Resmed Q4 FY2026 Earnings: Revenue Rises as Safety Costs Weigh on GAAP Margins

Resmed (NYSE: RMD) reported fiscal Q4 2026 revenue of $1.464 billion, up 9% from $1.348 billion, while GAAP diluted EPS rose 2% to $2.64 from $2.58. Growth across devices, masks, accessories, and software supported sales, but a $41.9 million Astral field safety notification expense reduced GAAP gross margin; operating and free cash flow also declined year over year.

Core Financial Results

Revenue increased 8% on a constant-currency basis, indicating that foreign exchange added about one percentage point to reported growth. Adjusted profitability improved more than the GAAP results suggested: non-GAAP EPS rose 16%, compared with the 2% increase in GAAP EPS.

The difference largely reflected expenses excluded from Resmed’s non-GAAP measures, particularly the Astral field safety notification charge.

Business and Segment Performance

Sleep and Breathing Health remained the primary growth engine, with masks and other products growing faster than devices. Residential Care Software expanded at a slower rate than the core device and mask businesses.

Geographically, Americas Sleep and Breathing Health revenue increased 8% to $853 million. Rest of World revenue rose 13% as reported and 10% at constant currency to $439 million, showing a larger currency benefit outside the Americas.

Resmed also agreed to sell its MatrixCare business, with closing expected during fiscal Q1 2027, and completed its acquisition of Noctrix Health. The release did not disclose the financial impact of either transaction.

Astral Safety Costs Drove the GAAP-Adjusted Margin Gap

The $41.9 million Astral field safety notification expense was recorded in cost of sales and was the main reason GAAP gross margin fell to 58.8%. Resmed’s non-GAAP gross margin, which excludes that expense and acquired-intangible amortization, increased 90 basis points to 62.3%, predominantly because of productivity initiatives.

Operating expenses absorbed much of that underlying gross-margin improvement. Research and development expense increased 22% to $105.7 million, while GAAP selling, general, and administrative expense rose 11% to $296.3 million. Consequently, non-GAAP operating income increased 8%, but non-GAAP operating margin was nearly unchanged at 35.2%, compared with 35.3% a year earlier.

On a GAAP basis, operating margin contracted 300 basis points and operating income declined 1%. Higher other income, which rose to $25.5 million from $3.5 million, helped net income remain slightly above the prior-year level despite the lower operating profit.

Cash Flow and Balance Sheet

Quarterly operating cash flow declined to $454.6 million. Capital expenditures increased to $51.1 million from $30.6 million, contributing to the steeper 21% decline in free cash flow. The cash-flow statement also showed a larger use of cash from accounts receivable than in the prior-year quarter.

Resmed still returned $287 million to shareholders through dividends and repurchases during the quarter. At June 30, 2026, cash and cash equivalents were $1.469 billion, up from $1.209 billion one year earlier. Total short- and long-term debt was approximately $659 million, compared with approximately $668 million at June 30, 2025.

For the full fiscal year, operating cash flow increased 3% to $1.806 billion, while free cash flow slipped 1% to $1.650 billion. These annual figures are distinct from the quarterly cash-flow declines.

FY2027 Capital Return Plan

Resmed’s quantitative forward-looking disclosure centered on shareholder distributions. The company plans to return more than $1.85 billion through repurchases and dividends during fiscal 2027 and raised its quarterly dividend by 10%.

Risks Investors Should Monitor

• Safety-related expenses: The Astral notification resulted in a $41.9 million charge and materially reduced GAAP gross margin. Any additional costs would continue to create a gap between GAAP and adjusted profitability.
• Operating expense growth: R&D and SG&A expenses grew faster than revenue, preventing the adjusted gross-margin improvement from translating into operating-margin expansion.
• Weaker quarterly cash conversion: Operating cash flow and free cash flow declined despite higher revenue and net income. Higher capital expenditures and increased cash use from receivables contributed to the pressure.
• Slower software growth and portfolio transition: Residential Care Software grew only 2% at constant currency, below the core Sleep and Breathing Health business. Investors also need to monitor the expected fiscal Q1 2027 closing of the MatrixCare sale.

Summary

Resmed’s fiscal Q4 2026 sales growth was broad-based, led by masks and Rest of World markets, while productivity supported better underlying gross margin and adjusted EPS. However, the Astral safety expense, faster operating expense growth, and weaker quarterly cash generation constrained the GAAP results. The next key issues are whether safety-related costs are contained, whether gross-margin gains can produce operating leverage, and how Resmed executes its portfolio changes and FY2027 capital return plan.