ResMed Inc. (RMD) delivered a solid quarter that had analysts nodding approvingly, even if some nagging questions about competition refuse to disappear entirely.
The medical device maker reported second-quarter fiscal 2026 adjusted earnings of $2.81 per share on Thursday, topping the consensus estimate of $2.72. Revenue jumped 11% year-over-year to $1.42 billion, sailing past expectations of $1.396 billion.
The growth story here is straightforward: people need sleep apnea devices, and ResMed keeps selling them. Sales climbed 9% on a constant currency basis, propelled by strong demand across the company's portfolio of sleep devices, masks, and accessories. The Residential Care Software segment added 5% growth on a constant currency basis.
AI Gets FDA Approval for Sleep Therapy
Here's something genuinely novel: the FDA cleared ResMed's Personalized Therapy Comfort Settings in December 2025, which the company is marketing as Smart Comfort. This marks the first FDA-cleared AI-enabled medical device that recommends personalized comfort settings to help obstructive sleep apnea patients start and stick with CPAP therapy.
Smart Comfort will roll out in early 2026 as a limited U.S. beta for new users of myAir, ResMed's consumer sleep companion app, when paired with a ResMed AirSense 11 device. A broader U.S. launch to new myAir users is planned for later in 2026.
Margins Tell a Happy Story
The numbers get more impressive when you look at profitability. Gross margin expanded by 320 basis points to 61.8%, primarily thanks to manufacturing and logistics efficiencies plus component cost improvements. Adjusted gross margin grew 310 basis points to 62.3%. Adjusted operating income rose 19% to $517.2 million.
Looking ahead, ResMed expects revenue to grow at a high single-digit rate over the next five years, with earnings projected to outpace revenue growth. That's the kind of guidance that keeps investors interested.
Analysts Stick With the Bull Case
William Blair captured the sentiment well on Friday: "Altogether, we think fiscal second-quarter updates provide support for the bull thesis that ResMed can remain a durable high-single-digit grower with strong double-digit EPS growth (we model +15% this year)."
Analyst Brandon Vazquez acknowledged that concerns about competition and GLP-1 drugs might persist partly because "the company is fighting a ghost," but he believes continued execution should build confidence in the growth trajectory. William Blair maintains an Outperform rating on ResMed, with shares trading at 20 times the calendar 2027 EPS estimate.
Other analysts followed suit with price target increases: Stifel raised its forecast from $260 to $265 while keeping a Hold rating. Wells Fargo bumped its target from $265 to $270 with an Equal-Weight rating. Piper Sandler lifted its price target from $270 to $275 while maintaining a Neutral rating.
Price Action: ResMed stock closed down 2.33% at $251.62 on Friday.
