Resmed (RMD) Q1 2027 earnings review
Resmed lifts gross margin, but its full-year plan stays unchanged
Resmed's sleep-apnea machines and masks kept growing briskly while the company sold off a software unit and bought back stock. Chief executive Mick Farrell reported 7% growth from continuing businesses at constant currency and a $1 billion return to shareholders after closing the MatrixCare sale. Gross margin excluding one-offs rose half a percentage point to 62.5%, beating the company's own prior warning of a first-quarter dip.
| Sales from core businesses (constant currency) | +7% 6% reported ($1.41B) |
|---|---|
| Gross margin, excluding one-offs | 62.5% +0.5 percentage points from a year ago |
| Profit per share, excluding one-offs | $2.91 +14% from a year ago |
| Full-year outlook | Unchanged middle of the range: 6% core growth, $12.13 EPS |
⚖️ Verdict: 🟢 Bullish
The story got better because factory productivity overcame component and freight inflation to lift gross margin, and front-loaded share buybacks cut the share count by over 2%. One caution: operating margin still slipped as research and overhead costs grew faster than revenue, and management left its full-year outlook unchanged, which by our math points to per-share profit growth slowing to 7% for the rest of the year.
The question now is whether the unchanged full-year outlook reflects early-year caution or upcoming profit pressure from the lost MatrixCare earnings, Noctrix research spending, and the Astral ventilator halt. If factory savings and share retirement keep outpacing those drags, full-year profit will top the range; if overhead stays high, earnings growth will slow sharply. Second-quarter operating margin will tell.
🐂 Bull Case
Productivity Gains Lifted Gross Margin Despite Inflation
Last quarter, Resmed warned that higher electronic-component and freight costs would push first-quarter gross margin slightly below last year's level before price increases and warehouse savings helped later in the year. Instead, gross margin excluding one-offs rose 0.5 percentage points from a year ago to 62.5%, and 0.2 points from the fourth quarter.
The medical-device maker said the gain came "predominantly from productivity pipeline execution", lowering the cost of making its products to 37.5% of sales, excluding one-offs, from 38.0% a year ago. One quarter fades the inflation concern rather than ending it, because the company left its full-year profit outlook unchanged.
What to watch: gross margin excluding one-offs in the second quarter. A second straight reading at or above 62.5% would show factory savings and modest price increases are beating component inflation.
Sleep Devices and Masks Grow Near 10%
Resmed is reshaping its lineup by selling slower-growing software and launching new sleep hardware, including the U.S. release of its AirTouch F40 fabric CPAP mask (a mask for continuous positive airway pressure machines). Global sleep-device sales rose 9% to $716 million, and masks and accessories grew 10% to $540 million.
Reported revenue in Residential Care Software, its software for out-of-hospital care providers, fell 7% to $155 million after the sale of its MatrixCare unit. However, Resmed noted that "the remaining businesses of Residential Care Software – Brightree and MEDIFOX DAN - increased by 8%", matching the high-single-digit rate it targets for the group.
What to watch: global mask revenue growth over the next two quarters against last year's 16% surge. Holding growth near 10% against that tough comparison would show the new fabric masks are winning repeat orders.
MatrixCare Sale Funded $936 Million in Buybacks
"Our strong free cash flow and the proceeds from our divestiture of MatrixCare enabled us to both invest in innovation and return more than $1 billion to shareholders during the quarter," chief executive Mick Farrell said. Critics argue the aggressive buyback pace eats into the company's net-cash cushion.
Resmed collected $451 million in net cash from selling MatrixCare and spent $936 million buying back shares in the first quarter, more than the $700 million it spent in all of fiscal 2026. That reduced diluted share count by 2.4% from a year ago to 143.4 million, turning a 12% rise in profit excluding one-offs into 14% per-share growth.
What to watch: diluted share count in the second quarter. A further drop toward 141 million will show how much of this year's per-share profit growth comes from share retirement rather than operations.
🐻 Bear Case
Ventilator Suspension Cut Life-Support Sales by 84%
Following a field-safety recall of its Astral home ventilators, Resmed suspended Astral sales for all of fiscal 2027, creating an estimated $75 million annual revenue drag. In the first quarter, global revenue from life-support devices dropped 84% from a year ago to $4 million, down from $25 million.
- Americas life-support devices: under $1 million, down 94% from $9 million a year ago
- Rest of World life-support devices: $3 million, down 79% from $17 million a year ago
- Implied Q2–Q4 reported revenue growth: 1.6% from a year ago by our math, down from 5.9% in Q1
Because the company kept its full-year revenue outlook at $5.75 billion to $5.85 billion, the combined loss of MatrixCare and Astral will pull reported revenue growth down to under 2% for the rest of the year by our math, while competitors take home-ventilation placements.
What to watch: any update on Astral replacement costs and the fiscal 2028 sales decision. Extending the suspension into fiscal 2028 would permanently cede ventilator market share.
Overhead and Restructuring Pushed Operating Margin Down
Farrell highlighted the 0.5-point gross margin expansion and 14% per-share profit growth excluding one-offs, and the release pointed to "Healthy profitability". However, operating margin fell on both a reported basis and excluding one-offs because overhead and research spending grew faster than the 6% rise in reported sales.
Reported operating margin dropped 1.4 percentage points from a year ago to 32.0%, as selling, general and administrative costs (sales and overhead) rose 1.2 points of revenue to 22.2% on $29 million of restructuring and $10 million of deal fees. Excluding one-offs, operating margin still dipped 0.3 points to 35.8% because research and development rose 0.7 points of revenue to 7.2%, reflecting the newly acquired Noctrix restless-leg-syndrome device business.
What to watch: operating margin excluding one-offs in the second quarter. If research and overhead stay above 26.5% of sales after MatrixCare's exit, operating leverage will lag gross-margin gains all year.
Risks this quarter didn't answer
Three standing competitive and demand concerns received no new data in the earnings release and depend on conference-call commentary or future filings.
- Weight-loss drugs (GLP-1s): no new patient-cohort numbers in the release, though the company announced partnerships with Eight Sleep and NASCAR driver Tyler Reddick to raise sleep-apnea awareness.
- Philips U.S. return and Medicare bidding: no update on rival device share or Medicare's competitive bidding programme.
- Price-increase pass-through: no breakdown of how much of the 7% underlying growth came from price versus volume.
👓 Other Themes
Accounting Change Moves Restructuring Into Functional Costs
In the first quarter, Resmed "revised the presentation of restructuring expenses and amortization of acquired intangibles", moving both out of separate lines and into cost of sales, research, and overhead, and renaming the restructuring line "restructuring and business transformation expenses". The change did not alter reported operating profit, net income, or cash flow, and prior quarters were restated to match.
💲 Other KPIs
Free cash flow fell 10% from a year ago, down from $414 million, while operating cash flow dropped 8% to $422 million. Cash generation slowed because Resmed used $72 million to build inventory and $70 million for prepaid expenses and other current assets, alongside $49 million in factory and equipment spending.
Total deferred revenue — cash customers have paid for software and services not yet delivered — rose 5.7% from a year ago and added $12 million from the fourth quarter. Growth slowed from 7.9% (adjusted for MatrixCare) in the fourth quarter and 9.9% in the third quarter following the software unit's sale.
Cash minus total debt declined from $810 million at the end of June to $601 million by our math. The respiratory-care group used cash on hand and MatrixCare sale proceeds to pay off $250 million in debt — reducing total borrowings to $410 million — and fund $1.03 billion in buybacks and dividends.
🔮 Guidance
Unchanged. The full-year plan still calls for 5% to 7% growth from businesses owned a year ago at constant exchange rates, including a 1.3-point drag from the Astral ventilator suspension. By our math, after 7% growth in the first quarter, the middle of the range leaves about 5.7% growth for the rest of the year.
Unchanged. At the $5.80 billion middle of the range, reported revenue grows 2.6% for the year. By our math, after a 5.9% rise in the first quarter (which still included two months of MatrixCare), the plan points to 1.6% reported growth across the remaining three quarters.
Unchanged. The plan points to 8.5% full-year per-share profit growth at the middle of the range, down from 14.1% in the first quarter. By our math, that leaves $9.22 per share for the rest of the year, or 6.9% growth from a year ago, as lost MatrixCare profit and Noctrix research costs weigh on results.
❓ Key Questions
Why Hold the Full-Year Plan After Beating Q1 Margin?
Gross margin excluding one-offs rose 0.5 percentage points to 62.5% instead of dipping as management previously indicated. Did first-quarter factory savings pull gains forward, or do component and freight costs still threaten margins later in the year?
How Much of the $936M Buyback Was the ASR?
Resmed planned $1.5 billion in full-year buybacks, including a $450 million accelerated share repurchase tied to MatrixCare's sale, and already spent $936 million in Q1. How much remains for the next three quarters?
What Caused the $29 Million Restructuring Charge in Q1?
Restructuring and business transformation expenses rose to $29 million in Q1 ($8 million in cost of sales, $20 million in overhead) from $16 million a year ago. Which operations are being restructured, and when do these charges end?
How Are Home-Medical Customers Handling Price Increases?
Americas sleep-device growth slowed to 6% in constant currency while Rest of World grew 13%. How much of the first-quarter growth came from price versus volume, and are U.S. equipment providers pushing back on price?