ResMed Inc. (ASX: RMD) shares are under pressure on Friday morning.
At the time of writing, the sleep disorder treatment company's shares are down 1.5% to $29.43.
As a comparison, the ASX 200 index is up 0.7% in early trade today.
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Why are ResMed shares falling?
Investors have been selling the company's shares today after it released its third-quarter update, which appears to have been softer than the market was expecting.
According to the release, ResMed delivered an 11% (8% in constant currency) increase in revenue to US$1.4 billion. This was driven by increased demand for its portfolio of sleep devices, masks, and accessories.
ResMed's gross margin increased by 290 basis points during the quarter. This was primarily driven by component cost improvements and manufacturing and logistics efficiencies, as well as a small positive impact from product mix and foreign currency movements.
However, offsetting some of this was an 11% jump in selling, general, and administrative (SG&A) expenses. ResMed revealed that this was mainly due to additional expenses associated with its VirtuOx acquisition, employee costs, marketing, and technology investments.
SG&A expenses, excluding acquisition and portfolio review related expenses, were 19.5% of revenue in the quarter, compared with 19% in the prior corresponding period.
This led to the company's net income increasing 9% to US$398.7 million or 20% to US$417.2 million on a non-GAAP basis.
Operating cash flow was strong for the quarter and came in at US$554 million.
This allowed the ResMed board to declare a quarterly cash dividend of US$0.60 per share. Australian shareholders will receive an equivalent amount in AUD, based on the exchange rate on the record date, and reflecting the 10:1 ratio between CDIs and NYSE shares.
Management commentary
Commenting on the company's performance, ResMed's CEO, Mick Farrell, said:
Our third quarter results reflect the continued strength of our global business, driven by ongoing demand for our market-leading products and disciplined execution of our strategy. Year-over-year, we delivered 11% reported revenue growth, 290 basis points of non-GAAP gross margin expansion, and 21% increase in earnings per share.
These results highlight the momentum behind our strategy, and the continued progress we are making in shaping the future of sleep health, breathing health, and healthcare in the home. As we advance through the remainder of our fiscal year 2026, we remain focused on expanding access to care globally, scaling our digital health capabilities, and delivering further strong, profitable growth.
