ResMed (RMD) Stock Drops After Q1 Results Fail To Impress

ResMed just absorbed a heavy hit. The stock closed at US$229.94, down 9.1% on the day after its Q1 FY2027 earnings, even though the company delivered US$1.41b in quarterly revenue and basic earnings per share of US$2.93. That is the short term punch to the gut.

Step back a little and a different picture starts to emerge. Trailing twelve month earnings sit at US$11.01 per share and the P/E multiple is 20.3x, below both the wider medical equipment group and key peers. This clash between a selloff on the screen and firmer profit trends in the sleep and respiratory therapy business is the real story to watch.

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Q1 2027 Earnings Summary

• Revenue (Q1 2027 vs. Q1 2026): US$1,414.8m vs. US$1,335.6m (up about 5.9%)
• Net Income (Q1 2027 vs. Q1 2026): US$418.4m vs. US$348.5m (up about 20.1%)
• Basic EPS (Q1 2027 vs. Q1 2026): US$2.93 vs. US$2.38 (up about 22.8%)
• Net Profit Margin (Trailing 12 Months vs. Prior Year): 27.8% vs. 27.4% (slight margin expansion)

ResMed leaned hard into AI and digital coaching this quarter. Ask Charlie what ResMed’s AI push means for future growth.

ResMed’s Sleep Therapy Focus Meets Early Milestones

The bullish story centers on ResMed converting a sharper focus on sleep therapy into concrete progress across devices, masks and software.

"ResMed's fabric based mask portfolio, including AirTouch N30i and the F30i range, is achieving strong early adoption and higher 90 day compliance versus silicone equivalents."

Q1 indicates that this claim is not just marketing. Management highlighted a roughly 6% lift in adherence for fabric masks versus silicone, and launched the AirTouch F40 full face mask to extend that portfolio. Combined with AirSense 11 ramping in the U.S. and rising myAir engagement, the quarter supports the idea that comfort focused hardware plus digital tools can deepen long term therapy usage.

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ResMed Bear Case: Supply Strain vs Reported Strength

Bears argue that ResMed’s growth story frays if supply and logistics plans fail to keep earnings on track.

"The company is leaning heavily on long-term gross margin accretion plans and a pipeline of supply chain productivity projects through 2030. Any sustained component cost inflation or logistics disruption could cap margins below current targets and limit net margin expansion."

Q1 gross margin expanded and management kept FY2027 margin and EPS guidance intact, which points against an immediate margin air pocket. The Astral exit and ongoing component inflation are acknowledged headwinds, however. The 9.1% one day share price fall indicates that investors are not yet convinced these supply projects fully neutralize that risk.

Hunt For Dislocated Fundamentals

ResMed shows that recent earnings strength and share price reactions may diverge. The real opportunity could sit in stocks where current valuations appear out of step with underlying fundamentals.

• Company 1 - 31% below our estimate - builds dedicated AI compute clusters that large model developers use to diversify and scale training workloads.
• Company 2 - 34% below our estimate - converts long duration optical and solar supply agreements into higher margin manufacturing linked to data and energy infrastructure expansion.
• Company 3 - 38% below our estimate - expands a trade-in led device recommerce platform as consumers favor subsidized upgrades and environmentally conscious purchasing choices.

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