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ResMed (RMD) Q1 FY2027 Earnings: EPS Up 14%, Operating Profit Up 5%

Editorial illustration for ResMed (RMD) Q1 FY2027 Earnings: EPS Up 14%, Operating Profit Up 5%
Ddrillr ResearchOriginal research
Published 5 min read

Summary

ResMed's fiscal Q1 2027 non-GAAP EPS rose 14% to $2.91 while non-GAAP operating profit grew 5%; sleep devices and masks kept growing after the Astral exit.

ResMed's Q1 fiscal 2027 earnings beat the earlier baseline and company guidance: the company reported results for the quarter ended September 30, 2026 on October 29, 2026 and filed its quarterly report the next day [1][2]. The earlier questions were sleep demand, gross margin, and earnings per share after the MatrixCare sale. Sleep demand and earnings per share both held up, and gross margin beat guidance, although part of the gain came from costs shifted into the next quarter. Operating profit grew much more slowly than earnings per share, and the company kept its full-year guidance unchanged rather than raising it [1][3].

ResMed makes positive airway pressure (PAP) devices, masks and cloud software used to treat sleep apnea. A physician prescribes the therapy, and a home medical equipment provider (HME) supplies the device to the patient [4]. HMEs resupply masks to patients who stay on therapy, so mask revenue rests on the installed base of active patients [4]. Sleep and Breathing Health accounted for about 89% of revenue in the quarter [2].

EPS kept pace with full-year guidance, but most of the gain came from non-operating income and buybacks

Non-GAAP diluted earnings per share were $2.91 in the first quarter, up 14% from $2.55 a year earlier [1]. The company maintained its full-year non-GAAP EPS guidance of $12.00 to $12.25, and the first quarter equals about 24% of the midpoint [1][3].

Operating profit explains only about one third of the increase. Non-GAAP income from operations was $506 million, up just 5% [1]. Non-GAAP other income rose to $24.4 million from $0.3 million, mainly from hedge gains on cross-currency swaps and gains on equity investments [2]. Based on the non-GAAP reconciliation, the $0.36 increase breaks down roughly as follows: operating profit added about $0.13, other income about $0.13, a lower tax rate about $0.04, and a 2.4% lower share count about $0.07. Management also said the timing of share repurchases lifted EPS in the quarter [3].

The portfolio reshaping was completed as planned. ResMed sold MatrixCare on September 1, received $470 million in cash at closing and recorded a preliminary pre-tax gain of $62 million [2]. The remaining Brightree and MEDIFOX DAN software businesses grew 8% [1]. ResMed repurchased $855 million of stock in the quarter, and the accelerated share repurchase is expected to settle no later than December 29 [2].

Cash generation weakened in the quarter. Operating cash flow was $422 million, down 8% because inventory rose with the supply-chain expansion, and free cash flow was $374 million, down 10% [1][2]. Shareholder returns of more than $1 billion relied in part on sale proceeds and cash on hand, and cash at quarter end fell to $1.01 billion [2].

Sleep devices and masks kept growing after the Astral exit

Higher unit sales of sleep products absorbed the gap left by the Astral ventilator. Global device revenue was $720 million, up 6%, or 5% excluding acquisitions and currency; sleep devices grew 9%, while life support devices fell to $4 million from $25 million [1][2]. Masks and other revenue was $540 million, up 10% [2].

Regional figures include one-time factors. Americas sleep devices grew 6% excluding acquisitions and currency [1]. Rest of World sleep devices grew 13%, helped in part by a five-year device fleet renewal in France, which management expects to end in the second half of the fiscal year [3]. Reported device revenue also includes a small amount from the newly acquired Noctrix business, estimated at about $8 million from the gap between reported and core growth rates [2].

These figures confirm that the flow of sleep patients has not weakened, but they only just meet the earlier confirmation marks. Management said patients taking GLP-1 drugs are 11% more likely to start CPAP therapy [3]. The Sleep and Breathing Health segment margin fell to 44.4% from 45.4% because R&D and selling expenses grew faster than revenue [2].

Gross margin rose 50 basis points, partly from deferred costs

Gross margin beat guidance, but timing helped. Non-GAAP gross margin was 62.5%, compared with 62.0% a year earlier, while management had expected a slight year-over-year decline [1]. On the call, management said pricing contributed little; supply-chain productivity drove most of the improvement, costs tied to the Indiana facility were deferred into the second quarter, and price increases should benefit margins gradually starting in the second half [3]. The company expects second-quarter gross margin to decline slightly from the first quarter and full-year gross margin to expand by a low double-digit number of basis points [3].

Conclusion

The quarter confirmed sleep demand and the pace of EPS, but profit conversion was weaker than the headline growth. Sleep devices and masks absorbed the Astral gap, while Rest of World growth had a one-time lift from the French fleet renewal. Higher expenses offset the gross margin gain, so operating profit grew only 5%, and higher inventory lowered free cash flow. The key evidence for the second quarter is whether gross margin declines only slightly once deferred costs arrive, whether masks keep growing against a high prior-year base, and whether EPS growth comes mainly from operating profit after the share repurchase settles. The timing of price increases and of the end of the French renewal still needs confirmation next quarter.

Sources

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