Resmed Q4 FY2026 earnings: Revenue rises 9% as adjusted gross margin expands

Resmed (NYSE: RMD; ASX: RMD) reported fiscal Q4 2026 revenue of $1.464 billion, up 9% year over year, while GAAP diluted EPS increased 2% to $2.64 from $2.58. Non-GAAP diluted EPS rose 16% to $2.95 as productivity supported adjusted gross margin, but a $41.9 million Astral field safety notification expense weighed on GAAP profitability. Operating and free cash flow declined despite modest growth in GAAP net income.

Core Earnings Data

Revenue growth was broad-based across sleep devices, masks and accessories, and software solutions. Constant-currency revenue increased 8%, one percentage point below reported growth.

Reported and adjusted profitability diverged because non-GAAP results excluded the Astral safety expense and other items. GAAP operating income declined slightly, while non-GAAP operating income increased 8%.

Non-GAAP measures exclude acquired-intangible amortization, safety-notification expenses, acquisition and portfolio-review costs, and related tax effects, among other specified adjustments.

Business and Segment Performance

Sleep and Breathing Health generated most of the quarter’s growth. Masks and other products grew faster than devices, while Residential Care Software remained the slowest-growing major business.

Within the Americas, device revenue rose 6% and masks and other revenue increased 10%. Rest of World growth was faster, with devices up 12% as reported and masks and other products up 16%, although favorable currency movements contributed to both rates.

Safety Costs Obscured Gross-Margin Gains

The clearest feature of the quarter was the contrast between GAAP and adjusted margins. The $41.9 million Astral field safety notification expense was recorded in cost of sales and was the main reason GAAP gross margin fell 200 basis points to 58.8%. Excluding that expense and acquired-intangible amortization, non-GAAP gross margin expanded 90 basis points to 62.3%, predominantly due to productivity initiatives.

Those gross-margin gains did not translate into adjusted operating-margin expansion. Research and development expense increased 22% to $105.7 million, while non-GAAP selling, general, and administrative expense rose 10% to $290.7 million. With both expense categories growing at least as fast as revenue, non-GAAP operating margin was nearly unchanged at 35.2%.

GAAP net income still increased 1% despite the decline in operating income. Total other income rose to $25.5 million from $3.5 million, including an increase in net interest income to $20.9 million from $5.8 million. A lower diluted share count also allowed GAAP EPS to grow slightly faster than net income.

Cash Flow, Balance Sheet, and Capital Allocation

Quarterly operating cash flow declined by approximately $84 million. A larger cash outflow from accounts receivable and a smaller benefit from prepaid expenses and related items contributed to the decrease. Capital expenditures increased to $51.1 million from $30.6 million, causing free cash flow to decline faster than operating cash flow.

Resmed returned $287 million to shareholders during the quarter, consisting of $200 million in share repurchases and $87.1 million in dividends. It also spent $325.3 million on business acquisitions. These uses of cash contributed to cash and equivalents declining from $1.661 billion at the start of the quarter to $1.469 billion at June 30, 2026.

At fiscal year-end, total short- and long-term debt was approximately $659 million, compared with approximately $668 million one year earlier. Inventory was $945.8 million, up from $927.7 million, while the balance sheet included $457.4 million of assets held for sale.

FY2027 Capital Return Guidance

Resmed plans to return more than $1.85 billion through share repurchases and dividends during fiscal 2027. It also raised its quarterly dividend by 10% to $0.66 per share.

Management Perspective and Portfolio Moves

Chairman and CEO Mick Farrell attributed the quarter’s performance to sustained product demand, global business momentum, and execution of the company’s productivity strategy. Management plans to emphasize global scale, digital capabilities, and its sleep and breathing product portfolio in fiscal 2027.

Resmed also agreed to sell MatrixCare, with closing expected during the first quarter of fiscal 2027, and completed its acquisition of Noctrix Health. Product launches during the period included AirSense 11 in Taiwan, AirCurve 11 ST/ST-A in the United States, and AirTouch F30i Comfort in Brazil and Chile.

Risks Investors Should Watch

• Safety-related expenses: The Astral field safety notification expense materially reduced GAAP gross and operating margins. Additional related costs would continue to affect reported profitability.
• Operating expense growth: R&D rose 22% and GAAP SG&A increased 11%, compared with 9% revenue growth. Continued expense growth at these rates could limit operating-margin expansion.
• Lower cash conversion: Operating cash flow fell 16% and free cash flow declined 21% even as net income increased. Working-capital movements and higher capital expenditures were important contributors.
• Software and portfolio transition: Residential Care Software grew only 2% in constant currency, below the company-wide rate, while the pending MatrixCare sale will change Resmed’s software portfolio.

Conclusion

Resmed ended fiscal 2026 with broad revenue growth and higher adjusted earnings, led by demand for sleep and breathing products and productivity-driven improvement in adjusted gross margin. The Astral safety expense pressured GAAP profitability, faster operating expense growth kept adjusted operating margin flat, and cash flow weakened. Fiscal 2027 attention will center on cash conversion, expense discipline, execution of the MatrixCare sale, and the substantially larger capital return plan.