Investors have had plenty to digest in the second quarter, from resilient artificial intelligence (AI) spending and shifting interest rate expectations, to a more mixed picture for UK consumers. It’s been an environment where elevated valuations leave little room for disappointment, with investor reactions increasingly driven by the quality of underlying results and forward guidance instead of headline beats.
Operational progress in our Five to Watch has been generally positive over the second quarter of 2026, but investor sentiment has been mixed. While the original investment cases are broadly intact, and in some cases strengthened, in others, investors are demanding better execution, or clearer evidence that recent setbacks are temporary.
So, at the halfway mark for 2026, how are our picks performing?
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Intuitive Surgical
Intuitive Surgical has carried strong momentum into its first-quarter results, which landed ahead of expectations. Revenue rose 23% to $2.8bn, helped by a 17% increase in worldwide procedures across its da Vinci and Ion systems. The company placed 431 da Vinci systems in the quarter (+17%), including 232 next-generation da Vinci 5 systems, and marginally lifted full-year procedure growth guidance to 13.5-15.5%.
That matters because the long-term case is built on installed base growth, higher utilisation and recurring revenue from instruments, accessories and servicing. Intuitive remains the dominant name in robotic-assisted surgery, with a large runway in established procedures and further upside from new clinical areas. Ion, its robotic lung biopsy platform, is also showing strong momentum.
The risks have not gone away. Tariffs, competition in China and weaker demand for some procedures linked to the growth of anti-obesity medicines remain areas to monitor. Although the valuation remains demanding, it’s less stretched than it has been for a while. Meanwhile the first-quarter update gave us more confidence that the growth story is intact, and we see scope for upgrades if momentum is maintained.
Novo Nordisk
Novo Nordisk’s first-quarter beat wasn’t quite as clean, with the numbers flattered by customer restocking. On an adjusted basis, sales and operating profit were still down, with volumes rising in response to price cuts, but not enough to offset the drag on margins.
Even so, the Wegovy pill has been a bright spot, with a very strong US launch and management narrowing full-year guidance to a 4-12% decline in both adjusted sales and operating profit, from 5-13% previously.
The key debate is whether price cuts are doing enough to stimulate volume growth. So far, the answer looks encouraging outside the US, with a clearer plot of data points required to claim a revival of its American business.
Competition from Eli Lilly remains intense, but the early head-to-head in oral weight-loss medicines has gone better for Novo than many expected. High-dose Wegovy also adds another option for doctors, while the rare disease pipeline provides useful diversification, including encouraging progress in blood disorders and sickle cell disease.
We still see a long runway for GLP-1 medicines (weight-loss medicines), and Novo remains a key player. But 2026 is a transition year. The narrative needs to move from managing decline to returning to sustainable profit growth. With the valuation still well below its long-term average, further evidence of improving execution could be rewarded, but patience is needed.
Marks & Spencer
Marks & Spencer’s (M&S) full-year results back in May confirmed the scale of last year’s cyber disruption but also showed why the recovery story hasn’t gone away. Sales rose 25% to £17.4bn, or 2% to £14.2bn excluding the consolidation of Ocado Retail.
Food remains the standout performer, with sales up 7% as value initiatives helped the group gain market share and bring more families through the door for their big weekly shop.
However, this growth was largely offset by declines in its Fashion, Home & Beauty (FH&B) segment, which was hardest hit by the cyber-attack, disrupting online trading and leading to steep discounting to clear old stock. As a result, full-year underlying pre-tax profits fell by 24% to £671mn.
Within FH&B, customer perceptions around value, quality and style are improving. But the online journey and margins in this division simply are not as good as the competition. Big investments are being made to fix this, and if successful, we think it could deliver a strong uplift in profitability.
The rationale for including M&S on the list still stacks up, but execution is now everything. The valuation is sitting at a discount to peers, and we see upside if the transformation stays on track. But competition is fierce, leaving little margin for error, and there’s no guarantee operations will recover on management’s timeline.
Nvidia
Nvidia has continued to raise the bar. First-quarter revenue surged 85% to $81.6bn, led by record Data Centre revenue of $75.2bn. The company also guided for around $91bn of second-quarter revenue, excluding China, and approved an additional $80bn share buyback programme alongside a larger dividend.
Nvidia’s strength is not just in chips, but in the broader data centre stack, including software, networking and full-system architecture. The new reporting split also gives investors more visibility over demand beyond the largest hyperscale customers, with AI cloud, industrial, enterprise and sovereign customers becoming increasingly important.
But demand still looks ahead of supply, and the scale of cash generation has become a bigger part of the story. Over $200bn of free cash flow is expected this year, supporting an $80bn boost in buybacks and a step-up in dividends. As always, no shareholder returns are guaranteed.
The risks are well known. Customers are still exploring in-house chips, Broadcom and AMD are gaining attention in parts of the AI market, China remains uncertain, and investors will keep asking whether AI spending can deliver returns. While uncertainty on that front remains, some volatility is to be expected.
RELX
RELX has been caught in the wider AI debate, but the company’s own narrative has been reassuring. April’s trading update showed a strong start to the year across all four divisions, with full-year guidance reaffirmed for strong underlying growth in revenue, operating profit and earnings per share at constant currency.
We still think RELX looks more like an AI winner than an AI casualty. The Legal division is an obvious area of investor concern, but renewals and new sales have remained strong, helped by AI-enabled tools. The proposed acquisition of French legal AI platform Doctrine also supports the view that RELX is investing to deepen its European legal AI capabilities rather than standing still.
Recurring revenue, embedded customer relationships and proprietary data remain key strengths. Cash generation also supports investment, dividends and buybacks, though shareholder returns are never guaranteed.
The main issue is sentiment. AI-first competitors are a real risk, and investors may want more proof that AI is adding to growth rather than threatening the moat. With the valuation having cooled from earlier peaks, execution so far continues to support the long-term case.
The authors hold shares in RELX and Nvidia.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Past performance is not a guide to the future. Investments rise and fall in value so investors could make a loss. Yields are variable and not guaranteed.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.
