Going back to the beginning of this year, it would have been difficult to predict the high-profile year that just ended for robotic surgery pioneer Intuitive Surgical, Inc. (NASDAQ:ISRG). It was marked by a number of significant announcements and even more compelling financial results.

The stock followed the company's financial performance, gaining 72% in 2017, and nearly tripling the gains of the broader market. Producing these kind of results doesn't happen unless the company is firing on all cylinders, so let's take a look at what Intuitive Surgical did in 2017 that inspired investors to bid up its shares.

A surgeon seated at a console which a scrubbed nurse adjusts the arms on a surgical robot.

Intuitive Surgical was a smooth operator in 2017. Image source: Intuitive Surgical.

Improving metrics

Intuitive Surgical recently released its preliminary fourth-quarter and 2017 year-end results, which showed that the company's solid performance continues. Surgical procedures, which drives instrument and accessories revenue, increased 16% year over year. This far exceeded the 9% to 12% growth the company had originally forecast. 

The company also shipped 684 surgical systems in 2017, a 27% increase compared to 537 systems shipped in 2016. 

These performance metrics flowed through to Intuitive's financial results. The company expects revenue for the year to come in at $3.1 billion, a 16% year-over-year increase. Sales of instruments and accessories grew to an estimated $1.6 billion, a 17% increase over 2016, and the recurring sales have grown to account for more than half of the company's revenue.

ISRG Chart

ISRG data by YCharts.

Stock repurchase plan

Early in the year, when Intuitive Surgical released its full-year 2016 financial results, the company announced that it had entered into an accelerated share repurchase program, intending to retire $2 billion of its stock -- exercising most of the authorization that same week.

While it was seen by many investors as a huge vote of confidence by the company, some worried that with the stock near all-time highs, the buyback could play out badly. Considering how the shares surged in 2017, up an incredible 72%, in hindsight it seemed a prescient move by Intuitive's management.

FDA approval

In May, Intuitive Surgical announced that it had received approval from the U.S. Food & Drug Administration (FDA) for the da Vinci X, the latest version of its flagship surgical system. Just the month prior, the company announced that the robot had been approved by European regulators.  

While the latest da Vinci system has many of the same capabilities as the company's higher priced models, the robot is a much more cost effective, entry-level machine. It is also designed to be upgraded to the full-featured system, giving hospitals the option to start small and grow as necessary.

Increasing its R&D budget

In the same financial release, Intuitive revealed that it planned to boost its research and development (R&D) spending by an additional $80 million dollars -- an increase of 30% over the prior year's budget. Sizable as it was, what made this increase even more jaw-dropping was the fact that the company had already boosted its R&D expenditure in the prior year by 20%. So, what precipitated this increase in spending?

Intuitive was ramping up to release its Sp, or single-port system, which is designed for surgeons operating in confined spaces. This robot is optimized for procedures such as trans-oral surgery, which takes place in difficult-to-access areas in the head and neck. Typically, the most significant spending occurs in the year prior to the launching of a new system.

The company was also investigating the potential of a flexible robotics platform for diagnosing and potentially treating lung cancer. This system is being designed under a joint venture with its distribution partner in China, Fosun Pharma. While the system is in the early stages, it still requires significant investment to come to fruition.

The results of the first-ever clinical study to evaluate the platform were released in November 2017, and they were promising. In the study, surgeons were able to obtain lung tissue samples from hard-to-reach areas in 29 of the 30 cases, without any adverse events related to the procedure. 

The company's willingness to spend heavily on R&D is particularly forward thinking, will result in new products coming to market, and has long been a key contributing factor in Intuitive's success.

The bottom line

By continuing to develop new technology, expand its installed base of systems, and increase the number of procedures per machine, Intuitive Surgical has produced impressive results. By keeping its eye on the ball and focusing on the things that matter, Intuitive Surgical crushed it in 2017.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.