ResMed Inc (ASX: RMD) shares are rising on Friday morning.
At the time of writing, the sleep disorder treatment company's shares are up 0.5% to $40.70.
This follows the release of the company's second quarter update before the market open.
ResMed shares higher on Q2 update
For the three months ended 31 December, ResMed reported a 10% increase in revenue to US$1.3 billion. This was ahead of the US$1,265 million that Goldman Sachs was forecasting for the three months.
This reflects increased demand for the company's sleep devices and masks portfolio, as well as solid growth across its Residential Care Software business.
Revenue in the Americas, excluding Residential Care Software, grew by 12%. Whereas revenue in Europe, Asia, and other markets, excluding Residential Care Software, grew by 8% in constant currency. Finally, Residential Care Software revenue increased by 8% on a constant currency basis.
ResMed revealed that its gross margin increased by 300 basis points mainly due to manufacturing and logistics efficiencies and component cost improvements. Non-GAAP gross margin increased by 230 basis points due to the same factors.
This ultimately led to ResMed reporting a 52% increase in income from operation to US$417.2 million and a 29% jump in non-GAAP net income to US$358.3 million. The latter was ahead of Goldman's estimate of US$349 million.
Management commentary
ResMed chair and CEO Mick Farrell was pleased with the company's performance during the quarter. He said:
Our second quarter fiscal year 2025 top-line growth, margin expansion, and double-digit EPS growth were the result of increased demand for our sleep health and breathing health products and digital health solutions that people love, as well as our laser-focus on operational excellence.
We delivered 10% year-over-year revenue growth, 230 bps improvement in gross margin, and $309 million of operating cash flow. These results are a continuation of the incredible commitment from our team to create a clear market-leading value proposition in connected digital health.
Farrell also spoke positively about the company's future and believes that ResMed is well-placed for growth. This is being supported by smart watches now being able to diagnose sleep apnoea, which could drive increased awareness. He said:
Our ecosystem is unmatched and ResMed is well-positioned to capitalize on the once-in-a-generation opportunities we have with the recent introduction and adoption of consumer wearables that track sleep health, as well as use of GLP-1 therapies.
We believe these developments will drive increased patient flow as we continue to educate people on the benefits of healthy sleep and breathing, with care delivered right in their own home.