ResMed closed fiscal 2026 with its biggest Revenue haul on record and a 10 per cent lift to its dividend, yet the market’s verdict was blunt. The morning after the recent August result, the sleep-device maker’s ASX-listed CDIs fell about 7.5 per cent, mirroring a 5.9 per cent slide in New York. The catalyst was not the headline numbers, which beat expectations, but what sat alongside them: a decision to stop selling its Astral life-support ventilator for the whole of fiscal 2027, and a first-ever formal revenue and Earnings forecast that struck investors as conservative. For a stock long prized as a steady compounder, the reaction was a reminder that expectations, not just performance, set the price.

What just happened

For the fourth quarter to 30 June, ResMed (ASX:RMD) reported revenue of US$1.464 billion, up 9 per cent (8 per cent in constant currency). Full-year revenue reached US$5.653 billion, a 10 per cent gain. Full-year GAAP Operating Income was US$1.887 billion and Net Income US$1.523 billion. Statutory Diluted Earnings per Share came in at US$10.43 for the year (up 10 per cent), while non-GAAP EPS, which strips out one-offs, rose 17 per cent to US$11.17.

The board lifted the quarterly Dividend 10 per cent to US$0.66 a share and pointed to more than US$1.85 billion in total Capital returns for fiscal 2027, up roughly 75 per cent year on year. That figure includes a US$1.5 billion buyback authorisation, part of it an accelerated program funded by the pending sale of its MatrixCare software arm.

Why it matters

ResMed occupies a near-duopoly in a growing market, and its results are read as a barometer for the whole sleep-apnoea and connected-breathing sector. Two things made this print consequential. First, the Astral suspension is a self-imposed hit to a profitable device line, driven by a field safety notification the company is treating cautiously. Second, management’s maiden numerical guidance gave the market a fixed target to trade against, and after years of double-digit growth, a mid-single-digit core revenue outlook landed as a step down, even if largely mechanical.

The numbers that matter

The engine remained the consumables. Masks and accessories, the recurring, high-margin part of the model, grew 13 per cent for the year to US$2.085 billion. Devices rose 9 per cent to US$2.892 billion, and quarterly device sales of US$750 million grew 8 per cent. Residential Care Software (the software-as-a-service unit) added 5 per cent to US$676 million.

Margins told a favourable story. Full-year non-GAAP gross Margin expanded 240 basis points to 62.4 per cent, helped by freight normalisation, Manufacturing efficiency and a richer mask mix. The fourth-quarter GAAP gross margin of 58.8 per cent absorbed roughly 200 basis points of drag from a US$42 million Astral field-safety provision.

Cash generation stayed strong: Operating Cash Flow of US$1.806 billion and free cash flow of US$1.650 billion for the year. ResMed returned about US$1.0 billion to shareholders in fiscal 2026 through US$700 million of Buybacks and US$350 million of dividends, up more than 70 per cent on the prior year.

The bigger industry picture

The debate that has shadowed ResMed for two years is whether GLP-1 weight-loss drugs will shrink its patient pool by treating the obesity that drives much sleep apnoea. Management again argued the opposite. Drawing on data covering 2.5 million patients, it said people prescribed both a GLP-1 and PAP therapy were about 11 per cent more likely to start on a breathing device, with resupply rates 3 per cent higher at one year and 6 per cent higher at three years. Chief executive Mick Farrell cautioned that oral GLP-1s show weaker adherence and weight loss than injectables, tempering the disruption thesis.

The connected-health theme also advanced. ResMed pointed to its tie-up with wearable maker ŌURA, which has directed some 13,000 users towards its funnel, about three-quarters of them previously undiagnosed, and noted Samsung’s Galaxy Ring is pursuing regulatory clearance for apnoea detection. The recent Acquisition of Noctrix Health, which owns the first FDA-cleared device for restless legs syndrome, opens a new adjacency estimated at 17 million US patients.

The bull case

The Investment case rests on durable Demand and improving quality of earnings. Sleep apnoea remains vastly under-diagnosed, giving ResMed a long runway even at modest device growth. The mask Franchise keeps compounding, lifting margins and smoothing revenue. The planned MatrixCare divestment (reported at roughly US$490 million) sharpens the focus on core breathing health and funds buybacks, while the enlarged capital-return commitment signals confidence in cash flows. With non-GAAP EPS guided to US$12.00-US$12.25 and core EPS growth of 12-14 per cent for fiscal 2027, the underlying earnings trajectory looks intact once the Astral distortion is set aside.

The risks

The clearest near-term risk is competition. Rival Philips is expected to return to the US sleep-device market in 2027 after years sidelined by its own recall, and ResMed offered little on how it will defend share and pricing. Chief financial officer Aaron Bloomer conceded the company “can no longer offset Inflation with productivity alone,” hinting at pricing pressure ahead. The Astral halt carries an estimated US$75 million revenue headwind and about US$0.15 EPS drag for fiscal 2027, with no decision yet on resuming sales in 2028. And the GLP-1 question, while addressed, is not settled; a genuine shift in obesity treatment could still alter long-run demand.

What happens next

Investors have several markers to watch. First, completion of the MatrixCare sale, expected around September, and the timing of the linked accelerated buyback. Second, any Philips re-entry and the competitive response through fiscal 2027. Third, progress on the Astral corrective action and whether sales resume in 2028. Fourth, further GLP-1 data as prescribing patterns mature. Fifth, uptake of newer products, including the AirTouch N30i mask, the AirSense 11 rollout in China, and early contributions from Noctrix in restless legs syndrome.

Conclusion

ResMed delivered the substance of a record year: higher revenue, wider margins, robust cash flow and a materially larger commitment to dividends and buybacks. The Astral suspension is a manageable but unwelcome self-inflicted knock, and the first hard guidance has recalibrated expectations after a long run of double-digit growth. The medium-term drivers, an under-penetrated market, a compounding consumables base and expanding capital returns, remain in place. The coming year will test whether ResMed can absorb a returning competitor and a device pause without dulling the qualities that made it a defensive favourite.