ResMed's Earnings Outlook: Navigating Sleep Apnea Demand and Supply Chain Recovery

ResMed (RMD) has emerged as a resilient player in the post-pandemic healthcare landscape, leveraging its leadership in sleep apnea treatment to drive robust financial performance. With a 10% year-over-year revenue increase in Q2 2025 to $1.28 billion and a non-GAAP gross margin expansion of 230 basis points to 59.2%, according to ResMed's press release, the company has demonstrated its ability to navigate supply chain challenges while capitalizing on growing demand for its devices. This analysis evaluates ResMed's margin resilience, long-term growth sustainability, and strategic positioning in a rapidly evolving market.

Margin Resilience: Operational Efficiency and Cost Management

ResMed's margin improvements in 2025 reflect a combination of operational efficiencies and favorable supply chain dynamics. The company's non-GAAP gross margin expanded to 61.4% in Q4 2025, driven by procurement optimizations, manufacturing streamlining, and logistics cost reductions, as noted in the Q4 2025 call transcript. CEO Kaili Chien emphasized that post-pandemic supply chain recovery-particularly in component sourcing and logistics-has been a key enabler of these gains, as outlined in the company's press release. For fiscal 2026, ResMed projects a gross margin range of 61%-63%, a projection discussed on the Q4 2025 call transcript.

Selling, general, and administrative (SG&A) expenses also improved, with costs stabilizing at 19.7% of revenue in Q4 2025, despite a 9% year-over-year increase in dollar terms (as detailed on the Q4 2025 call transcript). The company's disciplined cost management, including automation in customer service and digital marketing, has allowed it to scale operations without eroding profitability. Meanwhile, R&D expenses remained at 6.4% of revenue, reflecting a balanced approach to innovation without overextending margins (as reported in the Q4 2025 call transcript).

Sleep Apnea Market Dynamics: Growth Drivers and Competitive Pressures

The global sleep apnea devices market, valued at $8.52 billion in 2024, is projected to grow at a compound annual growth rate (CAGR) of 7.19% through 2030, according to a GlobeNewswire report. ResMed's dominance in this market is underpinned by its AirSense 11 devices, which combine advanced features like auto-adjusting pressure and integrated humidifiers to enhance patient adherence. The company's digital health ecosystem, including the myAir app and cloud-connected devices, further differentiates it from competitors like Philips Respironics and Inspire Medical Systems, as discussed in the company's press release.

However, the market faces headwinds. The 2021-2024 Philips Respironics recall of CPAP devices created a temporary supply gap, but it also spurred regulatory scrutiny and safety concerns that could delay product launches (as noted in the GlobeNewswire report). Additionally, the rise of implantable hypoglossal nerve stimulation (HNS) devices, such as Inspire's offering, presents a niche but growing alternative for patients who struggle with traditional CPAP therapy, according to the GlobeNewswire vendor report. ResMed's response has been to expand its digital health tools, including AI-powered sleep assistants and partnerships with telehealth platforms, to retain patient engagement, as highlighted in the company's press release.

GLP-1 Therapies: A Double-Edged Sword

The emergence of GLP-1 receptor agonists (GLP-1 RAs) as a treatment for obesity-related sleep apnea introduces both challenges and opportunities. Tirzepatide (Zepbound), approved by the FDA in December 2024 for OSA treatment, has shown significant reductions in apnea-hypopnea index (AHI) and weight loss of up to 20% in clinical trials, according to a Sleepdocs analysis. While these therapies may reduce demand for CPAP devices among certain patient populations, they also create a complementary market. ResMed has proactively integrated GLP-1 therapies into its care model, offering digital tools to monitor weight loss and sleep outcomes in tandem (as discussed in the Sleepdocs analysis).

Payers are also adapting to this shift, with Medicare and some commercial plans now covering GLP-1 therapies for OSA (per the Sleepdocs analysis). This trend could drive cross-selling opportunities for ResMed, as patients on GLP-1 therapies may still require sleep devices for residual symptoms. However, the high cost of GLP-1 drugs and payer-imposed prior authorization requirements could limit their adoption, preserving demand for ResMed's core products (as noted in the Sleepdocs analysis).

Supply Chain Resilience and Strategic Expansion

ResMed's supply chain strategy has been a cornerstone of its margin resilience. The company has diversified manufacturing to Singapore and invested in automation to mitigate risks from tariffs and global disruptions, as described in the company's press release. These efforts have already yielded results, with component costs declining and lead times shortening in 2025, according to the company's press release. Looking ahead, ResMed's guidance for 2026 assumes continued supply chain stability, though it remains cautious about potential inflationary pressures in raw materials, a point discussed on the Q4 2025 call transcript.

Investment Outlook: Balancing Growth and Risks

ResMed's earnings outlook remains optimistic, supported by a projected $18.3 billion sleep apnea market by 2032 (per the GlobeNewswire report). The company's focus on digital health and operational efficiency positions it to outperform peers, even as competition intensifies. However, investors should monitor three key risks:
1. GLP-1 adoption rates: If weight-loss therapies significantly reduce CPAP demand, ResMed's revenue growth could slow.
2. Regulatory hurdles: Delays in FDA approvals for new devices could impact innovation pipelines.
3. Supply chain volatility: Persistent inflation or geopolitical tensions could erode margin gains.

Conclusion

ResMed's ability to adapt to post-pandemic challenges while innovating in digital health and supply chain management underscores its long-term value. With a resilient margin structure, a growing market, and strategic investments in complementary therapies, the company is well-positioned to sustain its growth trajectory. For investors, the key will be balancing optimism about its market leadership with vigilance over emerging competitive and regulatory dynamics.