Why Did R&D Jump 2x In 4 Years for Intuitive Surgical?

Intuitive Surgical’s (NASDAQ:ISRG) research and development (R&D) expenses jumped 2x from $197 million in 2015 to $418 million in 2018, due to its new devices development initiatives, including da Vinci Single Port Surgical System and robotic-assisted catheter-based medical devices. Intuitive Surgical spends most of its money on cost of goods sold (COGS), selling, general & administrative (SG&A), and (R&D), which together accounted for 97% of the company’s total expenditure in 2018. Intuitive Surgical has seen strong revenue and expenses growth over the last few years. However, its total expenses as a percentage of revenue has declined. The jump in 2017 seen can be attributed to the tax reforms. In this note we discuss the key drivers of Intuitive Surgical’s total expenses. You can look at our interactive dashboard analysis ~ How Does Intuitive Surgical Spend Its Money? ~ for more details.

Intuitive Surgical’s Total Expenses As Percentage of Revenue Has Fluctuated In Recent Years

Breaking Down Intuitive Surgical’s Total Expenses


  • COGS, or cost of goods sold, accounted for 43% of the company’s total expense in 2018.
  • COGS as % of revenue has largely stayed around the 30% mark over the past few years, and we expect this trend to continue going forward.


  • SG&A, or selling, general & administrative expenses, includes salary, benefit costs, professional and marketing fees, shipping and handling costs, advertising and product promotions, among others. It accounted for 38% of the company’s total expense in 2018.
  • SG&A as % of revenue has largely stayed around the 26% mark over the past few years, and we expect this trend to continue going forward.


  • R&D, or research & development expenses, includes the costs of research and development of products, among other related expenses. It accounted for 16% of the company’s total expense in 2018.
  • R&D as % of revenue grew from 8.9% in 2016 to 11.2% in 2018. Trefis estimates the metric to see further growth to 11.6% in 2020. This can be attributed to new product development initiatives.

Income taxes

  • Income Taxes saw a sharp increase in 2017, due to the impact of the tax reform. The effective tax rate for Intuitive Surgical stood at 13% in 2018, and we estimate it to be around 5% in 2019, as the company recorded benefits from re-measurement of its Swiss deferred tax assets.

Interest & Other Expenses

  • Interest & Other Expenses have declined in the recent years. It accounted for -3% of the company’s total expenses in 2018. We expect Interest & Other Expense as % of revenue to to be around the 2% mark going forward.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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