ResMed Earnings Call Highlights Margin Strength, Growth

Resmed Inc ((RMD)) has held its Q3 earnings call. Read on for the main highlights of the call.

ResMed’s latest earnings call carried a distinctly upbeat tone as management highlighted double‑digit earnings growth, expanding margins, and strong cash generation alongside successful product launches. Executives balanced this optimism with candid discussion of rising costs, selective underperformance in software, and emerging macro pressures, but framed these as manageable within a robust financial and operational position.

Revenue Growth

Group revenue reached $1.43 billion, rising 11% on a headline basis and 8% in constant currency versus last year. Management emphasized that this performance reflects broad‑based demand across key geographies and product categories, underpinning confidence in the company’s long‑term growth algorithm.

Gross Margin Expansion

Gross margin climbed to 62.8%, an impressive 290 basis‑point improvement year‑on‑year and 50 basis points sequentially. The company reiterated guidance for FY26 gross margin of about 62%–63% and outlined a multi‑year plan to keep nudging margins higher through 2030.

Earnings and Operating Profit

Non‑GAAP diluted EPS advanced about 21% while operating profit grew 18% from the prior year, pushing operating margin up to 36.7% from 34.4%. Management linked the profitability gains to mix, scale, and cost efficiencies, even as they continue to spend on innovation and commercial capabilities.

Free Cash Flow and Capital Returns

Free cash flow surged to $520 million, with operating cash flow at $554 million and conversion above 100%, leaving the quarter with $1.7 billion in cash and net cash near $1 billion. ResMed returned $262 million to shareholders, combining $175 million of buybacks with a $0.60 quarterly dividend, signaling confidence in ongoing cash generation.

Masks and Device Adoption

Global masks and other sales grew 12% while devices rose 6% in constant currency, pointing to masks as the nearer‑term growth engine. In the Americas, masks were up 14%, and even without the VertuOx contribution they still delivered double‑digit gains, helped by rapid uptake of new fabric mask lines like AirTouch N30i and F30i.

Clinical Evidence and GLP‑1 Synergy

Management spotlighted large real‑world datasets suggesting patients on both PAP therapy and GLP‑1 drugs show higher initiation and resupply rates for PAP equipment over multiyear periods. These findings support the thesis that GLP‑1 usage can be a net demand tailwind rather than a structural headwind for sleep apnea treatment volumes.

Strategic M&A and Portfolio Expansion

ResMed announced a $340 million agreement to acquire Noctrix Health, a high‑growth, high‑margin business with about $24 million of run‑rate revenue focused on restless legs syndrome solutions. The deal is designed to broaden ResMed’s sleep health portfolio while leveraging its existing distribution and reimbursement infrastructure.

Operational and Supply Chain Progress

Executives highlighted continued supply chain optimization, shifting more shipments to sea from air, tightening component and vendor management, and improving manufacturing and logistics efficiency. These moves have already aided margin expansion and are expected to remain a key lever for further profitability gains.

Residential Care Software Challenges

The Residential Care Software segment delivered just 4% constant‑currency revenue growth, reflecting ongoing weakness in senior living and long‑term care markets. Management is pursuing portfolio optimization and targets returning RCS to healthier growth and margin levels by FY27, suggesting this remains a medium‑term turnaround story.

Rising Operating Expenses

SG&A expenses increased 14% on a reported basis and 9% in constant currency, lifting SG&A to 19.5% of revenue versus 19% a year ago. R&D spending rose as well, though it declined to 6% of revenue from 6.5%, reflecting both organic investment and acquisition‑driven costs aimed at sustaining future innovation.

Minority Investment Write‑Down

The company booked $10 million in unrealized losses on minority investments during the quarter, trimming non‑GAAP EPS by roughly $0.07. Management treated the charge as isolated and not reflective of the core operating trajectory of the business.

Noctrix EPS Drag and Integration Spend

While strategically attractive, the Noctrix acquisition will modestly dilute non‑GAAP EPS by about $0.02 in Q4 FY26 and drive incremental SG&A and R&D outlays as it is integrated. Management argued that Noctrix’s superior growth and margin profile should offset this near‑term hit over time.

Component Cost and Macro Pressures

ResMed flagged nascent inflation in components along with rising fuel and freight costs, which could introduce more volatility in near‑term margins. However, leadership expects a pipeline of productivity and pricing initiatives to largely counterbalance these headwinds.

Higher Tax Rate

The effective tax rate climbed to 20.9% from 20.1%, largely due to global minimum tax rules. The company raised its FY26 tax‑rate outlook to about 21%–23%, creating a modest earnings headwind versus prior expectations.

Device Growth Moderation and Seasonality

Device revenue grew 6% in constant currency, slower than in the prior quarter, with management attributing the moderation partly to seasonal dynamics and high‑deductible health plan and HSA timing. This backdrop has put more of the growth burden on masks and accessories in the near term.

Reimbursement Risks for Premium Masks

Some home medical equipment partners report that certain payers and states are compressing reimbursement for higher‑end fabric masks, pressuring channel economics. ResMed noted that reimbursement is highly fragmented and may require targeted payer negotiations or cash‑pay options in select markets to preserve margins and adoption.

Outlook and Guidance

Management reaffirmed FY26 and longer‑term guidance, calling for gross margins around 62%–63%, SG&A at 19%–20% of revenue, and R&D at 6%–7%, with an effective tax rate of 21%–23%. They continue to expect high single‑digit revenue growth with earnings growing faster than sales, supported by ongoing buybacks, dividends, and incremental net interest income.

ResMed’s earnings call painted a picture of a company executing well on growth, margins, and cash returns while investing heavily in innovation and strategic M&A. Investors will be watching how management navigates rising costs, software challenges, and reimbursement pressures, but for now, the trajectory of earnings outpacing revenue keeps the overall sentiment firmly positive.