ResMed: Stock coughs, but the machine is still breathing well

Published: 2026-05-01 05:00:07 ET RMD

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

Tommy Douziech

Published on 05/01/2026 at 05:00 am EDT

For the third fiscal quarter, revenue reached 1.43 billion USD, up 11% on a reported basis and 8% on a constant currency basis. Consensus expectations stood at 1.42 billion USD. Adjusted earnings came in at 2.86 USD per share, compared to 2.37 USD a year earlier and the 2.80 USD expected. Net income settled at 399 million USD, while GAAP diluted earnings per share reached 2.74 USD. Over nine months, revenue grew to 4.19 billion USD and net income to 1.14 billion USD. The quality of the quarter was primarily driven by the expansion of the non-GAAP gross margin, which rose to 62.8%, representing a 290 basis point improvement over the previous year and a 50 basis point increase from the prior quarter.

Operational momentum remains well-distributed. Excluding Residential Care Software, revenue 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 a 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-1s 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 effectively installed and used equipment.

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

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 progression by 2027, but this part of the portfolio still requires proof.

The release 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 a 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.