RMD ResMed Stock Outlook 2026: GLP-1 Fear Is Overdone, Here's the Real Math

GLP-1 fear is overdone in my read. That’s the thesis, and I’ll defend it with the numbers ResMed has actually put up.

The stock went from $300+ in early 2022 to below $150 in late 2023 as Eli Lilly’s weight-loss drugs generated headlines about the death of the CPAP market. What followed was one of the better cases of market mispricing I’ve tracked in healthcare — CPAP device activations didn’t fall, earnings accelerated, and the stock recovered to the $220-$240 range without the bear thesis ever materializing in the data.

TTM revenue of $5.54 billion, operating margin of 34.2%, and free cash flow of $1.75 billion. This is not a vulnerable business. But the GLP-1 story isn’t over, and there are legitimate long-term questions worth working through carefully.

Let me be precise about what I mean by “overdone.” I’m not arguing GLP-1 drugs have zero impact on ResMed’s long-term addressable market. Tirzepatide genuinely reduces apnea-hypopnea index scores in clinical trials — the FDA approved Zepbound for OSA for a reason. The question is whether that clinical signal translates into meaningful commercial erosion of CPAP usage at scale, over a realistic timeframe, and the data to date says no.

That doesn’t mean the bear case can never materialize. If next-generation oral GLP-1 formulations achieve 80%+ adherence rates and broad insurance coverage, the calculus changes. I’m arguing against the 2023 version of the bear case — that semaglutide and tirzepatide would rapidly obsolete CPAP therapy across the broad OSA population. That version was wrong.

ResMed at a Glance: The Business Model

Before the numbers, a quick structural overview for those new to the name.

ResMed was founded in 1989 by Dr. Peter Farrell in San Diego (headquarters remain there) and went public in 1995. CEO Mick Farrell — son of the founder — has led the company since 2013 and has been the primary architect of the digital health pivot. The company operates in two reported segments: Sleep and Breathing Health (devices, masks, consumables) and Software and Services (Brightree, MatrixCare).

The core device franchise is straightforward: ResMed makes CPAP and BiPAP machines that treat obstructive sleep apnea by delivering pressurized air through a mask to keep the airway open during sleep. OSA affects an estimated 1 billion people globally; fewer than 20% are diagnosed and treated. That 80%+ untreated gap is the secular tailwind, independent of GLP-1 dynamics.

What makes ResMed distinctive relative to most medical device companies is the software layer it has built on top of the hardware. The AirView clinical management platform, the myAir patient app, and the Brightree/MatrixCare SaaS businesses create recurring revenue streams that didn’t exist a decade ago. This transformation is why the margin story is structural rather than cyclical.

What the Financials Actually Show

ResMed’s margin expansion story is the headline buried beneath the GLP-1 noise.

Metric	FY2023	FY2024	FY2025	TTM (Mar 2026)
Revenue	$4.22B	$4.69B	$5.15B	$5.54B
Gross Margin	55.8%	56.7%	59.4%	61.6%
Operating Margin	26.8%	28.2%	32.8%	34.2%
Net Income	$898M	$1.02B	$1.40B	$1.52B
Diluted EPS	$6.09	$6.92	$9.51	$10.37
Free Cash Flow	$574M	$1.30B	$1.66B	$1.75B

The gross margin move from 55.8% to 61.6% over three years is structural, not cyclical. It reflects two simultaneous shifts: (1) AirSense 11’s embedded software subscription layer, and (2) the SaaS segment (Brightree, MatrixCare) growing faster than devices. Every 100 basis points of gross margin expansion at $5.5B revenue is $55M in incremental gross profit annually.

Free cash flow tripling from $574M in FY2023 to $1.75B TTM is the other key number. ResMed has moved from a capital-intensive device company to a cash generation machine that funds buybacks, dividends, and bolt-on acquisitions without straining the balance sheet.

The Philips Recall: A Permanent Share Transfer

When Philips Respironics announced the recall of approximately 5.5 million CPAP, BiPAP, and mechanical ventilator devices in June 2021, the CPAP industry changed structurally. The recall covered DreamStation and other devices where PE-PUR sound abatement foam could degrade and release potentially carcinogenic particles.

For ResMed, this was a gift that kept giving through FY2022 and FY2023. Millions of Philips users needed replacement devices immediately, and the only credible alternative at scale was ResMed. Fisher & Paykel Healthcare absorbed some volume but lacked the device breadth.

The key question for 2026: is this a lasting gain or a temporary one? Philips completed a strategic pivot away from sleep and respiratory care and sold its home care business. There is no credible scenario where Philips re-enters and reclaims that share. The gains are permanent.

This matters for valuation because the post-recall ResMed is a structurally different business than pre-2021 — higher market share, stronger brand recall, and a much larger installed base generating consumable (mask, cushion) replacement revenue.

GLP-1 Impact: The Real Analysis

Let me be direct about where I land on this. Tirzepatide (Zepbound) and semaglutide (Wegovy) will reduce the OSA addressable market at the margin over time. The question is by how much, over what timeframe, and whether TAM expansion from currently-undiagnosed patients offsets it.

The case for meaningful impact

Lilly’s SURMOUNT-OSA trial showed tirzepatide reduced the Apnea-Hypopnea Index (AHI) by approximately 18-25 events per hour in moderate-to-severe OSA patients. That’s clinically significant — enough to move some patients from moderate to mild or mild to normal. FDA’s approval of Zepbound for OSA was based on this data.

If GLP-1 adherence improves with next-generation oral formulations (orforglipron, danuglipron), the long-term adoption curve steepens.

The case that it’s overpriced in the bear thesis

First, current real-world GLP-1 adherence is poor. A 2024 analysis of insurance claims data found roughly 50% of patients discontinue GLP-1 therapy within 12 months. Without sustained weight loss, OSA returns. The CPAP is still on the nightstand.

Second, OSA is not a pure obesity disease. Anatomical factors — craniofacial structure, tongue volume, tonsil size — drive a significant share of OSA cases where weight loss makes minimal difference. These patients need CPAP regardless of tirzepatide availability.

Third, ResMed’s own device activation data has not declined. Management has disclosed this repeatedly. You would expect to see some signal in new-device prescriptions if GLP-1 were materially diverting patients. It hasn’t appeared.

Fourth, there’s a supply-and-demand mismatch in OSA diagnostics. The estimated global undiagnosed OSA population exceeds 800 million people. If GLP-1 therapy increases the salience of metabolic health and drives more patients into sleep studies, ResMed’s addressable market actually expands at the diagnostic funnel level. This irony is underappreciated.

For deeper context on the GLP-1 franchise itself, see our Eli Lilly stock outlook and Novo Nordisk stock outlook.

A scenario where GLP-1 helps ResMed

Here’s an argument I don’t see discussed enough: GLP-1 drugs have made obesity and metabolic health front-page news. This increased awareness may actually drive more people into sleep clinics for sleep studies than would have gone otherwise. If a patient’s cardiologist is now asking about sleep apnea as part of a weight management conversation (which is increasingly standard practice), the diagnostic pipeline expands. More diagnosed patients means more CPAP prescriptions.

The irony is real: the drugs that the market feared would kill ResMed could be channeling patients into the diagnostic funnel that feeds ResMed’s business. This isn’t speculation — Mick Farrell has referenced this dynamic on earnings calls, noting that physician awareness of the OSA-obesity link has increased substantially in the GLP-1 era.

AirSense 11 and the SaaS Layer

The AirSense 11 platform is where ResMed’s long-term margin story lives. Prior to AirSense 11, ResMed sold a device and ongoing mask/cushion consumables. With AirSense 11, it sells a device, consumables, and a data subscription layer connecting the device to the clinical workflow.

The myAir patient app tracks nightly therapy data — hours of use, mask seal quality, AHI events. This data feeds into AirView, the cloud clinical management platform used by sleep therapists to manage panels of hundreds of remote patients. For DME suppliers, Brightree’s billing and compliance workflows are built around this data.

The stickiness is structural. Once a sleep clinic is running its entire patient panel through AirView and Brightree, switching to a competitor device would require retraining staff and migrating patient histories. ResMed has created a clinical workflow lock-in that goes beyond any individual device feature.

SaaS economics: Brightree and MatrixCare combined serve tens of thousands of care facilities. Their annual contract values are subscription-based, predictable, and renew at high rates. The software segment’s gross margin is well above the device segment — the more this mix shifts, the higher ResMed’s blended margins go.

It’s worth quantifying the lock-in more precisely. A DME (durable medical equipment) supplier running Brightree has its entire billing operation, patient intake workflow, insurance prior-authorization process, and compliance documentation inside the platform. Migrating that to a different billing system is a 6-12 month project that distracts the entire operations team. The switching cost is high, which is why Brightree churn rates are low.

MatrixCare operates similarly in the long-term care sector. Skilled nursing facilities and home health agencies that have trained their clinical staff on the EHR interface, connected the platform to state Medicaid reporting systems, and built their quality metrics workflows around MatrixCare don’t switch lightly. These aren’t consumer apps people delete on a whim.

This is what makes the Software & Services segment’s growth rate more durable than the device segment. A CPAP device customer can theoretically switch to a competitor on the next prescription. A Brightree or MatrixCare customer is unlikely to switch for 3-5 years at minimum unless a competitor offers dramatically superior functionality at meaningfully lower cost.

Competitive Landscape

Inspire Medical Systems (INSP) — The hypoglossal nerve stimulator (HNS) is an implantable device that stimulates the hypoglossal nerve during sleep to keep the airway open. It’s surgical, expensive ($20,000+ procedure), and indicated for CPAP-intolerant patients with moderate-to-severe OSA. I don’t view INSP as a threat to RMD’s core market — CPAP-intolerant patients are by definition patients who have tried and failed CPAP, so they are already out of RMD’s serviceable market.

Fisher & Paykel Healthcare (FPHLY) — Competes directly with RMD in CPAP masks and high-flow nasal cannula (HFNC) therapy in hospital settings. NZ-based, well-run company. The mask competition is real but RMD maintains a global share advantage in the AirFit mask series. HFNC is a separate, growing market where both companies compete for hospital respiratory contracts.

Phillips — Effectively out of the consumer CPAP market. Residual competitive threat is minimal.

Big Tech wearables — Apple Watch sleep tracking, Garmin HRV monitoring — these are OSA screening tools, not treatments. If anything, they funnel people into the diagnostic pipeline, which benefits the CPAP market.

The international dimension: ResMed operates in 140+ countries. About 60% of revenue comes from the US and the remainder from international markets including Western Europe, Japan, Australia, and emerging markets. The developing world is where the secular tailwind is most powerful: hundreds of millions of undiagnosed sleep apnea patients in markets where CPAP penetration is in the low single digits. As healthcare infrastructure and insurance coverage expand in those markets, ResMed’s international growth engine has decades of runway.

The international business also provides a natural hedge against US-specific pricing pressure from CMS or commercial insurers. If US reimbursement rates tighten, international volume growth can compensate.

Peer Comparison

Company	Market Cap	Revenue	Operating Margin	P/E (Fwd)
RMD (ResMed)	~$32B	$5.54B TTM	34.2%	~22-23x
INSP (Inspire Medical)	~$5B	~$0.8B	-5% to 0%	N/M
MASI (Masimo)	~$4B	~$2.2B	~8-12%	~25-30x
FPHLY (Fisher & Paykel)	~$6B NZD	~$2B NZD	~18-20%	~40x

At 22x forward earnings with 34% operating margin and growing FCF, RMD is not expensive for its quality tier. It’s also not cheap — you’re paying a multiple appropriate for a compounding healthcare business with defensible market position.

Valuation and Scenarios

Let me work through the numbers more carefully before giving price targets.

At roughly $230/share, ResMed’s market cap is approximately $34 billion. Against TTM EPS of $10.37, that’s a P/E of about 22x. Forward P/E on consensus estimates is somewhat lower, around 20-21x, given expected continued earnings growth.

For a company with 34% operating margins, 60%+ gross margins, $1.75B annual free cash flow, and a secular growth market, 22x isn’t expensive. The S&P 500 Healthcare sector average P/E is typically in the 18-24x range. ResMed commands a premium within that for its margin profile, but not an extreme one.

The key question is what earnings growth rate to assign. The bear case implies earnings growth deceleration as GLP-1 drugs erode the revenue base — say 3-5% annual EPS growth. The bull case assumes the SaaS mix shift continues driving margin expansion alongside mid-to-high single digit revenue growth — say 10-12% EPS growth. My base case is 7-9% EPS growth, roughly where consensus sits.

Worked Example — Base Case

If EPS grows at 8% annually from the $10.37 TTM base, EPS in FY2028 is approximately $13.50. At a 20x forward multiple (a slight derating from current as growth moderates), that implies a $270 share price. Plus two years of $1.00+ annual dividends. Total return from $230: roughly 25-27% over two years, or 12-13% annualized. That’s a reasonable risk-adjusted return for a high-quality healthcare compounder.

Scenario	Key Assumption	FY2028 EPS Est.	Target Price
Bull	GLP-1 impact < 5% of TAM; SaaS 15%+ of revenue; 12% EPS growth	~$14.50	$280-$320
Base	7-9% revenue growth; margins 33-35%; GLP-1 contained	~$13.00-$13.50	$240-$270
Bear	GLP-1 adherence improvement; OSA market erosion 15-20%	~$9.00-$10.00	$170-$200

My base case is $240-270. The stock offers reasonable upside from current levels without requiring a heroic GLP-1 outcome in either direction.

US Investor Angle: ETF Context and Positioning

RMD is a top-15 holding in IHI (iShares U.S. Medical Devices ETF) and appears in XLV (Health Care Select Sector SPDR). Investors overweight healthcare should check for concentration before adding RMD on top of ETF exposure.

From a portfolio construction standpoint, RMD offers a useful hedge against the GLP-1 narrative — it is the asset that wins if the weight-loss drug enthusiasm overcooks, and it is also defensible if GLP-1 impact is modest because the underlying business is strong regardless.

For broader healthcare sector context, see our analysis of Abbott Laboratories and AbbVie.

Risks

GLP-1 adherence improvement — This is the primary risk. Oral GLP-1 formulations currently in Phase 3 trials (orforglipron from Eli Lilly, danuglipron from Pfizer) could meaningfully improve adherence by removing the injection barrier and potentially reducing cost through expanded competition. If 5-year adherence improves from ~40% to ~70%, the OSA TAM erosion becomes material rather than marginal.

FDA digital health regulation — Brightree and MatrixCare operate in a regulatory environment where the FDA has been progressively expanding its oversight of clinical decision software. If the FDA imposes additional premarket requirements on AI-assisted clinical tools embedded in these platforms, it could slow product development and increase compliance costs.

Currency headwinds — 40%+ of revenue is international, with meaningful exposure to EUR, AUD, and GBP. A sustained USD rally — which is plausible in a “US exceptionalism” macro scenario — compresses reported financials without any operational deterioration.

Competition in healthcare SaaS — Epic, Oracle Health, and other EHR giants are expanding into home health and long-term care modules. If Epic launches a direct competitor to Brightree’s DME billing functionality and integrates it natively within hospital systems, the switching cost dynamic could shift. This is a long-cycle risk, not an immediate threat.

Valuation compression — At 22x earnings, any growth scare compresses the multiple before fundamentals deteriorate. If Q1 FY2027 shows a CPAP volume miss for any reason (weather, supply chain, GLP-1 noise), the stock could re-rate 15-20% lower on a P/E multiple compression before the actual business impact is clear.

Reimbursement pressure — CMS periodically recalibrates CPAP reimbursement rates. A meaningful cut in the Medicare CPAP rental fee schedule would directly impact the unit economics for ResMed’s DME supplier customers, potentially affecting device demand.

International Growth: The Under-Discussed Tailwind

US investors tend to focus on the GLP-1 narrative and domestic CPAP dynamics, which is understandable. But approximately 40% of ResMed’s revenue comes from international markets, and that segment deserves more attention.

In Western Europe, CPAP therapy is reimbursed by national health systems across Germany, France, the UK, Italy, and Spain. The reimbursement structures vary — Germany’s TK and AOK sickness funds cover CPAP for patients with AHI above certain thresholds; the French Assurance Maladie covers devices through a monthly rental model. ResMed works with specialized home respiratory care providers (Orkyn, VitalAire, Linde Healthcare) that manage patient delivery under these national contracts.

The European regulatory environment has actually been a barrier to competition. The EU Medical Device Regulation (MDR) requires rigorous clinical evidence and conformity assessment for medical devices, raising the bar for new entrants trying to challenge AirSense 11’s established position.

Emerging markets — the 800M patient opportunity

The more exciting long-term story is the emerging market opportunity. Estimated OSA prevalence in Asia-Pacific, Latin America, and Africa is comparable to Western markets in percentage terms but the absolute patient numbers dwarf them. China alone may have 200-300 million people with OSA; India another 100-200 million. Current CPAP penetration in these markets is below 3%.

As middle-class incomes rise and healthcare infrastructure develops in these markets, the addressable CPAP population expands dramatically. ResMed has positioned distribution networks in China, India, Brazil, and Southeast Asia over the last decade precisely to capture this long-cycle opportunity. This is a 10-20 year secular tailwind that doesn’t appear in any 12-month GLP-1 impact analysis.

The Capital Allocation Story

ResMed’s $1.75B annual free cash flow gives management significant flexibility. The key questions are: how is it being deployed, and is that deployment creating value?

Share buybacks: ResMed has been consistently buying back shares, which reduces share count and boosts EPS mechanically. With diluted shares outstanding declining slightly each year, buybacks are a meaningful return-of-capital channel at current prices.

Dividend: At approximately $0.50/share quarterly (roughly $0.49-$0.52 range), the annual dividend runs approximately $150-$180M of cash — a small fraction of FCF. The payout ratio is conservative, leaving room for increases.

M&A: Brightree (acquired 2016, ~$800M) and MatrixCare (acquired 2018, ~$750M) were the transformative software acquisitions. ResMed has indicated appetite for additional software and digital health bolt-ons in adjacent areas (chronic disease management, sleep diagnostics, respiratory monitoring). The balance sheet is strong enough to fund another significant acquisition without overleveraging.

The capital allocation track record under Mick Farrell has been excellent. Brightree and MatrixCare have proven to be highly strategic acquisitions that accelerated the software margin expansion story. The same discipline applied to future M&A is worth betting on.

How to Think About Position Sizing

ResMed is not a stock that rewards position-sizing courage. The GLP-1 uncertainty introduces a tail risk that doesn’t exist for, say, a medical device company in a disease area with no pharmacological competitors. You should size accordingly.

For a healthcare-focused portfolio: RMD at 5-8% of healthcare allocation seems appropriate. It’s a high-quality core holding, not a high-conviction speculative bet. The 22x P/E leaves room for multiple compression if sentiment shifts, even without fundamental deterioration.

For a broader diversified portfolio: 2-4% is reasonable. Healthcare is a sector where concentration risks are real (FDA news, litigation surprises, macro shifts in CMS policy), and owning multiple healthcare names at modest weights is typically better than concentrating in one.

For the income-oriented investor: RMD’s 0.9% yield is not the reason to own it. If you’re building a dividend income portfolio, look at KVUE or sector ETFs like XLV that smooth out individual-name risk.

Bottom Line

ResMed is one of the cleaner long-term compounders in healthcare. The Philips recall handed it a structural market share gain that has proven permanent. AirSense 11 is steadily converting a device company into a platform company with meaningfully higher margins. And the GLP-1 apocalypse the market priced in 2023 simply hasn’t happened in the data.

The business runs at 34% operating margins with $1.75B in free cash flow on $5.5B revenue. Those are exceptional numbers for a medical device company and reflect both the brand dominance in CPAP and the growing software layer underneath.

At $230, it’s not a screaming buy, but it’s not expensive for the quality of the business. I’d be more aggressive below $200 and trim into strength above $270. For healthcare investors seeking an unambiguous market leader in a chronic disease with secular tailwinds — aging population, obesity prevalence, 800M+ undiagnosed globally — RMD remains a core position.

The one caveat I keep: stay alert to next-generation oral GLP-1 trial data. That’s the risk that could change the thesis, and it’s the variable I’d monitor most closely over the next 12-18 months.