Medical device company ResMed (NYSE: RMD) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 10.2% year on year to $1.35 billion. Its non-GAAP profit of $2.55 per share was 3% above analysts’ consensus estimates.

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StockStory’s Take

ResMed’s second quarter results were met with a positive market reaction, following revenue and non-GAAP profit figures that surpassed Wall Street expectations. Management attributed this performance to robust international demand for sleep and respiratory devices, ongoing operational efficiency initiatives, and strength in its ReSupply and software portfolios. CEO Michael J. Farrell emphasized the success of new product rollouts and the company’s disciplined investment in research and development, stating that strategic marketing campaigns and supply chain improvements have contributed to higher gross margins. The quarter also benefited from continued momentum in expanding software solutions and targeted acquisitions.

Looking ahead, management expects sustained margin expansion and top-line growth, underpinned by ongoing cost optimization and product launches. CFO Brett Sandercock highlighted a pipeline of procurement, manufacturing, and logistics efficiencies as key drivers for maintaining gross margins between 61% and 63% this year, while R&D investments are set to fuel innovation across both hardware and digital health platforms. CEO Farrell noted that initiatives such as broader adoption of artificial intelligence in digital tools and the integration of new diagnostic acquisitions are intended to improve patient care and operational leverage, with a focus on scaling demand generation and expanding the company’s global reach.

Key Insights from Management’s Remarks

ResMed’s management credited margin gains and international growth to operational execution, product innovation, and targeted acquisitions, with further improvements expected from ongoing strategic initiatives.

• International device sales strength: Double-digit growth in Europe, Asia, and other regions was fueled by both device and mask sales, with management citing improved performance in countries like China and robust execution in new product launches. A combination of market expansion and early-stage demand generation efforts contributed to the momentum.

• Gross margin expansion: Sequential and year-over-year improvements in gross margin were driven by procurement savings, manufacturing and logistics efficiencies, and favorable product mix. Nearly half of the sequential improvement was attributed to foreign currency, while the remainder stemmed from operational improvements such as reduced reliance on air freight and successful product transitions.

• ReSupply and mask innovation: U.S. mask sales outpaced broader market growth, which management attributed to successful new products like the AirTouch N30i and AirFit F40, as well as enhancements to ReSupply programs and digital engagement tools, including the myAir app and Brightree platform.

• Digital health and AI integration: The company advanced its digital health strategy with wider deployment of AI-powered coaching tools and virtual assistants, such as the Dawn feature in the myAir app. These initiatives are intended to improve therapy adherence and long-term patient outcomes.

• Acquisition and integration strategy: Recent acquisitions—including VirtuOx, Ectosense, and Somnoware—are being integrated into ResMed’s broader ecosystem to address diagnostic bottlenecks and streamline patient pathways from screening through therapy. Management highlighted these tuck-in deals as essential for supporting long-term growth and enhancing care delivery.

Drivers of Future Performance

ResMed’s forward outlook is shaped by continued investment in cost efficiency, innovation, and digital health, as well as market expansion and evolving regulatory dynamics.

• Cost optimization initiatives: Management expects further gains from procurement, manufacturing, and logistics improvements, along with ongoing transition to next-generation devices. These efforts are seen as critical for supporting the targeted gross margin range and offsetting potential headwinds, such as currency fluctuations and input costs.

• Product and digital innovation: The rollout of new hardware platforms and the integration of artificial intelligence into digital tools are major priorities. These innovations are expected to boost therapy adherence, streamline diagnostics, and enhance the patient experience, while supporting growth in both devices and software.

• Market and regulatory environment: Management is monitoring changes in competitive bidding processes and evolving global trade policies. While no major disruptions are anticipated, leadership remains focused on advocating for patient access and sustainable reimbursement, and views increased awareness of sleep health—spurred by pharmaceutical and wearable industry trends—as a tailwind for demand generation.

Catalysts in Upcoming Quarters

In coming quarters, our analysts will monitor (1) the pace and impact of new product rollouts—including AI-driven digital tools and next-generation masks, (2) the execution of cost optimization measures and their effect on margins, and (3) the integration and performance of recent acquisitions such as VirtuOx within the diagnostic ecosystem. Expansion in emerging markets and responses to regulatory changes will also serve as key indicators of sustained growth.

ResMed currently trades at $282.48, up from $271.97 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).

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