Intuitive Surgical ( ) recorded 19% revenue growth and 22% net income growth in the second quarter – defying the reduced capital spending by hospitals in the U.S. Revenues increased to $260.6 million from $219.2 million a year ago. Gross margin expanded to 73.0% from 71.2%. Net income was $62.4 million, or $1.62 per diluted share compared to $51.2 million, or $1.28 per diluted share during the year-ago period.

Revenues include $13.8 million of revenue deferral. Last quarter, Intuitive Surgical had deferred a total of $20.1 million of revenues – related to discount offers made to some of its clients for upgrading da Vinci S surgical systems to recently launched da Vinci Si surgical systems. The company expects to record the balance $6.3 million during the second half of 2009. The deferred revenue contributed around $8.3 million, or $0.22 per diluted share to the net income.

Instruments and Accessories revenues grew 30% y-o-y to $95.8 million primarily due to higher (52% growth) da Vinci surgical procedures. Systems revenues grew 6% y-o-y to $123.5 million. Service revenues grew 40% y-o-y to $41.3 million, resulting from increased installed base of da Vinci surgical systems.

Intuitive Surgical sold 76 da Vinci surgical systems during the second quarter – 56 in the U.S. and the balance in the international market. This takes the total installed base of da Vinci systems to 1242 globally at the end of the second quarter. Out of 76 systems, 47 (62%) were the newly released da Vinci Si systems and 16 (21%) were repeat sales to the existing clients. Intuitive Surgical sold 85 systems during the year-ago quarter.

Intuitive Surgical managed to post double digit growth in revenues and net income despite the constrained capital spending by the hospitals. We believe the high growth in da Vinci surgical procedures will continue to boost the revenues and profitability of the company going forward. We reiterate our Hold recommendation for the company.