In July this framework killed its own ISRG thesis on the day it wrote it. The stock closed at 345.42, through every acceptance zone on the chart, and the issue ended with a promise: Gate 1 gets a mandatory re-run at the October filing. The filing is out. On Wednesday ISRG closed at 428.12, 24% above the July close. In between came a third quarter with revenue up 22% to $3.05 billion, 546 robots placed against 427 a year ago, and a $450 million antitrust settlement. The day after the report the stock opened near 400, found buyers at the heaviest volume on its chart, and closed at 428. This issue keeps the promise: Gate 1 re-run on the new numbers, the valuation map that July voided rebuilt from scratch, and the flow read off today's terminal. The short answer, free: the business passes more cleanly than it did in July. Whether the stock passes is a different question.
The July verdict was WATCH: Gate 0 failed for longs in a Full Risk-Off regime, and the valuation map was void until a new base printed. The stock did go lower first. On the daily chart it bottomed in late July near 340, where the terminal printed an S3 buy and two oversold extremes. Then it rebuilt, and it is now 24% above the July close.
So the rule did two things, and we print both. It kept the framework out of the breakdown, which cost Friday-morning buyers 14% in one session. And it kept the framework out of the full recovery, because the re-entry conditions (regime permission, a printed base, a qualifying signal) never lined up as one trade. The only thing the July plan allowed at that low was a snapback of a quarter unit at most, first target only. Gates do not make you right. They decide in advance what being wrong is allowed to cost, in both directions.
This is a far better world than July's. Then all three layers were red and the tailwind was -2. Now money is flowing and risk appetite is back on; only the breadth layer, stocks joining the move, is off. Strength rose from +1 to +5 of 10.5 overnight.
But the rule does not grade on a curve. Longs need a tailwind of 0 or better. It reads -1, so ISRG goes to WATCH and is re-tested every morning. The reason it is negative is outside healthcare entirely: Brent near $110 after the Aramco attack and a 10-year Treasury yield above 5.1%. That is the macro backdrop a stock priced on a decade of growth has to live in, and it matters again at Gate 2.
July's red flag was demand: US procedure growth guided down toward 12%, patients deferring benign procedures, insurance subsidies expiring. The third quarter was the test. Revenue rose 22% to $3.05 billion. US revenue rose 20%, outside the US 25%. About 906,000 da Vinci procedures, up 14%. Ion lung procedures up 31%. The full-year procedure guide is now 14% to 15%, against 13.5% to 15.5% in July: the floor came up, the ceiling came down, the midpoint held.
| Check | Q3 2026 | What it says |
|---|---|---|
| Robots placed | 546 vs 427 (+28%) | 315 were da Vinci 5. Hospitals are still buying capacity, which is next year's instrument revenue. |
| Installed base | 12,094 (+12%) | Every robot is a recurring instrument stream. 60% of revenue is instruments and accessories. |
| Gross margin, non-GAAP | 69.9% | Full-year guide 68.7% to 69.3%, including a tariff cost of about 0.9% of revenue. |
| Cash from operations, 9 months | $3.20B vs $2.14B | Capital spending fell to $329M. Profit is turning into cash. |
| Buybacks, 9 months | $4.42B | $2.94B in Q3 alone, 7.8M shares at about $377. Diluted shares 351.6M, down 2.8% in a year. |
| Balance sheet | $6.80B cash, no debt | Down from $9.03B in December, spent on the buybacks. |
| Antitrust case | $450M, one time | Settled without admission, with agreed changes to business practice. Still needs court approval. |
The Cantillon File on ISRG scores the business 9.0 of 10 from the filings alone: 24.7% return on invested capital, $24 of every $100 of sales left for owners after stock pay, and research spending that has paid off. Our forensic read puts the red flag score at 3 of 10: tariffs, the extended-use instrument program, and the settlement's conduct terms. None comes near the kill line of 7.
Enter your Cantillon Research subscriber email to unlock Gates 2 to 5: the rebuilt valuation map with the growth today's price assumes, the three worlds and their price zones, the regime-tagged catalyst calendar, the full IVT read on both timeframes, the committee debate, the verdict, the size rules, the invalidation level and the targets.
ISRG stays on the Six Gates watchlist. Gate 0 is read every morning in the daily brief. Gate 4 is re-read after Friday's weekly close. Gates 1 to 3 run again at the January print, and the Cantillon File rebuilds itself within a week of every filing. If the three conditions line up before then, members get the entry in the brief, with the size and the invalidation set before the trade, not after.
Cost line the anchored VWAP: the average price large money has paid since a chosen point · Distance from cost line (Dev) how far price sits from it, in % · Window the Dev Filter: entries only while price is within the allowed distance · Tailwind for longs the Cantillon macro bonus; longs need 0 or better · Strength the Cantillon composite, out of 10.5 · Layers money flowing, stocks joining, risk appetite · Confirmation the confidence score and how many timeframes agree · S2, S3 signal tiers, higher means more independent confirming factors · Light the terminal's fit rating for this name, with its record in R · R one standard unit of risk · Owner earnings cash from operations minus capital spending minus stock pay · Implied growth the yearly growth in owner earnings, for ten years, that today's price needs to return 9%.