ResMed's growth slows as margins shrink and ventilator recall bites
Margin squeeze hits profits ResMed's operating margin fell to 30.7% from 33.7% a year earlier, and free cash flow margin dropped sharply. Higher research, supply chain and marketing costs, plus a $42 million safety charge, mean the company keeps less profit from each sale, which pushed shares down.
Margin decline is the core reason the stock dropped after earnings and is a key concern for future profitability.
Ventilator recall cuts sales ResMed suspended sales of its Astral ventilators after a serious safety recall. This removes about $75 million of expected revenue in fiscal 2027 and is a main reason the company's revenue forecast came in below what analysts expected, weighing on the stock.
The recall is a concrete, quantified headwind that directly explains the softer guidance and negative price reaction.
Soft FY27 guidance disappoints ResMed guided fiscal 2027 revenue to $5.75–$5.85 billion, below the $5.92 billion consensus. The shortfall, blamed on the ventilator recall and macro uncertainty like inflation in components and freight, caused a 7% share drop as investors worried about slower growth.
Guidance below expectations is a direct driver of the negative stock reaction and sets the growth outlook.
Divestiture and buybacks support focus ResMed is selling its MatrixCare software unit to Frazier Healthcare and buying Noctrix to expand into restless legs syndrome. It also raised its dividend 10% and plans over $1.85 billion in shareholder returns, including a $450 million accelerated share repurchase, signaling confidence and sharper focus on core sleep and respiratory care.
These capital actions show management's efforts to streamline and return cash, offering a positive counterweight to the margin and recall issues.