ResMed (ASX:RMD) Plunges 4% Despite Solid Q1: What’s Wrong?

ResMed (ASX: RMD) dropped nearly 5% on Monday despite reporting solid quarterly results. The sleep apnea treatment company delivered revenue growth of 9% to US$1.3 billion and net income up 11% to US$349 million, yet investors reversed Friday’s gains. With the broader ASX healthcare sector down 1.7%, the question is simple: if the numbers were good, why did the stock fall?

What are the Best Healthcare stocks to invest in right now?

Check our buy/sell tips

Solid Performance, Expanding Margins

ResMed’s Q1 results showed continued strength across its core business. Revenue growth was driven by strong demand for sleep devices, masks, and accessories, with the Americas up 10% and Europe/Asia up 6%. The standout metric was gross margin, which expanded 290 basis points to 61.5%, thanks to improved manufacturing efficiency and lower component costs.
Net income rose faster than revenue, despite a 7% increase in operating expenses—highlighting ResMed’s ability to scale profitably. CEO Mick Farrell called the start to FY26 “strong”, reaffirming the company’s strategy of integrating hardware, software, and solutions. A quarterly dividend of US$0.60 per share was declared, continuing its track record of shareholder returns. (Note: Australian investors should factor in exchange rate fluctuations.)

Why the Drop?

The selloff appears sentiment-driven rather than fundamental. After Friday’s 1.6% ASX gain, US investors sent NYSE-listed ResMed shares down over 2%, prompting Australian investors to follow suit. This isn’t unusual. After a strong run (RMD is up 24% YTD and 66% over five years), even good news can trigger profit-taking if results merely meet expectations.

GLP-1 Drugs: Threat or Tailwind?

Weight loss drugs like Ozempic and Zepbound may seem like a threat to ResMed’s CPAP business, especially after Zepbound was approved to treat sleep apnea in obese patients. But ResMed’s data shows GLP-1 users are actually 10.5% more likely to start CPAP therapy. Weight loss often encourages people to seek treatment, not avoid it.
Most sleep apnea patients aren’t obese, and 60% don’t qualify for GLP-1s, so CPAP remains essential. With 80% of cases still undiagnosed, anything that brings patients into care expands the market. Management sees these drugs as a growth driver, not a competitor.

Valuation: A Bit Rich?

ResMed trades at a P/E ratio of 27, slightly above its fair value estimate of 25. While not excessive, it’s elevated for a company guiding single-digit revenue growth. After a strong run, much optimism is already priced in. Consensus targets suggest ~15% upside from current levels, with growth expected to slow to 8–9% annually.

Investor Takeaway

ResMed remains a high-quality healthcare business with strong margins, market leadership, and over US$900 million in net cash. The GLP-1 narrative is more opportunity than threat, and the long-term outlook is solid. However, short-term upside may be capped unless new catalysts emerge.
Support appears around US$240, with stronger buying interest below US$230. Resistance near US$250–US$252 could limit gains.
For current holders, patience is warranted. For new investors, waiting for a pullback may offer better risk-reward. At 27x earnings, ResMed is priced for perfection, and perfection is hard to deliver every quarter.