Company: ISRG
Filing Date: 2025-01-31
Form Type: 10-K
Source: 0001035267-25-000017
Chunk: 35

Company: INTUITIVE SURGICAL INC
Filing Date: 2025-01-31
Form: 10-K
Item: Item 7
Chunk 35
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 higher costs associated with our da Vinci 5 surgical system launch.

Product gross profit for the years ended December 31, 2024, and 2023, included share-based compensation expense of $98.5 million and $83.4 million, respectively, and intangible assets amortization expense of $11.5 million and $13.5 million, respectively.

Our capital expenditures increased during 2024, as we continued to build the infrastructure needed to scale our business. As a result, beginning in 2025, we expect depreciation expense to increase, which may impact our future gross profit margin.

In 2025, the new U.S. presidential administration has proposed new and incremental tariffs on goods imported to the U.S. Specifically, tariffs of 25% could be imposed on imports from Mexico where a significant majority of our instruments and accessories are manufactured. In addition, we import raw materials and finished goods from sources outside of the U.S., which could also be subject to tariffs, such as our endoscopes, which are primarily manufactured in Germany. If the tariffs are implemented as proposed and noted above, we expect that the estimated decrease in our gross profit in 2025 could be material. 

77

The ultimate impact of any tariffs will depend on various factors, including if any tariffs are ultimately implemented, the timing of implementation, and the amount, scope, and nature of the tariffs.

Service

Service gross profit for the year ended December 31, 2024, increased by 11% to $0.90 billion, representing 69.0% of service revenue, compared to $0.82 billion, representing 69.8% of service revenue, for the year ended December 31, 2023. The higher service gross profit for the year ended December 31, 2024, was primarily driven by higher service revenue, reflecting a larger installed base of systems, and a lower service gross profit margin. The lower service gross profit margin for the year ended December 31, 2024, was primarily driven by an unfavorable repair mix and higher excess and obsolete inventory charges, partially offset by fixed cost leverage from higher repair volume.

Service gross profit for the years ended December 31, 2024, and 2023, included share-based compensation expense of $30.5 million and $28.2 million, respectively, and intangible assets amortization expense of $0.8 million and $0.9 million, respectively.

Selling, General and Administrative Expenses

Selling,