ResMed (RMD) Q2 2025: Devices Up 12% in Americas, Capturing Early Demand from Wearables and GLP-1 Tailwinds

2025-01-30 | By EarningsIQ Research

ResMed leveraged double-digit device and mask growth in the Americas, outpacing market averages and capitalizing on emerging demand from consumer wearables and GLP-1-driven awareness. Sustained margin expansion and disciplined investment signal operational leverage, but the company faces a complex competitive and reimbursement landscape as megatrends reshape sleep health. Investors should watch ResMed’s ability to convert new patient flows into durable revenue as industry tailwinds accelerate.

Summary

• Device and Mask Growth Outpaces Market: ResMed captured share with double-digit gains in both devices and masks, supported by new product launches and channel execution.
• Operational Leverage from Margins and Cash Flow: Gross margin expansion and disciplined SG&A spend drove strong operating profit and cash generation.
• Megatrends Expand Patient Funnel: Wearable tech and GLP-1 therapies are activating new patient flows, but conversion and infrastructure readiness will determine long-term impact.

Business Overview

ResMed is a global leader in sleep and respiratory care, generating revenue from medical devices—primarily CPAP (Continuous Positive Airway Pressure) machines, masks, and accessories—as well as digital health and residential care software. Its major segments include sleep and breathing devices, masks and accessories, and a growing software-as-a-service (SaaS) business (Brightree, Medifox). The company’s digital ecosystem spans >140 countries and integrates hardware, cloud software, and patient engagement tools.

Performance Analysis

ResMed posted a robust quarter with group revenue up 10% year-over-year, propelled by 12% growth in the Americas and 8% in international markets (excluding residential care software). Devices and masks each grew 11% globally, signaling broad-based demand. The U.S., Canada, and Latin America drove device and mask growth, aided by strong new patient diagnoses and ongoing resupply momentum, while Europe and Asia contributed with high single-digit gains.

Gross margin expanded by 230 basis points to 59.2%, underpinned by manufacturing and logistics efficiencies and lower component costs. Operating profit increased 19% and net income rose 29%, supported by disciplined R&D and SG&A investments. Cash flow from operations was $309 million, and the company continued its $75 million per quarter share buyback program, reinforcing capital allocation discipline. Currency headwinds impacted top-line growth and EPS, but operational levers offset these pressures.

• Mask and Resupply Momentum: Double-digit mask growth was supported by Brightree and SNAP technology rollouts, and resupply programs that increase patient adherence and recurring revenue.
• Software Growth Moderates: Residential care software revenue rose 8%, with Medifox outpacing the segment and Brightree tracking in line, but post-COVID softness persisted in some senior care verticals.
• Margin Expansion Drives Leverage: Manufacturing and procurement initiatives, along with product mix, supported sustained gross margin gains, with further improvement targeted in the second half.

ResMed’s above-market growth in devices and masks reflects both execution and early benefit from expanded patient awareness, but future conversion of new patient flows will be key to sustaining outperformance.

Executive Commentary

Strategic Positioning

1. Leveraging Megatrends: Wearables and GLP-1s

ResMed is positioned at the intersection of consumer tech and medtech, with major tailwinds from FDA-cleared wearables (Samsung, Apple) and GLP-1 (weight loss) therapies expanding the sleep apnea patient funnel. Management expects these forces to drive gradual, durable increases in patient flow, not a one-time step change, requiring infrastructure and process adaptation to capture and convert demand.

2. Brand and Channel Strength in Core Markets

ResMed’s market-leading AirSense 10 and 11 platforms and robust mask portfolio continue to outperform, supported by channel partnerships and digital health tools (Brightree, AirView, MyAir app). The company’s ability to drive both new patient setups and repap (replacement device) cycles is a core differentiator, reinforced by ongoing investment in patient engagement and resupply programs.

3. Operational and Margin Discipline

Manufacturing, procurement, and product mix initiatives are expanding margins, while R&D and SG&A spend remain tightly managed. The transition to newer platforms and scale benefits, alongside a focus on supply chain efficiency, are expected to sustain gross margin in the 59–60% range, providing leverage for reinvestment and capital returns.

4. Portfolio Management in Software

The residential care software business (Medifox, Brightree) is managed as a portfolio, with investment tilted toward higher-growth, higher-synergy verticals. While Medifox (Germany) is outperforming, some senior care SaaS segments lag post-pandemic, and management is reallocating resources accordingly to maximize net operating profit growth.

5. Innovation and Adjacency Expansion

Ongoing R&D investment (6–7% of revenue) underpins new product launches, such as the AirTouch N30i (fabric-based mask) and digital solutions (Dawn, Night Owl home sleep testing). The company is also expanding into respiratory insufficiency (COPD) and insomnia, aiming to leverage digital health leadership into adjacent markets.

Key Considerations

This quarter’s results highlight ResMed’s ability to convert industry tailwinds into above-market growth, but execution risk remains as the business scales to meet new demand flows and competitive dynamics evolve.

Key Considerations:

• Wearable-Driven Demand Generation: FDA-cleared sleep apnea detection in consumer wearables is broadening the pool of potential patients, but timely diagnosis and therapy conversion are critical for revenue capture.
• GLP-1 Therapy Impact: While GLP-1s are raising sleep apnea awareness and patient activation, the full benefit will unfold over multiple quarters and years, not as a sudden surge.
• Repap and Resupply Leverage: Channel initiatives and insurance-driven replacement cycles are boosting recurring revenue, but require ongoing digital and operational investment to maintain momentum.
• Margin Sustainability: Continued gross margin expansion is reliant on manufacturing, procurement, and product mix, with FX and input cost volatility as potential swing factors.
• Software Growth Variability: SaaS growth is uneven across verticals, prompting active portfolio management and resource reallocation toward higher-return segments.

Risks

ResMed faces risks from reimbursement shifts, competitive responses (including new entrants from China or Mexico), and the pace of commercial payer adoption for GLP-1 therapies. FX headwinds, post-COVID softness in certain software verticals, and potential bottlenecks in diagnosis infrastructure could constrain patient conversion. The company’s ability to execute on scaling home sleep testing and remote setup will be tested as new patient flows accelerate.

Forward Outlook

For Q3 2025, ResMed guided to:

• Gross margin in the 59–60% range for the second half, with sequential improvement targeted through manufacturing and procurement initiatives.
• SG&A at 18–20% of revenue and R&D at 6–7% of revenue, maintaining disciplined cost structure.

For full-year 2025, management maintained guidance:

• Effective tax rate of 19–21%.
• Continued $75 million per quarter share buyback, offsetting equity dilution.

Management highlighted that megatrend-driven demand will ramp gradually, with infrastructure and process enhancements focused on capturing and converting new patient flows into durable therapy adoption.

• Gross margin improvement initiatives remain a priority.
• Portfolio management in software will drive profit leverage.

Takeaways

ResMed’s above-market growth in devices and masks reflects operational execution and early benefit from industry tailwinds, but future performance will hinge on the company’s ability to convert new patient flows into recurring revenue and defend its leadership as competition intensifies.

• Device and Mask Outperformance: Execution on new product launches, channel initiatives, and resupply programs delivered double-digit growth, outpacing market trends and expanding share.
• Margin and Cash Flow Strength: Operational leverage from gross margin expansion and disciplined cost management drove robust profit and cash flow, supporting ongoing capital returns and R&D investment.
• Watch Conversion and Infrastructure: The pace at which ResMed can scale home sleep testing, remote setup, and digital engagement will determine its ability to capitalize on wearable and GLP-1-driven demand over the next several quarters.

Conclusion

ResMed delivered a quarter of strong operational and financial execution, with clear momentum in its core device and mask businesses and early signals of benefit from industry megatrends. Sustaining this outperformance will require agile execution as patient flows shift and the competitive landscape evolves, but the company’s market position and digital health infrastructure provide a solid foundation for future growth.

Industry Read-Through

ResMed’s results underscore the accelerating convergence of consumer technology and medical devices in sleep health. FDA-cleared wearables and GLP-1 therapies are expanding the total addressable market for sleep apnea diagnosis and therapy, but also raising the bar for digital engagement, infrastructure scalability, and patient conversion. Competitors with exposure to traditional device sales or legacy care models may face pressure as the industry shifts toward more integrated, digital-first solutions. The evolving reimbursement landscape and cross-industry partnerships (e.g., Apple, Samsung) highlight the need for agility and investment in patient-centric, data-driven care pathways across medtech and adjacent health verticals.

RMD Healthcare Medical Devices Digital Health Sleep Apnea Wearables SaaS GLP-1