ResMed pairs double-digit revenue growth, strong margins, and net cash with a large underpenetrated sleep-apnea market. The stock remains a Buy, but valuation and an Astral field-action headwind temper upside.
ResMed Inc. (RMD) combines 10.8% trailing revenue growth, a 27.4% net margin, $1.84B of free cash flow, and a net cash balance with a leading position in connected sleep and respiratory care. The investment case rests on an underpenetrated sleep-apnea market, recurring mask revenue, a cloud-connected installed base, and continued operating leverage. The main counterweight is valuation: RMD trades at 21.6x trailing earnings and 19.1x forward earnings while fiscal 2027 guidance calls for 5% to 7% core revenue growth and includes an Astral field-action headwind.
The medium-term setup is constructive rather than euphoric. Fiscal 2025 revenue reached $5.15B, operating margin reached 32.7%, and free cash flow reached $1.66B. The latest reported Q3 fiscal 2026 quarter added $1.43B of revenue, up 11% year over year, while non-GAAP gross margin reached 62.8%. Those figures support a Buy view for moderate-risk investors, but the share price already reflects a substantial portion of RMD's execution record.
That statement from CEO Mick Farrell is supported by the company's 10-K estimate that fewer than 20% of people with obstructive sleep apnea in the U.S. have been diagnosed or treated, with treatment rates of 10% or less in other markets. The growth opportunity is real, but its conversion depends on diagnosis, reimbursement, patient adherence, and continued product leadership.
ResMed was founded in 1989 and is headquartered in San Diego, California. The company develops, manufactures, distributes, and markets medical devices and cloud-based software for sleep apnea, chronic obstructive pulmonary disease, ventilation, and residential care. It sells through wholly owned subsidiaries and independent distributors in more than 140 countries and employed more than 10,600 people according to its fiscal 2025 10-K.
RMD operates through Sleep and Breathing Health and Residential Care Software. Sleep and respiratory products include CPAP, APAP, bilevel and ventilation devices, masks, diagnostics, accessories, AirView, and myAir. Residential Care Software includes Brightree, HEALTHCAREfirst, MatrixCare, and MEDIFOX DAN solutions for home medical equipment, pharmacy, home health, hospice, skilled nursing, and senior living providers.
The business model has two useful layers. Devices and masks create the initial clinical relationship, while replacement masks, accessories, remote monitoring, patient engagement, and provider workflow software extend that relationship. The 10-K says more than 30 million patients use cloud-connected devices on AirView and more than 10 million patients are registered to myAir. Those installed-base figures give RMD a distribution advantage for digital services and future product upgrades.
Sleep and Breathing Health is the economic center of RMD. In fiscal 2024, the segment generated $4.10B, or 87.5% of total revenue. In Q3 fiscal 2026, the segment produced $1.26B, up 11% year over year and 8% in constant currency. Devices generated $735.7M in that quarter, while masks and other products generated $524.8M.
Masks and other products are particularly important because they generated 15% reported growth and 12% constant-currency growth in Q3 fiscal 2026, outpacing total device growth of 9% reported and 6% constant currency. Masks represented $1.84B of fiscal 2025 revenue, according to the company materials. That recurring replacement stream supports revenue durability and can lift mix when new device demand moderates.
Residential Care Software generated $584.1M in fiscal 2024, or 12.5% of company revenue. Q3 fiscal 2026 software revenue was $170.9M, up 6% reported and 4% in constant currency. Q4 fiscal 2026 software revenue increased 2%, with growth from Brightree and MEDIFOX DAN partly offset by declines in MatrixCare.
The planned MatrixCare divestiture sharpens the software portfolio. Management said MatrixCare represented approximately $220M of fiscal 2026 revenue and $58M of non-GAAP operating profit, while fiscal 2027 Residential Care Software revenue is expected to grow at a high-single-digit rate after the transaction. The near-term revenue base becomes smaller, but the remaining portfolio is more closely aligned with home-based care and connected workflows.
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The AirSense 11 is the flagship of RMD's sleep-device franchise and the foundation of its connected-care ecosystem. It combines CPAP and APAP therapy with a touchscreen, built-in humidification, remote software updates, myAir engagement, and AirView connectivity. Management reported continued global rollout, including fast-growing penetration after the China launch.
The AirCurve 11 platform extends the same ecosystem to patients who need bilevel therapy or more advanced pressure support. RMD introduced AirCurve 11 ST and ST-A in the U.S. during Q4 fiscal 2026 and launched the platform in Hong Kong, Singapore, Australia, and New Zealand. These launches widen the addressable patient population without requiring a completely separate software and service architecture.
Mask innovation is as important as device innovation because comfort affects nightly adherence. Management reported that the AirTouch N30i produced 6% higher 90-day compliance than its silicone equivalent. The AirTouch F30i and AirFit F40 add further options in fabric and compact full-face designs. A small improvement in adherence has economic value because it supports therapy persistence, resupply, and patient outcomes.
The product stack also reaches upstream into diagnosis. NightOwl is a disposable, cloud-connected home sleep-apnea test, while the VirtuOx acquisition adds an independent diagnostic testing facility and remote testing capabilities. This gives RMD a way to participate earlier in the care pathway rather than waiting for a patient to arrive with a completed prescription.
RMD's advantage is the combination of regulated medical hardware, patient-facing software, provider connectivity, and recurring supplies. A device alone can be copied more easily than a system embedded in clinical workflows. AirView allows remote monitoring and device-setting changes, while myAir provides daily therapy data, coaching, and troubleshooting.
The GenAI-powered digital sleep coach inside myAir had generated more than 1.5 million inquiries by the Q4 fiscal 2026 call. Management also said the tool significantly reduced customer-service inquiries. That creates a rare combination in healthcare technology: a patient-support feature that can improve the user experience while reducing service intensity.
The quote captures RMD's strategic logic. The company does not need every advantage to come from a higher-priced device. Better comfort, faster diagnosis, remote monitoring, and digital coaching can increase therapy adoption and persistence across the installed base. RMD has also completed sleep-apnea education courses more than 5,000 times for more than 55,000 unique clinicians, giving its commercial strategy a clinical-education component.
The primary innovation risk is execution. R&D expense rose 22% on a headline basis in Q4 fiscal 2026 as RMD invested in next-generation devices, masks, and AI-driven workflow solutions. Those investments can support future growth, but they also raise the hurdle for product launches and regulatory performance.
Supply-chain execution has become a visible earnings driver. Fiscal 2025 gross margin was 59.4%, up from 56.7% in fiscal 2024, and Q3 fiscal 2026 non-GAAP gross margin reached 62.8%, up 290 basis points year over year. Management attributed the improvement to productivity, efficiency, and mix that more than offset inflation.
RMD plans to increase fiscal 2027 capital expenditures to $160M to $180M to expand and automate its U.S. and global manufacturing footprint. A distribution center in Greenwood, Indiana is scheduled to begin operations in 2027. These investments align capacity with management's statement that demand for RMD products continues to grow.
The Astral field safety corrective action is the major operational blemish. RMD recorded a $42M provision in Q4 fiscal 2026 and suspended Astral sales to prioritize corrective work and service for existing patients. Management estimates the suspension will create an approximately $75M, or 130-basis-point, revenue headwind in fiscal 2027.
Tariff exposure is partly protected by product classification. Management said RMD's respiratory products retain tariff relief under Chapter 98 protections and the Nairobi Protocol despite recent U.S. Section 301 announcements. The fiscal 2027 outlook still includes a 50-basis-point foreign-exchange headwind and inflation across electronic components and freight.
RMD addresses a large clinical need. Its fiscal 2025 10-K cites a Lancet Respiratory Medicine estimate of 936 million people worldwide with mild-to-severe obstructive sleep apnea, including 54 million Americans. The same filing says fewer than 20% of U.S. patients and 10% or less in other markets have been diagnosed or treated.
The respiratory opportunity extends beyond sleep apnea. The 10-K cites approximately 480 million people worldwide with COPD and describes opportunities in home non-invasive ventilation, high-flow therapy, overlap syndrome, obesity hypoventilation syndrome, and neuromuscular disease. RMD can therefore grow through both greater penetration of CPAP and expansion into more complex respiratory care.
Third-party market estimates also support a favorable backdrop. MarketsandMarkets estimates the global home healthcare market at $309.94B in 2025, growing to $473.76B by 2030 at an 8.9% compound annual rate. Grand View Research estimates the global positive-airway-pressure devices market at $5.09B in 2026 and $7.40B by 2033.
The market is not simply a hardware replacement cycle. Diagnosis, reimbursement, clinician awareness, patient adherence, remote monitoring, and home-based care all affect the addressable revenue pool. RMD's NightOwl, VirtuOx, AirView, myAir, and mask portfolio let it participate across several of those steps.
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RMD serves several customer groups. Patients use CPAP, APAP, bilevel, ventilation, masks, and digital engagement tools. Sleep physicians, pulmonologists, cardiologists, neurologists, and primary-care clinicians diagnose patients and prescribe therapy. Home medical equipment providers and durable medical equipment distributors deliver devices, supplies, and ongoing support.
Residential Care Software serves organizations rather than individual patients. Brightree supports home medical equipment, pharmacy, orthotic and prosthetic, and home infusion organizations. HEALTHCAREfirst supports home health and hospice agencies. MatrixCare has served skilled nursing and senior-living providers, while MEDIFOX DAN supports residential care providers.
The customer relationship is influenced by workflow and reimbursement as much as by product specifications. AirView helps providers manage patients remotely, while the software portfolio supports billing, documentation, analytics, revenue-cycle management, and electronic medical records. The 10-K says RMD's residential-care platforms support more than 160 million individual patient accounts.
Patient demographics are broadening. Management reported higher percentages of women and younger patients entering the sleep-apnea pipeline and said RMD is adapting product design, education, and promotional efforts. That shift expands the commercial audience beyond the traditional middle-aged male profile.
RMD's fiscal 2025 10-K names Philips, Fisher & Paykel Healthcare, DeVilbiss Healthcare, Apex Medical, BMC Medical, React Health, Jiangsu Yuyue Medical Equipment & Supply, and Löwenstein Medical among its primary competitors. Regional manufacturers and new entrants add further pressure, especially in more standardized device categories.
Philips remains the most important strategic rival in sleep therapy. Philips Respironics has operated under recall-related constraints and a U.S. consent decree, creating a favorable competitive opening for RMD. A stronger Philips return would increase pricing, marketing, and product-development pressure. That risk is material because RMD's current growth record benefited from a disrupted competitor.
Lower-cost competitors such as BMC Medical and Jiangsu Yuyue can pressure pricing, while Fisher & Paykel Healthcare competes across respiratory products and masks. RMD's response is to compete on ecosystem depth, comfort, connectivity, clinical education, and patient adherence rather than on device price alone.
Substitution risk comes from dental appliances, surgery, nerve-stimulation devices, and anti-obesity medicines. GLP-1 therapy is not a simple replacement for PAP in the available company data. Management's claims analysis found that patients with prescriptions for both PAP and GLP-1s were approximately 11% more likely to start PAP therapy, with resupply events more than 3% higher at one year and more than 6% higher at three years.
The most relevant macro trend is the movement of chronic care into the home. RMD's 10-K explicitly focuses on care delivered outside hospitals, while MarketsandMarkets identifies aging, chronic disease, remote monitoring, and telehealth as drivers of home healthcare growth. RMD's connected devices and residential-care software fit directly into that transition.
Foreign exchange and input costs are the near-term financial variables. Fiscal 2027 reported revenue guidance of $5.75B to $5.85B assumes a 50-basis-point FX headwind. Management also cited inflation in electronic components and freight, although productivity and modest strategic price increases are expected to offset much of that pressure.
Geopolitical tariff risk is moderated by the company's stated Chapter 98 and Nairobi Protocol relief. That protection does not remove logistics or component risk, but it reduces the direct tariff burden described by management after the Section 301 announcement.
GLP-1 adoption creates a mixed macro influence. RMD's claims analysis links GLP-1 prescriptions with higher PAP initiation, adherence, and resupply, while the 10-K also identifies sustained weight loss as a potential substitute risk. The current evidence in management's analysis favors a demand tailwind for the medium term.
Net cash, $1.84B of free cash flow, and a 27.4% net margin point to a balance sheet that can fund growth without stretching leverage.
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Get Full Access →Trailing revenue growth of 10.8% and a 32.7% operating margin in fiscal 2025 show a business still converting scale into profit.
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Get Full Access →Fiscal 2027 guidance for 5% to 7% core revenue growth suggests steady expansion, but the Astral field-action headwind keeps expectations measured.
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Get Full Access →At 21.6x trailing earnings and 19.1x forward earnings, the market is pricing in a lot of ResMed’s operating strength already.
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Get Full Access →The report’s fair value sits at $235, with the Buy case supported by growth, cash generation, and a durable connected-care installed base.
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Get Full Access →ResMed is a high-quality healthcare compounder with a credible path to further growth. The evidence is concrete: revenue reached $5.15B in fiscal 2025, operating margin reached 32.7%, free cash flow reached $1.66B, and Q3 fiscal 2026 revenue grew 11% with non-GAAP gross margin of 62.8%.
The strongest part of the story is the ecosystem. AirSense 11, AirCurve 11, masks, NightOwl, VirtuOx, AirView, myAir, and residential-care software connect diagnosis, therapy, adherence, and provider workflow. RMD's large installed base and strong liquidity give that ecosystem room to expand.
The stock is not a bargain at 21.6x trailing earnings, especially with fiscal 2027 reported revenue guidance of $5.75B to $5.85B and an Astral-related $75M headwind. Still, the combination of recurring consumables, high margins, cash generation, underpenetrated markets, and disciplined portfolio management supports a Buy recommendation for a moderate-risk investor. The preferred approach is accumulation below the $235 fair-value estimate rather than paying a premium for perfection.
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ResMed Inc. (RMD) falls after hours as investors react to a softer fiscal 2027 outlook tied to suspended ventilator sales and higher cost pressure. The company still topped Q4 EPS estimates and posted solid full-year revenue growth, but guidance concerns are driving the selloff.
The $490 million MatrixCare sale and planned ASR improve capital-return optics, but they do not answer the FY2027 growth question. With a 60/100 Growth component in the TickerSpark Score and a 20.30 P/E, RMD remains a defensive setup before the next proof point.
ResMed Inc. (RMD) falls sharply after its fiscal Q4 earnings release, even as revenue hit a record and EPS rose. Investors are weighing strong sales growth against softer operating margin and weaker free cash flow, which raised questions about whether the stock’s prior valuation was too rich.