Breaking Down ResMed Inc. (RMD) Financial Health: Key Insights for Investors

You're looking at ResMed Inc. (RMD) and seeing a paradox: a company that just delivered a phenomenal fiscal year 2025, but whose stock still feels like it's walking on glass, and honestly, you want to know why. The numbers are defintely strong: full-year revenue hit $5.15 billion, a 10% jump, and non-GAAP diluted earnings per share (EPS) rocketed to $9.55, up 23.7% from the prior year. Plus, the business generated $1.8 billion in operating cash flow, showing incredible operational efficiency and cash conversion. But here's the rub, the market is still pricing in the risk from GLP-1 weight-loss drugs, which some fear could fundamentally shrink the sleep apnea market, so we need to look past the robust financials to map out the real near-term risks and opportunities that will actually drive the stock price from here.

Revenue Analysis

You're looking for the core engine of ResMed Inc. (RMD)'s business, and honestly, the picture for fiscal year 2025 is one of steady, profitable growth. The company's total revenue for the full fiscal year 2025 hit approximately $5.15 billion, marking a solid 10% year-over-year increase. That's a reliable, high-single-digit expansion, which is defintely what you want to see from a market leader.

The revenue streams are well-diversified across hardware, consumables, and software, which helps insulate them from single-point market shocks. The key takeaway is that the consumables business-masks and accessories-continues to provide the high-margin, recurring revenue that underpins their valuation, but the software segment is the fastest-growing piece, even if it's the smallest.

Breaking Down Primary Revenue Sources

ResMed Inc. operates on a razor-and-blade model (devices and masks/accessories) with a growing third pillar in software. Here's a look at how the revenue pie sliced up in fiscal year 2025, using the full-year revenue of $5.15 billion to map the contributions:

• Devices (CPAP/APAP machines): Accounted for roughly 52% of sales, approximately $2.68 billion.
• Masks and Consumables: Contributed about 36% of sales, or around $1.85 billion.
• Residential Care Software (RCS): Made up the remaining 12%, approximately $618 million, and is a crucial, high-growth segment.

The device segment, which includes the popular AirSense 10 and AirSense 11 platforms, is the largest, but the mask and accessory sales are the true recurring revenue stream, driving consistent demand as patients need replacements every few months. This is the financial flywheel in action.

Geographic and Segment Growth Drivers

The geographical revenue split shows a heavy reliance on the US market, but international growth remains strong. Here's the quick math for the full year: the United States alone generated about $3.29 billion, or 63.8% of total revenue, while the rest of the world contributed $1.86 billion, or 36.2%.

For the full fiscal year 2025, the overall revenue growth was 10%, or precisely 9.84%. Device sales increased by 9%, and the masks and software segments combined grew by 10%. This shows balanced growth across the core product lines. You can dive deeper into the market dynamics by Exploring ResMed Inc. (RMD) Investor Profile: Who's Buying and Why?

The Residential Care Software (RCS) segment, while only 12% of revenue, is a critical growth area. It saw revenue increase by 9% on a constant currency basis in the fourth quarter of FY2025, reflecting continued organic growth in their out-of-hospital care portfolio. This digital health ecosystem is what differentiates ResMed Inc. from pure-play hardware competitors and is a major opportunity for margin expansion.

Profitability Metrics

You're looking at ResMed Inc. (RMD) because the headline numbers suggest a high-margin business, and honestly, you'd be right. The company's financial health in fiscal year 2025 (FY2025) shows a significant acceleration in profitability, which is a key signal for long-term investors.

For the full FY2025, ResMed reported total revenue of approximately $5.15 billion, a 10% increase year-over-year. What really matters, though, is how much of that revenue they kept, and the margins tell a powerful story of operational excellence and market dominance.

• Gross Margin: Core product profitability is strong, landing at 59.4% (GAAP).
• Operating Margin: This shows efficiency after overhead, reaching roughly 32.8% (calculated from $1.69B operating income on $5.15B revenue).
• Net Margin: The bottom-line profit margin was approximately 27.2% (calculated from $1.4B net income on $5.15B revenue).

Trends and Operational Efficiency

The trend over the last few years has been a steady march toward higher margins, but FY2025 was a defintely strong year. ResMed's strategic focus on efficiency and favorable market dynamics translated directly into profit growth far outpacing revenue growth. Here's the quick math on the profit increases:

• Gross Profit grew by 15% to $3.1 billion.
• Operating Income (Operating Profit) surged by 28% to $1.69 billion.
• Net Income (Net Profit) jumped by a remarkable 37% to $1.4 billion.

This acceleration is a clear sign that the company is managing its cost of goods sold (COGS) extremely well, largely through procurement, manufacturing, and logistics efficiencies, plus component cost improvements. Selling, General, and Administrative (SG&A) expenses also showed good control, improving to 19.0% of revenue in the third quarter of FY2025. That's how you get a 10% revenue increase to turn into a 37% net income jump-you simply run a tighter ship.

Industry Comparison: RMD Outperformance

When you stack ResMed Inc. against its medical device peers, its profitability ratios are not just competitive; they are superior in key areas. Its GAAP Gross Margin of around 60.69% is already in line with the sector average of 59.25%. But the true difference-maker is how well ResMed converts that gross profit into net income and cash flow.

ResMed's Net Margin of roughly 27% and Free Cash Flow (FCF) Margin of about 26% in FY2025 are massive outliers compared to the sector average Net Margin of only 0.38% and FCF Margin of 4%. This is the kind of financial firepower that allows for sustained investment in research and development (R&D) and shareholder returns, even in a challenging economic climate. The business model, which includes a strong Software as a Service (SaaS) component, helps drive this exceptional performance Breaking Down ResMed Inc. (RMD) Financial Health: Key Insights for Investors.

Here is a quick snapshot of ResMed's FY2025 profitability compared to the broader sector:

The takeaway is simple: ResMed has a best-in-class profitability profile, turning a higher percentage of every sales dollar into pure profit and cash flow than nearly all of its peers. This financial strength is a huge buffer against near-term risks.

Next step: Dig into the balance sheet to see if the debt profile matches this strong income statement performance.

Debt vs. Equity Structure

ResMed Inc. (RMD) maintains a remarkably conservative capital structure, which is a key signal of financial stability. The company leans heavily on equity financing and retained earnings, keeping its debt load low, especially when compared to its cash reserves. This low leverage approach means ResMed Inc. has a strong buffer against economic downturns and high interest rates.

You can see this conservative approach clearly in the latest figures. As of September 30, 2025, the company's total debt stood at approximately $668.6 million, a figure easily offset by its cash position. That's defintely a good sign.

Here's the quick math on the debt breakdown for the first quarter of fiscal year 2026 (ended September 30, 2025):

What this estimate hides is a significant shift in the short-term debt, which jumped from $9.9 million at the end of June 2025 to $259.9 million just three months later. Still, the overall long-term debt has been trending down, dropping from roughly $658.4 million to $408.7 million in the same period, showing management's commitment to debt discipline.

The Debt-to-Equity (D/E) ratio is the most telling metric here. It measures total debt against total stockholders' equity. For ResMed Inc., the D/E ratio as of September 30, 2025, was approximately 0.11 (or 10.9%). This is exceptionally low for a company of this size, and it's far below the broader Healthcare industry benchmark of around 7.9% for Debt/Common Equity, though the company's ratio is still very competitive.

This low D/E ratio means ResMed Inc. has more than $9 in equity for every $1 of debt. The company is primarily funding its growth and operations through retained earnings and equity, not through financial leverage (borrowing). In fact, with cash and cash equivalents of $1.384 billion on the balance sheet as of September 30, 2025, the company operates with a substantial net cash position, meaning it has more cash than total debt.

The company's approach to capital is clear: prioritize operational cash flow and equity funding, and use debt selectively. This strong liquidity and minimal reliance on external debt financing means ResMed Inc. has ample capacity to fund future acquisitions, R&D, and share buybacks without needing to issue new equity or take on risky debt, helping to maximize shareholder returns. For a deeper dive into the company's overall financial health, you can check out the full analysis at Breaking Down ResMed Inc. (RMD) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You need to know if ResMed Inc. (RMD) can cover its short-term obligations, and the quick answer is a resounding yes. The company's liquidity position is defintely strong, backed by a significant shift to a net cash balance in the last fiscal year.

When we look at short-term solvency, the standard metrics are impressive. ResMed Inc.'s Current Ratio for fiscal year 2025 stood at an excellent 3.44, meaning they have $3.44 in current assets for every $1.00 in current liabilities. The Quick Ratio, which strips out less-liquid inventory, was also robust at 2.53. Both figures signal a very healthy ability to meet immediate obligations without needing to liquidate long-term assets or scramble for financing. That's a huge margin of safety.

Working capital trends further underscore this strength. ResMed Inc. has a substantial working capital balance, reported at approximately $2.49 Billion, which is significantly higher than the sector average. The change in net working capital for the full fiscal year 2025 was a positive $16.74 million, contributing to their operational cash flow. This suggests efficient management of current assets and liabilities, keeping the engine running smoothly without tying up excessive cash in inventory or receivables. For a deeper dive into the company's long-term vision guiding these operational decisions, you can review their Mission Statement, Vision, & Core Values of ResMed Inc. (RMD).

The cash flow statement tells the most compelling story about ResMed Inc.'s financial muscle. For the full fiscal year 2025, Cash Flow from Operating Activities (CFO) was a massive $1.8 Billion, or $1.75 Billion, which represents a 25% increase over the prior year.

Here's the quick math on their cash movements, using the most recent Q1 2026 data as a snapshot of capital allocation:

• Operating Cash Flow: Strong at $457.321 million. This shows core operations are generating substantial cash.
• Investing Cash Flow: Net cash used was $52.578 million. This usage is primarily for capital expenditures like purchasing property, plant, and equipment ($42.965 million). It's a healthy sign of reinvestment for growth.
• Financing Cash Flow: Net cash was used for capital return, including $150.010 million for treasury stock purchases (share buybacks) and $87.750 million in dividend payments.

The clear strength is the high conversion of net income into operating cash flow, which drives an impressive Free Cash Flow (FCF) of $1.66 Billion for FY 2025. This FCF growth of approximately 28% year-over-year gives them tremendous flexibility. The biggest win is the transition to a $541 million net cash position in FY2025, where their $1.2 billion in cash and equivalents now outweighs their $668 million in total debt. This financial flexibility, plus an additional $1.5 billion in unused borrowing capacity, means liquidity is not a concern; it's a competitive advantage.

Next Step: Portfolio Managers should model the impact of a 15% increase in capital expenditures (CapEx) against the current FCF to stress-test the investment capacity over the next 18 months. Owner: Investment Strategy Team.

Valuation Analysis

You're looking for a clear answer on ResMed Inc. (RMD): Is it a buy, a hold, or a sell? The short answer is that the market currently gives it a premium, but analysts see a defintely upside, suggesting a 'Moderate Buy' consensus with a price target that points to double-digit returns.

The stock's valuation multiples for the fiscal year ending June 2025 show why investors pay up for this medical device leader. Here's the quick math on where ResMed stands based on its latest financial data.

Is ResMed Inc. (RMD) Overvalued or Undervalued?

ResMed Inc. trades at a premium to the broader market and many of its peers, which is typical for a company with its market dominance in sleep and respiratory care and its strong growth trajectory. The valuation multiples for the 2025 fiscal year reflect this expectation of continued high performance. The core question is whether the growth justifies the price.

For the fiscal year (FY) ending June 30, 2025, ResMed's key valuation ratios were:

• Price-to-Earnings (P/E) Ratio: 26.96
• Price-to-Book (P/B) Ratio: 6.33
• Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: 20.24

A P/E of nearly 27 for FY 2025 is rich, but it's actually lower than the P/E of 35.80 it saw just two years prior in FY 2023. This suggests the valuation has moderated as earnings have caught up. The latest twelve months (LTM) EV/EBITDA is even lower at around 18.5x, which is a significant drop from its five-year average of 26.5x, making the stock look relatively cheaper on an enterprise value basis than it has historically. You are paying a premium, but you're paying less of a premium than you would have a couple of years ago.

Stock Price Trends and Analyst Outlook

The stock has been somewhat volatile over the past year. As of November 20, 2025, the closing price was around $243.92. Over the last 12 months, the stock price change has been relatively flat, with one measure showing a slight fall of 0.54%, but the year-to-date return for 2025 is stronger, up about 10.74%. Still, it has underperformed the S&P 500's rise of nearly 12.3% over the past year.

The 52-week range tells the real story of investor sentiment, with a high of $293.81 and a low of $199.92. This wide swing shows the market's internal debate over growth versus competition. The good news is the analyst community has a clear view.

The consensus rating across 19 analysts is a Moderate Buy. The average price target is between $291.31 and $297.45, which implies an upside potential of roughly 18.9% to 20.05% from the current price. That's a strong signal that the Street believes the stock has room to run toward its historical valuation norms and growth expectations. Mission Statement, Vision, & Core Values of ResMed Inc. (RMD).

Dividend Profile: Growth, Not Yield

ResMed Inc. is not a high-yield stock; it's a growth stock that happens to pay a dividend. The focus here is on the safety and growth of the payout, not the immediate income.

The annual dividend is currently $2.40 per share, which translates to a modest dividend yield of about 0.98%. The important number is the payout ratio, which is only about 23.13% of earnings. This low ratio is a major strength because it means the company has plenty of room to increase the dividend-which it has for 13 consecutive years-while retaining most of its earnings to reinvest in R&D and acquisitions. That's a sign of financial health and management confidence.

Next Step: Review the company's Q1 2026 earnings transcript to gauge the momentum of the Software-as-a-Service (SaaS) segment, which is key to justifying the growth premium.

Risk Factors

You're looking for the clear-cut risks that could derail ResMed Inc. (RMD)'s otherwise impressive trajectory, and honestly, it comes down to two big external forces: a new class of drugs and the ever-present threat of government reimbursement changes. The company's financial health is strong-FY2025 revenue hit $5.1 billion, up 10% year-over-year-but even a fortress has vulnerabilities.

External and Competitive Pressures

The most significant near-term external risk is the rise of Glucagon-like peptide-1 (GLP-1) drugs, like Ozempic, which are primarily used for diabetes but are gaining traction for weight loss. Since Obstructive Sleep Apnea (OSA) is often linked to obesity, there's a lurking fear that widespread GLP-1 use could reduce the overall patient pool for Continuous Positive Airway Pressure (CPAP) devices, impacting ResMed's core device and mask sales. However, this risk is defintely a long-term one; analysts suggest CPAP demand will remain steady until the cost of these drugs drops exponentially to a normal household's affordability.

On the regulatory front, the biggest question mark is the Centers for Medicare & Medicaid Services (CMS) competitive bidding program in the U.S. If CMS were to resume or tighten this program, it would put immediate pressure on pricing and could significantly compress ResMed's non-GAAP gross margin, which stood at a robust 60.0% for FY2025. This is a clear, actionable risk that warrants close monitoring.

• GLP-1 Drugs: Potential long-term threat to OSA patient volume.
• CMS Bidding: Near-term risk of pricing pressure on devices and masks.
• Global Tax Changes: OECD Pillar Two minimum tax may impact the effective tax rate in FY2026.

Operational and Strategic Risks

Despite strong operational cash flow of $1.8 billion in FY2025, ResMed still faces operational bottlenecks. The massive increase in demand, partly due to the competitor Philips' major product recall, is a double-edged sword. Management has acknowledged the potential for bottlenecks in patient diagnosis and therapy setup. Also, as the company leans heavily into its digital health ecosystem, the use of Artificial Intelligence (AI) introduces new technology risks, including the potential for flawed algorithms, biased datasets, or legal liability under new regulations like the European Union's AI Act.

Here's the quick math on their resource allocation for the year:

Mitigation Strategies and Clear Actions

The company is not sitting still; they are actively managing these risks. To address the operational demand bottleneck, they opened a new manufacturing facility in Calabasas, California, which will double the U.S. manufacturing footprint and enhance production capacity for mask resupply. Strategically, ResMed continues to invest heavily in its cloud-connected devices and digital health platforms, which helps with patient adherence and provides a competitive moat (economic barrier to entry) that is hard to replicate. Plus, they've confirmed that their medical devices are exempt from current global trade tariffs, which removes a common financial risk for international manufacturers. If you want to dive deeper into the players betting on these moves, you should check out Exploring ResMed Inc. (RMD) Investor Profile: Who's Buying and Why?

Growth Opportunities

You're looking for a clear path forward with ResMed Inc. (RMD), and the direct takeaway is this: the company is successfully converting its market leadership and digital ecosystem into consistent, high-single-digit growth, with operating efficiency driving even faster earnings expansion. Their fiscal year 2025 results show they are defintely executing on their strategy.

Product Innovation and Market Expansion Fueling the Core

The primary growth engine remains two-fold: product innovation and geographic expansion. In fiscal year 2025, ResMed Inc. delivered a 10% year-over-year revenue increase, reaching $5.1 billion. This wasn't just a fluke; it was driven by strong demand for their next-generation devices, like the AirSense 11 series, and a continuous rollout of new mask platforms, including fabric mask offerings.

Here's the quick math: mask sales and device sales both grew strongly, but the real upside is in market penetration. While the U.S. market is over 10% penetrated, international markets are still under 10%. That gap is the opportunity. The company is actively targeting high-growth markets in Asia and Latin America, which contributed to double-digit growth in Europe and Asia in one quarter.

• Scale new mask platforms and AI tools.
• Expand in Asia and Latin America.
• Drive U.S. CPAP destigmatization.

Future Projections and The 2030 Strategy

Looking ahead, the financial outlook is strong, with profit growth outpacing revenue growth due to operational efficiencies. For the full fiscal year 2025, non-GAAP diluted earnings per share (EPS) hit $9.55. Analysts are projecting full-year 2026 revenue to climb to around $5.58 billion. The company's long-term strategic initiatives are designed to sustain this trajectory.

The '2030 Strategy' is the blueprint. Their goal is ambitious: to help over 500 million people worldwide achieve their full health potential by 2030. They are backing this up by committing to invest 7% of revenue into Research & Development (R&D) to build a fully integrated digital ecosystem. This focus on R&D is what will keep them ahead of the curve.

Competitive Moat and Near-Term Headwinds

ResMed Inc.'s competitive advantage (or moat) is its connected digital health platform. They have a massive data advantage, leveraging data from over 28 million patients in their AirView™ platform. This digital ecosystem, bolstered by tuck-in acquisitions like VirtuOx and Ectosense, streamlines the patient journey from diagnosis to therapy, making it harder for competitors to match the convenience and adherence rates. Plus, their software as a service (SaaS) segment, while only a portion of revenue, saw organic growth near 10% in the first half of FY25.

Still, you can't ignore the noise around GLP-1 weight loss drugs. To be fair, management is viewing the introduction of these new drugs as a potential market expander, not a threat, believing they will broaden the addressable market for sleep apnea solutions. The real risk is the ongoing potential for U.S. competitive bidding pressures. If you want a deeper dive into who is betting on this future, you should check out Exploring ResMed Inc. (RMD) Investor Profile: Who's Buying and Why?

Next Step: Model a sensitivity analysis on your valuation, factoring in a 5% reduction in average selling price (ASP) for devices to account for potential bidding pressure.