Resmed earnings soar—Is this sleep tech giant the next big health stock to watch?

What drove Resmed’s strong financial results in Q3 FY25?

Resmed Inc. continued its upward financial trajectory in the third quarter of fiscal year 2025, posting an 8% increase in revenue to $1.29 billion and a 22% surge in diluted earnings per share to $2.48. On a constant currency basis, revenue was up 9%, highlighting consistent demand across the company’s hardware and digital sleep health solutions. The company’s gross margin also improved by 140 basis points to 59.3%, with a corresponding 59.9% on a non-GAAP basis.

Operational performance was equally compelling. Operating income rose 14% to $426 million, and non-GAAP income from operations increased by 13% to $445 million. The company’s robust operating cash flow totalled $579 million—boosted by a $100 million IRS tax refund previously booked as a receivable—while non-GAAP net income reached $349 million.

Which regions and products contributed to revenue expansion?

The company’s performance was geographically diversified, with 9% growth in the United States, Canada, and Latin America, excluding residential care software contributions. These gains were driven by solid uptake of sleep devices and mask systems, which rose 6% and 13% respectively across the region.

In Europe, Asia, and other international markets, the company posted 8% revenue growth on a constant currency basis. Device sales grew 9% to $254 million, while masks and other products delivered a 7% constant currency increase to $128 million. Overall, the Sleep and Breathing Health segment reached $1.13 billion in global revenue—an 8% increase year-on-year.

Resmed’s Residential Care Software segment continued its double-digit momentum, growing 10% to $161 million. This business line, which focuses on cloud-based platforms for out-of-hospital care, reflects the broader industry shift towards digital health tools in chronic disease management and care delivery at home.

How is Resmed managing expenses while investing in innovation?

The company managed to keep operating costs aligned with its growth strategy. Selling, general, and administrative expenses rose 8% to $245 million but declined slightly as a percentage of revenue to 19.0%, compared to 19.2% in the prior year. This increase was driven primarily by employee-related expenses and higher marketing activity, as the company broadened its global reach and educational campaigns.

Research and development expenses rose by 9% to $84 million, underscoring Resmed’s commitment to innovation. The company continues to focus its R&D pipeline on AI-powered diagnostics, smart respiratory devices, and scalable software infrastructure. These efforts underpin the expanding suite of solutions designed to tackle sleep apnea, COPD, and related disorders.

What new launches and strategic shifts shaped the quarter?

Resmed launched its FDA-cleared NightOwl home sleep apnea test in the U.S. during the quarter. The test enables patients to conduct sleep studies at home, reducing pressure on clinics while improving access for undiagnosed populations. This initiative aligns with Resmed’s vision of decentralised, tech-enabled healthcare.

The company also released its fifth annual Global Sleep Survey, which included data from more than 30,000 respondents across 13 countries. The findings revealed that people worldwide are losing an average of nearly three nights of restorative sleep each week—emphasising the urgency of solutions that improve sleep quality.

Another key development was the company’s comprehensive brand refresh, designed to unify its hardware, software, and service offerings. This initiative is expected to enhance recognition among providers and patients and reflect Resmed’s evolution into a full-service digital health company. Additionally, Resmed received recognition as one of the “Top 100 Global Innovators” by LexisNexis, reinforcing its leadership in health tech innovation.

What’s the latest investor sentiment and stock market performance?

Resmed’s strong quarterly performance has been reflected in its stock price and market sentiment. Following the earnings release, the stock gained upward momentum as investors reacted to the robust financials and clear execution of its digital-first strategy. Trading volume rose substantially, and analysts maintained a broadly positive view of the company’s prospects.

Resmed holds a consensus “Hold” rating from analysts, with an average price target of $225. Institutional confidence remains high, with major shareholders such as The Vanguard Group and BlackRock maintaining significant positions. Insider activity has been mixed, but the broader investment community continues to view Resmed as a long-term growth play in the sleep and respiratory health markets.

The post-earnings sentiment is reinforced by the company’s consistent dividend history, solid cash reserves of $933 million, and prudent capital management. In Q3 FY25 alone, Resmed returned over $150 million to shareholders through $78 million in dividend payments and $75 million in share buybacks.

What should investors consider—Buy, Hold, or Sell?

For investors seeking exposure to the growing digital health ecosystem, Resmed offers a compelling narrative. The company’s track record of margin improvement, earnings growth, and software adoption signals enduring tailwinds. While the current analyst consensus leans toward a “Hold,” many market participants see Resmed as a long-term buy due to its strategic position at the intersection of medtech and cloud-based healthcare.

However, potential investors should weigh current valuation levels, insider selling patterns, and the global economic backdrop. Risks such as currency headwinds, regulatory developments, and competitive pricing remain key factors. Yet the fundamentals—solid cash flows, recurring revenue streams, and innovative product lines—suggest a company well-positioned for continued leadership in its sector.