ResMed: Stock splutters, but machine is still breathing well

Published: 2026-05-02 09:59:55 ET RMD

ResMed delivered a quarter that was more robust than the market reaction suggests. The stock's decline of over 4% in after-hours trading on Thursday, following a dip to its lowest level since February 2024, contrasts with a release that slightly beat expectations, significantly improved profitability, which confirmed the structural strength of demand in sleep apnea. This disconnect is telling: the market not so much punished the reported figures - rather it is reacting to persistent questions regarding the future trajectory, amid GLP-1 concerns, competition, changing reimbursement landscapes, and a financial leadership transition at the top of the group.

Tommy Douziech

Published on 05/02/2026 at 09:59 am EDT

Q3 revenue reached $1.43bn, up 11% on a reported basis and 8% at constant FX. Consensus expected $1.42bn. Adjusted EPS came in at $2.86, compared with $2.37 a year earlier and the $2.80 anticipated. Net income reached $399m, while GAAP diluted EPS reached $2.74. 9m revenues grew to $4.19bn and net income was $1.14bn. The quarter was primarily driven by the expansion of the non-GAAP gross margin, which rose to 62.8%, representing a 290bp improvement over the previous year and a 50bp increase from the previous quarter.

Operational momentum remains well-distributed. Excluding Residential Care Software, revenues grew by 9% in the United States, Canada, and Latin America, and by 7% on a constant currency basis in Europe, Asia, and other markets. Device sales increased by 6% globally at constant exchange rates, while masks and accessories advanced by 12%, with particularly robust performance in the Americas. ResMed highlighted the adoption of fabric-based masks, notably the AirTouch N30i and F30i variants, for which early feedback suggests better compliance. This is a central point: in this market, comfort is not just a marketing argument but an economic factor, as patient adherence dictates recurring revenue.

The main implicit message concerns GLP-1s. While some fear that weight-loss treatments might reduce the need for positive airway pressure therapy, ResMed argues the opposite. According to its internal analyses, patients combining PAP and GLP-1 are more likely to initiate therapy and show better resupply rates at two and three years. The argument is credible insofar as sleep apnea depends not only on weight but also on age, gender, and craniofacial anatomy. It nevertheless remains a point to monitor: if GLP-1s widen the diagnostic funnel, ResMed must still convert this additional demand into equipment that is actually installed and used.

The quarter also demonstrates real financial discipline. Operating cash flow reached $554m, share buybacks totaled $175m, and dividends amounted to $87m. The quarterly dividend has been set at $0.60 per share, payable on June 18. The balance sheet remains comfortable, with $1.7bn in cash and $996m in net cash. The planned acquisition of Noctrix Health for $340m opens an adjacent expansion into restless legs syndrome, with annualized revenue of approximately $24m, growth exceeding that of ResMed, and a slight expected dilution of $0.02 per share in Q4.

The weaker point remains Residential Care Software, limited to 4% growth at constant exchange rates, despite the solid performance of MEDIFOX DAN. Management promises a return to high single-digit growth and double-digit operating income growth by 2027, but this part of the portfolio still requires proof.

The publication is of high quality: solid organic growth, margin improvement, high cash generation, and a reassuring message on GLP-1s. The stock's weakness reflects an uncertainty premium rather than fundamental degradation.

For ResMed, the challenge is now less about proving that demand exists and more about demonstrating that the company can continue to capture that demand with the same operational leverage.