Peloton Interactive shares were up sharply on Thursday morning, August 7 as the company beat top and bottom-line estimates for its fiscal fourth quarter, swinging to a quarterly profit against estimates for a Q4 loss. The company reported earnings of 5 cents per share for the period, easily outpacing the 5 cents per share loss forecast by analysts.

The company warned that sales of its exercise equipment and digital subscriptions are set to decline further in calendar 2025, prompting it to lay off some employees and relocate operations in a bid to cut costs.

Along with the revenue and earnings beats, company President and CEO Peter Stern also announced that the company was launching a cost restructuring plan intended to achieve at least $100 million of run-rate savings by the end of FY26. He said this would be achieved by reducing the size of the company’s global team, paring back indirect spend, and relocating some work.

“This is not a decision we came to lightly, as it impacts many talented team members, but we believe it is necessary for the long-term health of our business,” Stern added.

Revenue
Total company revenue was $606.9 million in the fourth quarter, which came in above the $580.54 million consensus estimate for the period, and outperforming the company’s own $571 million to $586 million implied guidance range.

Connected Fitness Products Revenue reached $198.6 million for the quarter and Subscription Revenue amounted to $408.3 million. The outperformance relative to guidance was said to be primarily driven by Connected Fitness Products Revenue from higher-than-expected hardware sales of both Peloton and Precor products.

Connected Fitness Products Revenue decreased $13.5 million, or 6 percent year-over-year, driven by lower sales and deliveries, partially offset by a mix shift toward higher-priced products.

  • Subscription Revenue decreased $23.2 million, or 5 percent year-over-year, driven by lower Paid Connected Fitness Subscriptions and lower Paid App Subscriptions, partly offset by Used Equipment Activation Fee Revenue, which was introduced in Q1 FY25.

Subscriptions
The company ended the fourth quarter with 2.80 million Ending Paid Connected Fitness Subscriptions, reflecting a net decrease of ~80,000 in the quarter due to seasonally lower hardware sales and seasonally higher churn.

Ending Paid Connected Fitness Subscriptions decreased 6 percent year-over-year, and exceeded the high end of our guidance range by ~10,000, driven by both higher additions and favorable net churn.

  • Gross additions outperformance relative to guidance was driven by stronger hardware unit sales in both first-party and thirdparty retail channels, while secondary market additions were in-line with expectations.
  • Average Net Monthly Paid Connected Fitness Subscription churn was 1.8 percent, an improvement of 10 bps year-over-year and an increase of 60 bps quarter-over-quarter, in-line with our seasonality expectations for a sequential increase in Q4. We ended Q4 with 552 thousand Ending Paid App Subscriptions.

Gross Profit and Margins
Total Gross Profit was $328.1 million in Q4, an increase of $16.1 million or 5 percent year-over-year. Total Gross Margin was 54.1 percent, an increase of 560 bps year-over-year and 380 bps above the company’s implied guidance of 50.3 percent, driven by outperformance in both segments.

  • Connected Fitness Products Gross Margin was 17.3 percent, an increase of 900 bps year-over-year, driven by inventory writedowns recorded in Q4 of last year, a mix shift toward higher margin products, and decreases in service and repair, warehousing and transportation costs.
  • Subscription Gross Margin was 71.9 percent, an increase of 370 bps year-over-year driven by decreases in music licensing royalties, personnel-related expenses, inclusive of stock-based compensation, and depreciation & amortization. Subscription Gross Margin benefited from $11.0 million of one-time balance sheet adjustments for accrued music royalties associated with renewing a music licensing agreement. Excluding these one-time benefits, Subscription Gross Margin would have been 69.2 percent.
  • Image courtesy Peloton