization of the underlying temporary differences.

The consistent growth in deferred tax assets warrants further investigation to understand the underlying causes, such as net operating loss carryforwards, deductible temporary differences, or tax credit carryforwards. The minimal level of deferred tax liabilities suggests a limited presence of taxable temporary differences.

The financial information reveals consistent adjustments made to reported figures between 2021 and 2025. These adjustments primarily relate to the removal of deferred tax assets and liabilities, resulting in lower reported total assets and stockholders’ equity. A consistent pattern emerges where the adjusted values are lower than the reported values, indicating a reduction in the carrying value of assets and equity upon removing deferred tax items.

Total Assets

Reported total assets demonstrate an overall increasing trend from US$13,555,000 thousand in 2021 to US$20,458,700 thousand in 2025. However, the adjusted total assets, reflecting the removal of deferred tax items, show a smaller increase, moving from US$13,113,600 thousand to US$19,440,100 thousand over the same period. The difference between reported and adjusted assets widens over time, suggesting a growing impact from deferred tax adjustments.

Total Liabilities

Total liabilities, both reported and adjusted, exhibit a steady increase from 2021 to 2025. Notably, the reported and adjusted total liabilities are identical across all years, indicating that the deferred tax adjustments do not impact the reported liability figures. This suggests the deferred tax adjustments are primarily affecting asset and equity valuations.

Stockholders’ Equity

Reported total stockholders’ equity increases from US$11,901,100 thousand in 2021 to US$17,824,000 thousand in 2025. The adjusted stockholders’ equity, after removing deferred tax effects, shows a similar upward trend, but at a lower magnitude, rising from US$11,460,300 thousand to US$16,805,400 thousand. The gap between reported and adjusted equity expands each year, mirroring the trend observed with total assets.

Net Income

Reported net income attributable to the company fluctuates between 2021 and 2025, starting at US$1,704,600 thousand, decreasing to US$1,322,300 thousand in 2022, then increasing to US$2,856,000 thousand in 2025. The adjusted net income follows the same pattern, but is consistently lower than the reported net income in each year. The difference between reported and adjusted net income also increases over the period, indicating a growing impact of deferred tax adjustments on reported profitability.

In summary, the consistent adjustments for deferred tax items result in a lower valuation of both assets and equity. The impact of these adjustments appears to be increasing over time, as evidenced by the widening differences between reported and adjusted figures. While liabilities remain unaffected by these adjustments, both reported and adjusted net income show a similar trend, with the adjustments consistently reducing the reported profit.

The financial performance, as indicated by a set of key ratios, demonstrates a notable impact from adjustments related to deferred tax assets and liabilities. Generally, the adjusted ratios present a slightly more conservative view of profitability and efficiency compared to the reported figures. Several trends emerge when examining the period between 2021 and 2025.

Profitability

Reported net profit margin experienced volatility, decreasing from 29.85% in 2021 to 21.25% in 2022, before recovering to 28.38% in 2025. The adjusted net profit margin mirrored this trend, though the magnitude of the decrease in 2022 was more pronounced, and the subsequent recovery was slightly less substantial. This suggests that deferred taxes had a more significant influence on reported earnings during the 2022 downturn. The difference between reported and adjusted margins remained relatively consistent across the observed period.

Asset Efficiency

Reported total asset turnover fluctuated between 0.42 and 0.49, showing a general upward trend over the five years. The adjusted total asset turnover exhibited a similar pattern, consistently exceeding the reported value, indicating that the removal of deferred tax impacts slightly improves the assessment of asset utilization. The adjusted ratio also showed a stronger increase from 2021 to 2025.

Financial Leverage

Reported financial leverage remained relatively stable, ranging from 1.14 to 1.17. The adjusted financial leverage showed a slight increase in 2022, peaking at 1.19, before returning to a level comparable to the reported leverage. This suggests that deferred taxes can influence the perception of financial risk, particularly during periods of fluctuating profitability.

Return on Equity (ROE)

Reported ROE followed a similar trajectory to the net profit margin, declining in 2022 and then recovering. The adjusted ROE consistently presented a lower value than the reported ROE, with the largest difference observed in 2022. This indicates that deferred tax adjustments have a material effect on the return generated for shareholders. The adjusted ROE demonstrated a more substantial increase between 2024 and 2025.

Return on Assets (ROA)

Reported ROA mirrored the trends observed in ROE, with a dip in 2022 and subsequent recovery. The adjusted ROA consistently fell below the reported ROA, again highlighting the impact of deferred taxes on profitability measures. The gap between reported and adjusted ROA narrowed in the later years of the period, suggesting a potential stabilization of the deferred tax effects. The adjusted ROA showed a more pronounced increase from 2024 to 2025.

In summary, the adjustments for deferred taxes generally result in lower profitability and return ratios. The impact of these adjustments appears to be most significant during periods of lower reported earnings, such as in 2022. The trends observed in the adjusted ratios provide a potentially more conservative, yet consistent, view of the company’s financial performance.

The period between 2021 and 2025 demonstrates fluctuating performance in both reported and adjusted net profit margins. While both metrics generally trend upwards over the five-year span, significant variations are observed, particularly in the adjusted figures.

Reported Net Profit Margin

Reported net profit margin decreased from 29.85% in 2021 to 21.25% in 2022, representing a substantial decline. A recovery is then noted, with margins increasing to 25.24% in 2023, 27.81% in 2024, and further to 28.38% in 2025. This indicates a return towards levels seen in 2021, though not fully achieving that initial peak.

Adjusted Net Profit Margin

The adjusted net profit margin mirrors the reported margin’s initial decline, falling from 28.73% in 2021 to 18.27% in 2022. The subsequent recovery is also present, with the adjusted margin reaching 21.30% in 2023, 26.19% in 2024, and 28.57% in 2025. The adjusted margin consistently trails the reported margin throughout the period, suggesting that adjustments are regularly reducing the stated profitability.

The divergence between reported and adjusted net profit margins suggests the presence of recurring non-operational items impacting the reported results. The magnitude of these adjustments appears to be significant, as evidenced by the consistent difference between the two margin calculations. The overall trend indicates a strengthening of profitability from 2022 through 2025, with both reported and adjusted margins showing improvement. However, the adjustments consistently lower the perceived profitability compared to the reported figures.

Margin Relationship

The difference between the reported and adjusted net profit margins remained relatively stable between 1.12% and 1.47% in 2021, 2024 and 2025. However, in 2022 and 2023, the difference widened to 3.00% and 3.94% respectively, indicating a larger impact from adjustments during those years.

Further investigation into the nature of these adjustments would be necessary to fully understand their impact on the company’s financial performance and to assess the sustainability of the observed trends.

An examination of the provided financial information reveals trends in both reported and adjusted total assets, alongside their corresponding turnover ratios, over a five-year period. Total assets, both as reported and adjusted, generally increased throughout the period, with fluctuations observed in 2022. The adjusted total asset turnover ratio demonstrates a slightly more stable pattern than the reported ratio.

Adjusted Total Assets

Adjusted total assets decreased from US$13,113,600 thousand in 2021 to US$12,309,400 thousand in 2022. Subsequent years show consistent growth, reaching US$14,531,000 thousand in 2023, US$17,698,100 thousand in 2024, and US$19,440,100 thousand in 2025. This indicates a strengthening asset base following the initial decline.

Adjusted Total Asset Turnover

The adjusted total asset turnover ratio increased from 0.44 in 2021 to 0.51 in 2022, representing improved efficiency in asset utilization. The ratio then decreased slightly to 0.49 in 2023 and 0.47 in 2024 before rising again to 0.52 in 2025. This suggests a generally efficient use of assets to generate revenue, with a peak in 2022 and a return to a higher level in the final year of the period. The fluctuations may warrant further investigation to determine underlying causes.

The difference between reported and adjusted total assets is not explicitly defined within the provided information, but the adjusted ratio consistently presents a slightly higher turnover value. This suggests that the adjustments made to total assets result in a more favorable assessment of asset efficiency. The overall trend indicates a company capable of generating increasing revenue relative to its asset base, despite some year-to-year variability.

An examination of the financial information reveals trends in both reported and adjusted asset and equity figures, impacting calculated financial leverage ratios over the five-year period. Reported total assets demonstrate an increasing trend, beginning at US$13,555,000 thousand in 2021 and rising to US$20,458,700 thousand in 2025. Adjusted total assets follow a similar pattern, though consistently lower than reported values, starting at US$13,113,600 thousand and reaching US$19,440,100 thousand in 2025.

Reported total stockholders’ equity also exhibits growth, moving from US$11,901,100 thousand in 2021 to US$17,824,000 thousand in 2025. Adjusted stockholders’ equity mirrors this increase, beginning at US$11,460,300 thousand and concluding at US$16,805,400 thousand in 2025. The difference between reported and adjusted equity values remains relatively consistent throughout the period.

Reported Financial Leverage

Reported financial leverage remains relatively stable throughout the observed period, fluctuating between 1.14 and 1.17. It begins at 1.14 in 2021, increases to 1.17 in 2022, then decreases slightly to 1.16 in 2023, before returning to 1.14 in 2024 and concluding at 1.15 in 2025. This indicates a consistent, moderate level of financial risk based on reported figures.

Adjusted Financial Leverage

Adjusted financial leverage shows a slight upward trend over the five years. Starting at 1.14 in 2021, it rises to 1.19 in 2022, then decreases to 1.17 in 2023. It subsequently declines to 1.15 in 2024 and ends at 1.16 in 2025. While the fluctuations are minor, the overall trajectory suggests a gradual increase in financial leverage when considering the adjusted figures. The peak in 2022 is notable, followed by a subsequent moderation in the following years.

The consistent difference between reported and adjusted figures for both assets and equity suggests the adjustments relate to specific items impacting the balance sheet. The slight increase in adjusted financial leverage, despite the stability of reported leverage, indicates that these adjustments contribute to a marginally higher risk profile when assessed using the adjusted metrics.

The period between 2021 and 2025 demonstrates fluctuating, yet generally increasing, financial performance as reflected in both reported and adjusted return on equity (ROE). Reported net income attributable to Intuitive Surgical, Inc. initially decreased from 2021 to 2022, before exhibiting consistent growth through 2025. A similar pattern is observed in adjusted net income, though the magnitude of the initial decrease is more pronounced. Stockholders’ equity, both reported and adjusted, generally increased over the five-year period, with a slight dip from 2021 to 2022.

Reported ROE

Reported ROE experienced a decline from 14.32% in 2021 to 11.98% in 2022, coinciding with the decrease in reported net income. Subsequent years show a recovery, with ROE reaching 13.51% in 2023, 14.13% in 2024, and peaking at 16.02% in 2025. This upward trend aligns with the increasing reported net income.

Adjusted ROE

Adjusted ROE mirrors the trend of reported ROE, though with slightly lower values each year. It decreased from 14.32% in 2021 to 10.96% in 2022, followed by increases to 12.24% in 2023, 14.21% in 2024, and culminating in 17.11% in 2025. The adjusted ROE consistently demonstrates a stronger growth trajectory than the reported ROE in the later years of the period.

Relationship between Reported and Adjusted Figures

The difference between reported and adjusted ROE remains relatively consistent throughout the period, typically within a narrow range. This suggests that the adjustments made to net income and stockholders’ equity do not fundamentally alter the overall profitability picture. The adjustments appear to smooth out some of the year-to-year volatility, resulting in a slightly more stable ROE figure.

Stockholders’ Equity Impact

The growth in both reported and adjusted ROE from 2022 to 2025 is supported by increases in stockholders’ equity. While net income drives the numerator of the ROE calculation, the expansion of the equity base contributes to the overall improvement in returns. The equity growth suggests a strengthening financial position.

In summary, the period under review indicates a recovery and subsequent growth in profitability, as evidenced by the increasing ROE figures. The consistency between reported and adjusted ROE suggests that the adjustments applied do not significantly change the underlying financial performance. The concurrent growth in stockholders’ equity further supports the positive trend in returns.

The period between 2021 and 2025 demonstrates generally positive trends in both reported and adjusted net income, total assets, and return on assets. However, there are notable fluctuations and differences between the reported and adjusted figures, particularly in 2022.

Net Income

Reported net income attributable to the company decreased from US$1,704.6 million in 2021 to US$1,322.3 million in 2022, before recovering and increasing steadily to US$2,856.0 million by 2025. Adjusted net income follows a similar pattern, declining in 2022 to US$1,137.0 million and then increasing to US$2,875.1 million in 2025. The adjusted net income is consistently lower than the reported net income each year, suggesting the presence of items impacting the reported figures.

Total Assets

Reported total assets experienced a slight decrease from US$13,555.0 million in 2021 to US$12,974.0 million in 2022. Subsequently, assets increased significantly, reaching US$20,458.7 million in 2025. Adjusted total assets mirror this trend, with a similar decrease in 2022 and subsequent growth, ending at US$19,440.1 million in 2025. The difference between reported and adjusted total assets remains relatively consistent across the period.

Reported Return on Assets (ROA)

Reported ROA decreased from 12.58% in 2021 to 10.19% in 2022, coinciding with the decline in reported net income. The ROA then increased steadily, reaching 13.96% in 2025, reflecting the growth in net income and assets. The ROA remained above 12% for the majority of the period.

Adjusted Return on Assets (ROA)

Adjusted ROA also decreased in 2022, falling to 9.24% from 12.51% in 2021. It then exhibited a consistent upward trend, culminating in 14.79% in 2025. While generally following the same direction as the reported ROA, the adjusted ROA consistently reports a lower value, indicating that the adjustments made to net income and total assets have a negative impact on the calculated return. The difference between reported and adjusted ROA narrowed in 2025.

The consistent difference between reported and adjusted figures suggests the presence of non-recurring or unusual items that are removed for the adjusted calculations. The increasing trend in both net income and assets, coupled with the corresponding increase in both reported and adjusted ROA, indicates improving profitability and efficient asset utilization over the analyzed period.