[RMD] Resmed: Q1 FY2027 Earnings Test for Sleep Device Growth as Astral Sales Pause

Resmed sells flow generators, masks and residential-care software to patients with sleep apnea and other respiratory conditions, and its products are usually bought first by a home medical equipment (HME) provider that then supplies the patient [1]. According to the earnings calendar, the company is scheduled to report on 2026-10-29 for the First quarter of fiscal year 2027 (three months ended September 30, 2026) [2]. The latest fully disclosed period is fiscal 2026, ended June 30, 2026: revenue rose 10% to $5.653 billion (8% in constant currency), with devices up 9%, masks and other up 13% and operating cash flow of $1.806 billion [1]; in the fourth quarter, Americas sleep device revenue grew 8% while life-support devices fell 45% because of the Astral ventilator correction [3]. On August 6, management guided fiscal 2027 reported revenue to $5.75 billion to $5.85 billion and non-GAAP diluted EPS to $12.00 to $12.25, and said first-quarter revenue would follow the usual seasonal sequential decline, with gross margin slightly lower year over year and operating expense roughly flat with the fourth quarter [3]. Analyst consensus compiled by Drillr puts first-quarter revenue at about $1.394 billion (10 analysts, range $1.374 billion to $1.414 billion) and non-GAAP EPS at about $2.69 (9 analysts, range $2.65 to $2.73) [4].

Three things matter most in this Resmed Q1 FY2027 earnings report. The first is sleep device and mask growth excluding Astral: devices and masks together made up about 88% of fiscal 2026 revenue [1], and mask resupply rests on the installed base of past device starts, so mid-to-high single-digit sleep device growth and mask growth near 10% would show that GLP-1 weight-loss drugs have not weakened patient flow. The second is gross margin: management said fourth-quarter non-GAAP gross margin fell 50 basis points sequentially because of accelerating electronic component and freight inflation plus about 20 basis points of currency, while modest price increases add little in the first quarter [3], so the size of the year-over-year contraction will show whether inflation has overtaken supply-chain savings. The third is EPS after the portfolio reset: the first quarter is the first in which the MatrixCare sale, the Noctrix acquisition and a $450 million accelerated share repurchase all reach the accounts [5], and whether EPS lands inside the consensus range and the company breaks out growth in the remaining software business will test the guidance logic after roughly $0.50 of deal dilution [3].

Company Background and Business Structure

Almost all of Resmed's revenue comes from the sleep and respiratory device chain, and software is a much smaller second segment. The company reports two operating segments, Sleep and Breathing Health and Residential Care Software (RCS) [1]. In fiscal 2026, Sleep and Breathing Health generated $4.978 billion of revenue, made up of $2.892 billion of devices and $2.085 billion of masks and other; by region, the Americas contributed $1.768 billion of devices and $1.513 billion of masks and other, while the rest of the world contributed $1.124 billion of devices and $572 million of masks and other [1]. RCS revenue rose 5% to $676 million, driven by MEDIFOX DAN in Germany, home and hospice, and HME software, partly offset by weaker senior living and long-term care [1].

The purchasing chain makes mask revenue a recurring stream built on the patient installed base. According to the 10-K, a patient diagnosed with sleep apnea by a physician or sleep clinic is referred to an HME provider, which works with the prescriber to select the equipment, fit the mask and set the prescribed pressure, and prescribers, HME providers, public and private insurers and patients can all influence which brand is chosen [1]. The HME provider then resupplies masks and accessories to adherent patients as often as reimbursement allows, so new device starts drive both current device revenue and resupply revenue for years afterward.

The company's asset base is weighted toward manufacturing outside the U.S., and its consolidation scope is changing. Resmed has its primary research and development, office and manufacturing facilities at an owned site in Sydney, with other facilities in Singapore, Johor Bahru in Malaysia, the U.S., France, Germany and Suzhou in China, and it manufactures substantially all of its products outside the U.S. [1]. On June 30, 2026, it agreed to sell MatrixCare for $490 million in cash, with closing expected in the first quarter of fiscal 2027, and MatrixCare generated about $220 million of fiscal 2026 revenue; also in June, the company acquired Noctrix, a device company that treats restless legs syndrome [1].

Financial History and Current Position

The fiscal 2026 annual figures show steady growth in both revenue and segment profit. Revenue for the year ended June 30, 2026 rose 10% to $5.653 billion from $5.146 billion (8% in constant currency), and GAAP gross margin rose to 61.1% from 59.4%, mainly because of procurement, manufacturing and logistics efficiencies partly offset by Astral field safety notification expenses, while research and development ran at 6.7% of revenue and selling, general and administrative expenses at 19.8% [1]. Segment operating profit was $2.204 billion for Sleep and Breathing Health (up from $1.964 billion) and $218 million for RCS (up from $205 million), and the reconciling items included $383 million of corporate costs, $41.9 million of Astral expenses and $21.7 million of restructuring [1].

Cash generation was large enough to fund buybacks, dividends and bolt-on acquisitions at the same time. Fiscal 2026 operating cash flow was $1.806 billion (up from $1.752 billion) and purchases of property, plant and equipment were $156 million (up from $90 million), which implies free cash flow of about $1.650 billion [1]. The company repurchased $700 million of stock (up from $300 million), paid $2.40 per share in dividends totaling $350 million, spent a net $351 million on acquisitions and ended the year with $1.469 billion of cash and cash equivalents (up from $1.209 billion) [1].

The latest official information after the fiscal year comes from the August 6 fourth-quarter call and the September 1 8-K. The call summary shows fourth-quarter Americas sleep devices up 8% and masks and other up 10%, rest-of-world sleep devices up 13% and masks and other up 12%, and life-support devices down 45% and 38% in the two regions, with a $42 million charge taken for the Astral correction [3]. As disclosed by the company, fourth-quarter non-GAAP gross margin was 62.3% and non-GAAP EPS was $2.95, while the year-ago base for the coming quarter is fiscal 2026 first-quarter revenue of $1.3356 billion, non-GAAP gross margin of 62.0% and non-GAAP EPS of $2.55. On August 31, the company signed a $450 million accelerated share repurchase agreement with Citibank, paying on September 3 and receiving an initial delivery of shares equal to 80% of that amount at the prior day's closing price, with final settlement scheduled for December 2026 [5].

Operating Model

Revenue is driven by two lines, new device starts and the installed patient base, and they work on different lags. Consolidated revenue is the sum of devices, masks and other, and software: device revenue is roughly new positive airway pressure (PAP) patients multiplied by unit price, plus life-support devices, and was $2.892 billion in fiscal 2026; masks and other is roughly the installed patient base multiplied by resupply frequency and price, at $2.085 billion; and RCS, billed on subscriptions and services, was $676 million [1]. A new start lifts device revenue in the current period and then lifts mask revenue through resupply for years, so changes in patient flow show up in mask revenue with a lag. Fiscal 2027 reported revenue will also be affected by the MatrixCare divestiture (about $220 million of annual revenue) [1], the Astral sales suspension (a headwind of about $75 million) and a currency headwind of about 50 basis points [3].

Operating profit depends on the gap between gross margin and expense ratios, and changes in gross margin pass through to profit quickly. Operating profit is roughly revenue times gross margin, less selling, general and administrative expenses and research and development; in fiscal 2026, GAAP gross margin was 61.1%, the SG&A ratio was 19.8% and the R&D ratio was 6.7% [1]. Gross margin reflects procurement, manufacturing and logistics efficiency against component and freight inflation, currency and price: component and freight increases hit margin directly once goods are bought and shipped, while management said very modest price increases will be phased in through fiscal 2027, with minimal benefit in the first quarter and growing contributions later [3]. EPS then depends on diluted share count, and buybacks lift EPS by reducing shares, with the effect depending on the pace of share delivery.

The main change in the cash model is higher capital spending and larger shareholder returns. Operating cash flow is roughly net income plus depreciation, amortization and stock compensation, less working-capital investment, and free cash flow is what remains after capital spending; in fiscal 2026, operating cash flow was $1.806 billion and capital spending was $156 million [1]. Management plans to raise fiscal 2027 capital spending to $160 million to $180 million to expand and automate U.S. and global capacity, and to return more than $1.85 billion to shareholders, up more than 75% from the prior year, with $450 million of buybacks funded by MatrixCare sale proceeds [3]. Higher capital spending reduces free cash flow first, while revenue from the added capacity arrives later.

Industry and Competitive Position

Resmed competes with a mix of global and regional manufacturers, and management aims to grow faster than the market. The 10-K lists its primary Sleep and Breathing Health competitors as Philips, Fisher & Paykel Healthcare, DeVilbiss Healthcare, Apex Medical, BMC Medical, React Health, Jiangsu Yuyue and Löwenstein Medical, plus regional and new-entrant manufacturers [1]. Management estimates mid-single-digit market growth for core sleep devices and high-single-digit growth for masks, targets meeting or beating market growth every quarter, and said underlying core growth is 6% to 8% once the $75 million Astral headwind is excluded [3]. The main substitution threat comes from GLP-1 weight-loss drugs: injectable GLP-1s have been approved to treat obesity with moderate to severe sleep apnea, and sustained significant weight loss could reduce disease severity [1].

Resmed's evidenced advantages lie in patient data and mask products, but the scope for comparison is limited. Management cited an analysis of 2.5 million de-identified patients showing that those with both PAP and GLP-1 prescriptions were 11% more likely to start PAP therapy and 3% and 6% more likely to still be resupplying after one and three years, and that the AirTouch N30i fabric mask had 6% higher 90-day adherence than comparable silicone masks [3]. These data come from the company's own analysis, the company does not disclose patient starts, resupply rates or unit costs, and the available materials also lack directly comparable peer financials, so competitive position can only be inferred from product and regional revenue and management's attributions.

Core Debates

With Astral ventilator sales suspended, can sleep-apnea device placements and mask resupply keep growing at or above market rates?

This question sets Resmed's revenue base for years, because devices and masks made up about 88% of fiscal 2026 revenue [1] and mask resupply rests on the base of patients who started therapy in the past. The market's biggest worry is that GLP-1 weight-loss drugs will shrink the sleep apnea population; if first-quarter sleep devices excluding Astral still grow at a mid-to-high single-digit rate, patient flow has not been weakened.

The current evidence leans positive, but it does not rule out other explanations. Fiscal 2026 device revenue rose 9% and masks and other rose 13% [1]; in the fourth quarter, Americas sleep devices grew 8%, masks and other grew 10% and life-support devices fell 45% because of the Astral correction, and management also cited data showing that patients on GLP-1s were more likely to start PAP therapy and to keep resupplying [3]. An alternative reading is that part of the growth came from an acquired diagnostic testing business and price increases, and that the long-term effect of GLP-1s may be milder disease and fewer new diagnoses, which short-term data would not yet show.

The coming quarter has several directly comparable bases, and the transmission path is clear. As previously disclosed by the company, fiscal 2026 first-quarter global device revenue was $680.3 million (up 9%, 7% in constant currency) and global masks and other revenue was $489.1 million (up 11%, 10% in constant currency); in the fourth quarter of fiscal 2026, devices were about $750 million and masks and other about $542 million, up 8% and 11%, with Americas sleep devices up 8% and total Americas devices up 6%. The financial chain runs from physician education, wearable screening and GLP-1 prescriptions to doctor visits, then to diagnosis and a PAP prescription, then to HME purchases of flow generators as device revenue, and then to adherent patients resupplying masks as masks and other revenue, which feeds Sleep and Breathing Health revenue and segment profit; the Astral suspension reduces only life-support device revenue and does not affect sleep patient flow.

What remains unresolved is patient volume itself, because the company does not disclose patient starts and the split between sleep and life-support devices comes only from the call. In the first quarter, watch whether global device revenue exceeds $680.3 million and what growth management gives for sleep and life-support devices separately, whether masks and other can sustain growth near 10% in both the Americas and the rest of the world, and whether Astral correction costs rise and when new device sales resume. A year-over-year decline in device revenue attributed to sleep devices would weaken the claim that GLP-1s are a tailwind, while sleep device growth above 6% and mask growth near 10% would support the view that core patient flow is stable.

After two years of margin expansion, component and freight inflation has started to outrun supply-chain savings; how far will first-quarter gross margin fall?

Gross margin is the main reason Resmed's profit has grown faster than revenue over the past two years. Fiscal 2026 GAAP gross margin rose to 61.1% from 59.4%, mainly because of procurement, manufacturing and logistics efficiencies [1]; on the company's non-GAAP basis, gross margin expanded 240 basis points for the year and non-GAAP EPS rose 17%, faster than 10% revenue growth. Management's fiscal 2027 guidance calls for non-GAAP EPS growth of 7% to 10% and a slight increase in full-year operating margin [3], which assumes gross margin does not fall meaningfully before price increases take effect.

The latest evidence shows gross margin has come off its high, but the cause can be read in different ways. As disclosed by the company, non-GAAP gross margin rose from 62.0% in the first quarter of fiscal 2026 to 62.8% in the third quarter and fell back to 62.3% in the fourth; management attributed the 50 basis point sequential decline mainly to accelerating electronic component and freight inflation and about 20 basis points of currency, noted margin was still up 90 basis points year over year, and guided to a slight year-over-year contraction in the first quarter [3]. The company manufactures substantially all of its products outside the U.S. [1], and management confirmed that Chapter 98 tariff relief still applies [3]. An alternative reading is that the fourth-quarter dip came mainly from currency and seasonal mix and does not mark a trend; conversely, if inflation persists, the "very modest" price increases management described may not be enough to offset it.

The first-quarter comparison base and transmission path are both well defined. As previously disclosed by the company, fiscal 2026 first-quarter non-GAAP gross margin was 62.0% (up 280 basis points year over year) and GAAP gross margin was 61.5%; fourth-quarter GAAP gross margin was 58.8%, including the $42 million Astral correction charge. The chain runs from higher electronic component and freight prices and currency to higher unit cost of sales, offset by procurement, manufacturing and logistics productivity and by modest price increases phasing in from the second quarter, and the balance between the two sets non-GAAP gross margin, which then flows to non-GAAP operating margin and EPS.

What remains unresolved is how long inflation will last and how much pricing can cover, and because the company does not disclose unit costs, readers must rely on management's attributions. In the first quarter, watch whether non-GAAP gross margin stays at or above 61.5%, how management now attributes the moves among components, freight and price, and whether operating expense stays roughly flat with the fourth quarter. A year-over-year decline of more than 50 basis points would show that inflation has outrun productivity and put the full-year operating margin guidance under pressure, while flat year-over-year margin would support the view that productivity and pricing are enough to cover inflation.

After selling MatrixCare and returning the proceeds through buybacks, can EPS keep growing through the dilution, and can the remaining software business accelerate?

This question determines the quality of the full-year EPS guidance. Management's fiscal 2027 non-GAAP EPS guidance of $12.00 to $12.25 already absorbs about $0.30 of dilution from the MatrixCare sale and about $0.20 from the Noctrix acquisition, and core EPS growth excluding both is 12% to 14% [3]. The guidance depends on faster growth in the remaining software business, stable gross margin and more than $1.85 billion of capital returns, and the first quarter is the first in which these transactions all reach the accounts.

The current evidence supports execution of the buyback, but growth in the remaining software business has not yet been verified on its own. RCS revenue rose 5% in fiscal 2026, with growth partly offset by weaker senior living and long-term care [1]; the call summary put fourth-quarter RCS growth at about 2% (about 3% on the company's disclosed basis), held back mainly by MatrixCare declines, and management said the remaining Brightree and MEDIFOX DAN businesses will grow at a high-single-digit rate in fiscal 2027 [3]. On August 31, the company signed a $450 million accelerated repurchase agreement that it intends to fund with MatrixCare sale proceeds and cash on hand [5]. An alternative reading is that EPS growth comes more from buybacks than from operating improvement, and that stranded costs after the sale may exceed what the transition services agreement covers.

The first-quarter base requires looking at profit, software revenue and share count together. As previously disclosed by the company, fiscal 2026 first-quarter non-GAAP diluted EPS was $2.55 (up 16%), RCS revenue was $166.1 million (up 6%, 5% in constant currency, including a full quarter of MatrixCare) and diluted shares were 146.9 million; in the fourth quarter, non-GAAP EPS was $2.95, RCS revenue was about $172 million and diluted shares were about 145.1 million (derived by dividing $428 million of non-GAAP net income by EPS). The chain runs from the MatrixCare sale, which removes about $220 million of annual revenue [1], and the Noctrix acquisition, which adds a little revenue but dilutes profit, to a smaller RCS revenue base and changed company profit; the sale proceeds then reduce diluted shares through the $450 million accelerated repurchase and more than $1.85 billion of full-year capital returns, which ultimately shapes non-GAAP EPS [3].

What remains unresolved is the true growth rate of the remaining software business, because the first quarter includes only about two months of MatrixCare and a clean comparison needs the company's own breakout. In the first quarter, watch whether non-GAAP EPS is at least $2.65 and the full-year guidance holds, whether the company separates MatrixCare's contribution and discloses growth in the remaining RCS business, and the diluted share count and initial share delivery under the accelerated repurchase. EPS below the bottom of the consensus range or a cut to full-year guidance would show the net effect of the transactions is worse than expected, while EPS of $2.73 or more with high-single-digit growth in the remaining RCS business would support the logic of the portfolio reset.

Risks and Falsifiers

U.S. reimbursement policy is the external variable with the largest effect on Americas revenue. The upcoming CMS competitive bidding Round 2028 does not include CPAP or other respiratory or sleep-assist devices, but the 10-K warns that future changes to the program or reimbursement policies could still affect the U.S. business; the exposed line is Americas revenue of $3.281 billion in fiscal 2026, about 58% of consolidated revenue, because HME purchasing depends on reimbursement levels [1]. If CMS keeps CPAP out of competitive bidding in later rules and Americas mask and device growth holds, this concern would be falsified.

Currency and tariffs affect both reported revenue and gross margin. The company manufactures substantially all of its products outside the U.S., and rest-of-world sales were about 37% of fiscal 2026 revenue [1]; a stronger dollar would reduce reported revenue and gross margin and the loss of tariff relief would raise costs, while fiscal 2027 guidance already assumes a currency headwind of about 50 basis points and currency cut fourth-quarter gross margin by about 20 basis points sequentially [3]. If Chapter 98 tariff relief continues to apply and currency effects stay within the guidance assumption, this risk would not change the current understanding.

GLP-1 weight-loss drugs are a long-term risk to patient flow. Injectable GLP-1s have been approved to treat obesity with moderate to severe sleep apnea, and if sustained weight loss reduces disease severity, fewer patients may be diagnosed and start PAP therapy; the exposure is $4.978 billion of combined device and mask revenue, about 88% of consolidated revenue [1], and because mask resupply depends on the installed patient base, the effect would last for years. If first-quarter sleep device growth stays above mid-single digits and management keeps reporting higher PAP start and adherence rates among patients also on GLP-1s, this concern would be falsified.

The Astral correction is a risk that has already materialized but whose size is not yet capped. The correction requires reallocating all available electronic components to support existing patients, the timing for resuming new device sales is undecided, and costs could exceed the $42 million provision taken in the fourth quarter; management estimated a fiscal 2027 revenue headwind of about $75 million and an EPS headwind of about $0.15, and said both are already in the guidance [3]. If the correction requires no additional charges and the company gives a resumption date within fiscal 2027, the concern that costs keep growing would be falsified.

Electronic component and freight costs are the most direct risk to gross margin. The 10-K warns that the supply chain may be affected by transport disruptions and constraints on raw materials and electronic components, including semiconductor chips and magnets [1], and a disruption at a key supplier would hit both costs and shipments. Based on fiscal 2026 revenue of $5.653 billion, each percentage point of gross margin corresponds to about $57 million of gross profit. If first-quarter non-GAAP gross margin stays at or above 61.5% and management says inflation is stabilizing, the view that this risk is growing would be falsified.

The costs of the portfolio reset could offset the EPS lift from buybacks. MatrixCare generated about $28 million of operating profit in fiscal 2026, a figure that already reflects about $28 million of amortization of acquired intangibles [1]; the MatrixCare sale and the Noctrix acquisition together reduce fiscal 2027 EPS by about $0.50 [3], and stranded costs after the sale, expenses after the transition services agreement ends and investment in Noctrix could all exceed expectations. If first-quarter non-GAAP EPS is at least $2.73 and full-year guidance holds, this concern would be falsified.

What to Watch Next

• Sleep patient flow: watch whether global device revenue exceeds the year-ago $680.3 million and what growth management gives for sleep versus life-support devices; sleep device growth above 6% would confirm the current view, while a device decline attributed to sleep would weaken it.
• Mask resupply: watch whether masks and other, $489.1 million a year ago, keeps growing near 10% in both the Americas and the rest of the world.
• Gross margin: watch whether non-GAAP gross margin, 62.0% a year ago and 62.3% in the fourth quarter, stays at or above 61.5%; flat year over year would confirm, and a decline of more than 50 basis points would falsify.
• EPS and guidance: watch whether non-GAAP EPS, $2.55 a year ago, reaches at least $2.65 against a consensus range of $2.65 to $2.73, and whether full-year guidance holds.
• Remaining software and share count: watch whether the company separates MatrixCare from the remaining RCS business and how many shares were initially delivered under the accelerated repurchase.
• Astral: watch for additional charges beyond the $42 million provision and any date for resuming new device sales.

Conclusion

Resmed's business is driven by new sleep apnea patient starts and mask resupply, and in fiscal 2026 it generated $5.653 billion of revenue and $1.806 billion of operating cash flow, with devices and masks making up about 88% of revenue [1]. The central unresolved relationship combines three questions: whether sleep patient flow excluding Astral can keep growing above the market, how far component and freight inflation will push down gross margin, and whether EPS can reach management's $12.00 to $12.25 guidance after about $0.50 of dilution from selling MatrixCare and buying back stock [3].

There is a clear coverage gap in outside views. Since the latest results on August 6, 2026, public coverage has consisted only of results news and share-price reports, and no independent assessment attributable to a named firm or analyst could be identified. The post-results share-price moves therefore cannot be read as a verdict on any of the debates above.

Confirmation or falsification will require several observations to line up. If first-quarter sleep devices grow above 6%, masks grow near 10%, non-GAAP gross margin stays at or above 61.5%, and non-GAAP EPS reaches $2.73 or more with high-single-digit growth in the remaining RCS business, the current understanding of patient flow, costs and the portfolio reset would be materially strengthened. Conversely, a device revenue decline attributed to sleep devices, a gross margin decline of more than 50 basis points, or EPS below the bottom of the consensus range with a cut to full-year guidance would show that GLP-1s, inflation or deal dilution is having a larger effect than the current understanding allows.

Sources

[1] RMD FY2026 10-K filed 2026-08-13 · 2026-08-13 · 10-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000943819&type=10-K&dateb=&owner=include&count=40

[2] RMD earnings calendar updated 2026-10-26 · 2026-10-26 · Drillr earnings calendar

[3] RMD Q4 FY2026 earnings call 2026-08-06 · 2026-08-06 · Resmed · https://gateway.drillr.ai/mcp/private

[4] Drillr analyst estimates RMD Q1 FY2027 retrieved 2026-10-26 · 2026-10-26 · Drillr analyst estimates · https://gateway.drillr.ai/mcp/private

[5] RMD 8-K filed 2026-09-01 · 2026-09-01 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000943819&type=8-K&dateb=&owner=include&count=40