ResMed reported its 3Q26 result this week. We are reiterating our Buy view on the stock with a price target of A$46.20, against a closing price of A$28.73 on 1 May 2026 and roughly 60.8 per cent upside to that target. The thesis is straightforward. Top-line growth keeps compounding through the GLP-1 overhang, gross margins are stepping up around 600 basis points to FY28, and the stock trades below the medtech peer mean despite holding the number one global share position in obstructive sleep apnea devices.
Research published 4 May 2026. Price target and upside based on prices at time of publication.
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About ResMed
ResMed Inc is the world’s largest manufacturer of devices and masks used to treat obstructive sleep apnea, the breathing disorder that affects close to a billion people globally. The company was founded in Sydney in 1989 and is dual-listed on the ASX and the NYSE, with its primary operations and reporting in US dollars and a June fiscal year end. The product portfolio is built around the AirSense range of CPAP devices, the AirFit and AirTouch mask families, and a growing software-as-a-service business that helps durable medical equipment providers, sleep clinics and hospitals manage patient compliance and reimbursement. Recent additions include the Noctrix wearable for restless legs syndrome and a small high-flow oxygen therapy line being readied for the 2030 strategy. More on the company at resmed.com.
The 3Q26 Print
The headline numbers were solid. Total revenue of US$1,431 million for the quarter put RMD on track for FY26 revenue of around US$5,688 million, a roughly 10.5 per cent step-up on FY25. Non-GAAP gross margin came in at 62.7 per cent for the quarter, up around 280 basis points year on year and at the top end of the company’s 62 to 63 per cent FY26 guidance band. Adjusted EPS of US$2.87 was up roughly 12 per cent year on year. Cash flow from operations is tracking around US$1.57 billion for the year against capex of US$183 million, which gives the business plenty of room to keep funding the buyback at the new at-least US$175 million per quarter pace management has guided.
The cleanest read on the result is in the masks line. ResMed’s masks business grew around 15 per cent in 3Q26, with management calling out genuine share gains and pointing to better compliance on the fabric range. That matters because masks is the high-margin recurring revenue line that compounds quietly between device launches. Compliance gains feed straight into resupply orders, which feed straight into earnings.
The GLP-1 Question, Revisited
The biggest single overhang on ResMed for the past two years has been the worry that oral GLP-1s, with Eli Lilly raising its weight-loss guidance again this quarter, would erode the long-term need for CPAP therapy. The argument goes that as obese patients lose weight, they stop having sleep apnea, so demand for ResMed’s devices and masks compresses.
The 3Q26 numbers, and a string of independent third-party indicators, keep telling a different story. VirtuOx, a major sleep-test referrer, reported home sleep test referrals up around 25 per cent year on year. New patient flow into the sleep diagnostic funnel is not slowing, it is accelerating. The most plausible read is that GLP-1 prescriptions are themselves driving more patients to ask their doctor about sleep, and only a small subset of those patients lose enough weight quickly enough for it to flow through to therapy demand on a 12 to 18 month view. The science is also clear that obstructive sleep apnea is not exclusively weight-driven. Anatomy, age and the position of the tongue and palate explain why slim people get diagnosed too. ResMed’s market is wider than the obesity overlap, and the data is not bearing out the thesis that GLP-1s are about to halve it.
The one debate that does still warrant attention is the timing of Philips Respironics re-entering the US market. After years of recall and regulatory remediation, Philips is on the cusp of being a viable competitor again. The market has been pricing this for a long time. ResMed’s response has been to keep pushing the AirSense 11 rollout, the AirTouch F30i full-face launch, and the AirCurve 11 launch ahead of any Philips return. The 3Q26 share-gain commentary suggests the strategy is working.
The Margin Story Has More to Run
What is not yet fully reflected in consensus is the margin step-up that the new product cycle generates. The AirSense 11 and AirTouch product platforms carry materially better gross margins than the older equivalents they replace. Layer on the Noctrix wearable, which is being introduced as a high-margin software-plus-hardware bundle for restless legs syndrome, and the path to a 64 per cent non-GAAP gross margin in FY28 from around 60 per cent in FY25 is concrete rather than aspirational.
Management has been telling the market the same thing for two years. Target a 62 to 63 per cent non-GAAP gross margin in FY26 and target double-digit basis points of accretion every year through to FY30. The 3Q26 print was inside the FY26 band already, and the inventory unwind that supported it is genuine, not a one-off pull-forward. Component costs and freight have continued to normalise from the 2022 peaks. The combination is what produces the slope on the chart below.
This is the part of the story that we think is most underappreciated. Revenue growth in the high single digits is fine, but if you bolt on 600 basis points of gross margin expansion across the same window, the operating leverage on the back of a roughly fixed cost base produces double-digit EPS growth out to FY28. The buy-thesis numbers are not a story about top-line being faster than people expect. They are a story about margin being more durable than people expect.
Top-Line Growth Levers Stack Cleanly
Three growth levers are stacked into the FY27 and FY28 numbers and each one is independently verifiable.
The first is Noctrix. The product is being introduced into the US restless legs syndrome market this year and we see around 200 basis points of incremental growth contribution to FY27 from the scale-up alone. Restless legs is a large and undertreated population that ResMed can address with its existing prescription channel and its installed base of sleep specialists. The cross-sell economics are unusually clean.
The second is China. AirSense 11 is the first major CPAP launch into China since the regulatory framework was tightened, and management called it out as a key 4Q26 lever following the late April launch. China is the fastest-growing CPAP market globally and ResMed has historically been under-represented there relative to its US share. AirSense 11 is the platform that gets the share.
The third is the AirTouch F30i full-face mask launch across major markets. Full-face is around a third of the global mask market and ResMed has been ceding ground to Fisher and Paykel in this segment for a number of years. The F30i is the product that lets ResMed re-enter the segment with a fabric-based mask that targets the comfort and seal complaints that have driven Fisher and Paykel’s share. The 3Q26 print already showed around 10 per cent constant-currency masks growth globally, with full-face the call-out. The next four quarters of rollout are what extend that.
Where We Land on Valuation
RMD trades on a forward 12-month P/E of roughly 18.8 times. The medtech peer set sits at a mean of around 22.7 times. Fisher and Paykel, the most direct competitor, sits at 28.5 times. Boston Scientific 28.5 times. Edwards Lifesciences 27.8 times. Intuitive Surgical 44.2 times. Even Medtronic, the most mature large-cap medtech, trades within roughly 4 turns of RMD’s multiple at 14.7 times.
The 4 to 10 turn discount to the closer comps is not justified by the growth profile. ResMed should be growing earnings at a faster pace than Medtronic on the strength of new products and margin accretion, and at a comparable pace to Fisher and Paykel, BSX and Edwards. A market that prices RMD as a slow grower is a market that is still over-discounting the GLP-1 risk. Triangulating a 10-year DCF at an 8.1 per cent WACC with a 3.0 per cent terminal growth rate and a forward EV/EBIT multiple of 21.3 times produces a blended fair value of A$46.20, with around A$3.70 of that attributable specifically to high-flow oxygen therapy and other 2030-strategy products that have not yet shown up in the printed numbers.
Risks to the Buy Call
Three risks bear watching. The first is a US tariff implementation that targets Mexican manufacturing, where ResMed has meaningful production exposure. The risk is real but the company has multiple manufacturing footprints and has been actively diversifying since 2024. The second is US reimbursement pressure, particularly any tightening of the criteria around home sleep tests or initial CPAP approval. Most of the policy noise has gone the other way over the past 18 months as Medicare expands coverage, but a single CMS rule change could move sentiment quickly. The third is therapy compliance falling, which is the channel through which a structural GLP-1 effect would actually show up. The data is not yet showing it, but the next two quarterly prints are the most important compliance reads of the cycle.
Our View
RMD is one of the cleanest defensive growth franchises on the ASX. The 3Q26 print confirms that the new product cycle is working, the margin step-up is real, and the GLP-1 overhang has not damaged the underlying patient-flow trajectory. At a P/E discount to the medtech peer set, the risk-reward is skewed up. We are comfortable with the Buy view and the A$46.20 price target.
If you would like to discuss ResMed or how healthcare and medtech stocks fit within your portfolio, request a callback or call us on 1300 889 603.
