ResMed's Sleep Story Outlasts the GLP-1 Scare as Managers Look to Wearables and AI

After a year in which weight-loss drugs dominated the debate, most fund managers argue the evidence favours CPAP demand, while a minority questions valuation and slowing revenue growth.

· 6 min read

From GLP-1 casualty to the market's next sleep story

For most of 2026, the debate over ResMed was framed around a single question: would GLP-1 weight-loss drugs shrink the market for sleep apnoea treatment? By October, the conversation among Australian fund managers had moved on. Auscap Asset Management, which holds the company as a top-10 position across both of its funds, is now talking about wearables, AI-enabled therapy and sleep as the next frontier of consumer health, while most managers who covered the stock through the year argue the GLP-1 thesis has been tested against the numbers and found wanting.

That is not a unanimous view. Ralton Asset Management exited after the August reporting season, citing valuation and moderating revenue growth, and ClearBridge Investments noted that a small gross margin miss in the FY26 result triggered an outsized sell-off. But the centre of gravity in recent commentary is clear: managers see a market-leading franchise whose earnings have kept growing while its multiple contracted.

The evidence managers say the market ignored

Perpetual Asset Management laid out the evidence-based case in September. “There's been a lot of noise around the impact that GLP-1s will have on sleep apnea and ultimate demand for CPAP machines,” Perpetual said, adding that in US device and mask sales, where any impact should appear first, “it just hasn't transpired.” Perpetual contrasted that with sectors such as fast food, where GLP-1 effects are starting to show up in the data, and described a sub-20 times multiple for double-digit growth and a net cash balance sheet as attractive.

Blackwattle Investment Partners went further. “I think the death of ResMed has been greatly exaggerated by GLP-1s,” the manager said in September, arguing that GLP-1 prescriptions may actually widen the diagnostic funnel because people seeking the drugs are being told to get tested for sleep apnoea. ECP Asset Management made a similar point in May, saying recent data shows the drugs have expanded awareness and diagnosis rates, leading to an increase in CPAP and mask purchases.

I think the death of ResMed has been greatly exaggerated by GLP-1s.

— Blackwattle Investment Partners, Article, September 2026

Paradice Investment Management said in May that its calls with sleep doctors around the world point to the same conclusion: weight loss on its own does not resolve sleep apnoea, and CPAP remains the first line of treatment for a condition that is still underdiagnosed globally. ClearBridge, picking the stock in June, noted obstructive sleep apnoea still has only around a 20 per cent recognition or treatment rate in the US. Pengana Capital Group summarised the structural case as an under-treated population and durable margins from a duopoly device market.

Wearables, AI and the third pillar of health

The newest strand of the bull case comes from Auscap. In a September presentation, the manager said wearable devices such as the Apple Watch and Galaxy Watch can now detect sleep apnoea, which matters for a company holding roughly 75 per cent share of the space. “We talked about exercise, we talked about diet, and now the market is moving to sleep,” Auscap said, describing sleep as the third pillar of health and ResMed as the leading company positioned to serve it.

We talked about exercise, we talked about diet, and now the market is moving to sleep.

— Auscap Asset Management, Presentation, September 2026

Auscap's October quarterly report added an AI dimension. It highlighted ResMed's Smart Comfort feature, trained on more than 100 million nights of de-identified sleep data, which it described as the first FDA-cleared AI-enabled medical device that recommends personalised comfort settings for CPAP users, along with a virtual assistant called Dawn that integrates with products such as Apple Health. Alvia Asset Partners, writing in October, pointed to the continuity behind that innovation: Peter and Mick Farrell have been the only chief executives since 1989, and a long focus on reinvestment in research and manufacturing built the leading global position in CPAP devices and masks.

A sharper portfolio and bigger capital returns

Managers also see a business tightening its focus. In July, Pendal Group reported ResMed's sale of MatrixCare, Healthcare First and related residential-care software assets to Frazier Healthcare Partners for US$490 million in cash. Pendal said the market viewed it positively because it removes a drag on growth, lets management refocus on higher-quality assets such as Brightree and frees capital for buybacks.

That capital is being put to work. Auscap said ResMed has forecast 12 to 14 per cent earnings per share growth for the coming year, sits in a net cash position and has flagged a $1.5 billion share buyback in FY27. ELM Responsible Investments noted in its September quarterly that FY26 revenue reached US$5.7 billion, non-GAAP diluted EPS grew 17 per cent and more than US$1 billion was returned to shareholders, with management guiding to further substantial returns. Pendal, reviewing the result in August, described it as messy because of a divestment, an acquisition and an Astral product recall, but said US flow generator growth of 8 per cent was solid and that ResMed “continues to execute soundly.”

Philips and the competitive question

The second overhang is competition. Yarra Capital Management noted in June that a legacy US competitor currently unable to sell into the US under an FDA consent decree may eventually return, though it judged the risk overdone. Blackwattle argued Philips will need time to rebuild trust with distributors hurt by its product recall, and Elston Asset Management said in July that both the Philips and GLP-1 concerns have merit but are only part of the picture. Yarra's September view was simple: in a healthcare sector where re-rating has been PE-driven rather than earnings-driven, “in large cap, ResMed is still the standout.”

In large cap, ResMed is still the standout.

— Yarra Capital Management, Article, September 2026

The dissenting view

Not every manager is buying the recovery. Ralton exited in September, noting management guidance for constant currency revenue growth of 5 to 7 per cent and arguing that at 28 times forward earnings the multiple does not justify a slower profile. Ralton also said GLP-1 adoption presents “an ongoing structural overhang on CPAP addressable market expansion,” and that relatively low dividend yields reduced the stock's appeal for an income portfolio. ClearBridge framed the post-result sell-off differently, asking whether the underlying business value moved anywhere near as much as the share price did. Plato Investment Management, looking back to 2023, noted that while ResMed remains a successful, well-run company, its evasion signal on an earnings call had flagged the GLP-1 sentiment shift before it arrived.

What managers are watching next

The checklist for the year ahead is short. Managers will watch gross margins after the FY26 slip, which Pendal attributed to product mix, currency and some input cost and freight inflation. They will track whether US device and mask growth continues to hold up as new GLP-1 formulations, including oral versions, reach the market, and whether Philips returns to the US. And they will watch the execution of the FY27 buyback alongside whether wearables-driven diagnosis becomes the tailwind Auscap expects. For now, most managers covering the stock share Paradice's assessment of good capital management and good earnings growth at a very attractive valuation.