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PI

PELOTON INTERACTIVE, INC. (PTON)·Q2 2025 Earnings Summary

Executive Summary

  • Revenue of $673.9M declined 9% Y/Y but exceeded the high end of guidance by $13.9M; total gross margin reached 47.2% (+700 bps Y/Y), and Adjusted EBITDA was $58.4M, $28.4M above the high end of guidance .
  • Hardware unit economics inflected: Connected Fitness Products gross margin reached 12.9% (first double-digit in 3+ years), aided by favorable mix (Tread/Tread+) and disciplined promotions; subscription gross margin was 67.9% .
  • FY25 guidance raised across key metrics: revenue to $2.43–$2.48B, total gross margin to 50.0%, Adjusted EBITDA to $300–$350M, and Free Cash Flow target to at least $200M .
  • Cash generation and deleveraging: Q2 operating cash flow $106.7M and FCF $106.0M; cash $829.0M; Net Debt down to $670.3M (−30% Y/Y) as management continues to focus on cost structure and balance sheet strength .
  • Engagement and mix trends supportive: average net monthly Connected Fitness churn 1.4%; male mix in gross additions up 280 bps Q/Q; Costco seasonal partnership was the top third-party driver of Bike+ units; Tread+ demand exceeded inventory, pushing some deliveries into Q3 .

What Went Well and What Went Wrong

What Went Well

  • Hardware margin inflection and disciplined promotions: CF Products GM reached 12.9% as mix shifted to higher-margin Tread/Tread+, with lower warehousing/transport and reduced inventory reserves; Stern highlighted “double digits for the first time in over 3 years” .
  • Strong cost execution and profitability: OpEx down 25% Y/Y; Adjusted EBITDA $58.4M (beat by $28.4M); FCF $106.0M, fourth straight quarter of positive FCF/CFO .
  • Member satisfaction and engagement improving: NPS >70 across Bike/Tread; Member Support satisfaction 4.3 (vs 3.1 in Q2 FY24); churn improved 50 bps Q/Q to 1.4% .

What Went Wrong

  • Hardware volumes softer in mid-range: Original Bike underperformed; third‑party retail sales below expectations amid lower promotional depth as Peloton prioritized margin .
  • Tread+ fulfillment constraints: higher-than-expected Tread+ sales created inventory constraints, delaying some deliveries and revenue recognition into Q3 .
  • Y/Y top-line pressure persists: total revenue −9% Y/Y; subscription revenue −1% Y/Y on lower subscriber base; CF Products revenue −21% Y/Y .

Financial Results

Consolidated metrics (oldest → newest)

MetricQ2 FY2024Q1 FY2025Q2 FY2025
Total Revenue ($M)$743.6 $586.0 $673.9
EPS (basic & diluted, $)$(0.54) $(0.00) (rounded; reported $(0.9)M net loss) $(0.24)
Total Gross Margin (%)40.3% 51.8% 47.2%
Adjusted EBITDA ($M)$(81.7) $115.8 $58.4
Cash from Operations ($M)$(31.2) $12.5 $106.7
Free Cash Flow ($M)$(37.2) $10.7 $106.0

Segment breakdown (oldest → newest)

MetricQ2 FY2024Q1 FY2025Q2 FY2025
Connected Fitness Products Revenue ($M)$319.1 $159.6 $253.4
Subscription Revenue ($M)$424.5 $426.3 $420.6
CF Products Gross Margin (%)4.3% 9.2% 12.9%
Subscription Gross Margin (%)67.3% 67.8% 67.9%
Subscription Contribution Margin (%)71.7% 71.7% 72.1%

KPIs (oldest → newest)

KPIQ2 FY2024Q1 FY2025Q2 FY2025
Ending Paid Connected Fitness Subs (M)3.004 2.900 2.879
Avg Net Monthly CF Churn (%)1.2% 1.9% 1.4%
Ending Paid App Subs (M)0.718 0.582 0.579
Avg Monthly App Churn (%)7.2% 7.1% 6.4%

Results vs guidance and Street

  • Company guidance (Q2): Revenue $640–$660M; actual $673.9M (above high end). Adjusted EBITDA $20–$30M; actual $58.4M (above high end) .
  • S&P Global Wall Street consensus for revenue/EPS was unavailable due to data access limits; therefore vs‑Street comparisons are not shown (we attempted to retrieve via S&P Global but were rate‑limited) [GetEstimates error].

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenueFY25$2.40–$2.50B $2.43–$2.48B Raised (midpoint +$0.05B)
Total Gross MarginFY2549.0% 50.0% Raised
Adjusted EBITDAFY25$240–$290M $300–$350M Raised
Ending Paid CF SubsFY252.68–2.75M 2.75–2.79M Raised
Ending Paid App SubsFY250.55–0.60M 0.55–0.60M Maintained
Free Cash Flow targetFY25≥$125M ≥$200M Raised
Total RevenueQ3 FY25—$605–$625M New intra‑year
Total Gross MarginQ3 FY25—50.0% New intra‑year
Adjusted EBITDAQ3 FY25—$70–$85M New intra‑year
Ending Paid CF SubsQ3 FY25—2.85–2.87M New intra‑year
Ending Paid App SubsQ3 FY25—0.56–0.58M New intra‑year

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY24, Q1 FY25)Current Period (Q2 FY25)Trend
Unit economics & promotionsPlan to restore CF margins; reduce promo depth/frequency; focus on LTV/CAC (Q4) . Q1 continued promotion discipline and price actions (Intl Bike/Bike+, Row NA) .CF GM hit 12.9% with favorable Tread/Tread+ mix; marketing spend −38% Y/Y; discipline on discounts .Improving discipline and margins.
Product focus: Tread/Tread+Tread+ reintroduction driving growth; Pace Targets launched; race training programs (Q4) .Tread/Tread+ exceeded plans; some deliveries slipped to Q3 due to constraints; Pace Targets used by ~60% of Tread running users .Strong demand; fulfillment catching up.
Strength & new softwareBeta for Strength+, personalized plans, game-inspired features (Q4) .Strength+: 220k MAUs; 2M unique strength users; strength minutes 735M; personalization features highlighted .Broadening beyond cycling; engagement rising.
Marketing mix & audiencesPullback on media; focus on efficiency; target men/Latine (Q4) . Q1: “Find Your Power” to drive men/Tread demand .Men = 42% of gross adds (+280 bps Q/Q); Costco seasonal partnership led Bike+ units .Better targeting; lower CAC progress.
Deleveraging & cashRefinancing reduced debt; path to sustained FCF (Q4) . Q1: positive CFO/FCF; raised FCF target .Q2 CFO $106.7M and FCF $106.0M; Net Debt down 30% Y/Y; leverage ratio improvement with interest savings .Strengthening balance sheet.
Tariffs/macroCautious macro and category softness (Q4) .If proposed tariffs fully enacted: ~1% impact to CF COGS (mainly Apparel/Precor), China alone well under 1%; paused MX/CA tariffs noted .Tariff exposure modest; monitoring.

Management Commentary

  • “During this important holiday quarter, we had 12.9% Connected Fitness Products gross margin, reaching double digits for the first time in over 3 years by selling a favorable mix of premium and [aligning] our discounts with the margins of our products.” — Peter Stern (CEO) .
  • “We are on track to exceed $200 million of run rate cost savings by the end of fiscal ’25.” — Peter Stern .
  • “Our advertising and marketing spend was down $64.4 million or 38% Y/Y while our Connected Fitness Products revenue was down by 21% Y/Y.” — Shareholder Letter .
  • “We generated $106.0 million of Free Cash Flow… our fourth consecutive quarter of positive Free Cash Flow and Net Cash Provided by Operating Activities.” — Shareholder Letter .
  • “We are raising our full year FY25 guidance… Adjusted EBITDA by $60 million to $300–$350 million… Free Cash Flow target to at least $200 million.” — Shareholder Letter .

Q&A Highlights

  • Path to growth vs profitability: Near-term focus on delivering FY25 financials (margin, cost, LTV/CAC, deleveraging) to “earn the right to grow”; longer-term growth levers are product innovation, meeting members in more places, and deepening member connections — no timeline yet .
  • Deleveraging benefits: Lower leverage improved loan tiering, cutting annualized interest expense by ~$5M as leverage ratio fell; balance sheet progress reduces risk and cost of capital over time .
  • Free cash flow drivers: Q2 FCF beat included timing benefits (music/media invoices to Q3) plus structural improvements (opex, working capital via reduced production); FY25 FCF target ≥$200M implies ≥$87M in 2H minimum .
  • Churn dynamics: Exceptional CF churn at 1.4% (tenure effect, engagement, NPS); Q3 churn expected in line with Q2; full-year churn to increase modestly due to secondary market mix and non-recurring pause/unpause benefit last year .
  • Pricing: Broad review across hardware and subscriptions; disciplined holiday promotions helped margins; no specific subscription pricing actions disclosed .
  • CF Product margin trajectory: Mix into premium products, optimized discounting, and pricing changes support further expansion; no explicit long-term target shared .

Estimates Context

  • We attempted to retrieve S&P Global (Capital IQ) consensus for revenue/EPS/EBITDA but were rate-limited; therefore, Street consensus and beats/misses vs estimates are not shown (S&P Global data unavailable at time of analysis) [GetEstimates error].
  • Company results vs guidance: Revenue beat the $640–$660M guide (actual $673.9M), and Adjusted EBITDA beat the $20–$30M guide (actual $58.4M), reflecting stronger mix and lower opex .

Key Takeaways for Investors

  • Margin-led repair is working: hardware GM turned double‑digit; subscription GM stable ~68%; total GM now high‑40s, with FY25 GM guided to 50% — a credible base for sustainable profitability .
  • Cash inflection and deleveraging reduce risk: four straight positive CFO/FCF quarters; cash balances rising; Net Debt trending lower — supports valuation resiliency and optionality for selective growth investments .
  • Growth next step hinges on execution of product roadmap: Strength+ traction, Tread/Tread+, personalization (Pace Targets/Plans) and broader men/Latine targeting show early signals; delivery constraints (Tread+) and mid-tier Bike softness are watch items .
  • Guidance raise narrows debate: FY25 Adj. EBITDA and FCF targets moved materially higher; Q3 guide embeds seasonal hardware slowdown but ongoing margin/opex leverage .
  • Mix and pricing discipline remain catalysts: continued shift to premium hardware and restrained promotions can support further CF margin expansion and durable FCF, albeit with some trade-off to unit volumes in lower-priced SKUs .
  • External risks manageable near term: Tariff exposure appears modest (~1% impact to CF COGS in aggregate if fully enacted, China well under 1%); macro and category softness remain broader headwinds .
  • Stock reaction catalyst: Continued beats vs company guidance and proof of durable FCF should be supportive; a clear roadmap/timeline to re-accelerate subscriber growth and evidence of sustained hardware margin gains would be incremental upside drivers .

Sources

  • Q2 FY2025 8‑K and Shareholder Letter (Feb 6, 2025)
  • Q2 FY2025 Earnings Call Transcript (Feb 6, 2025)
  • Q1 FY2025 8‑K and Shareholder Letter (Oct 31, 2024) for prior guidance/metrics
  • Q4 FY2024 Earnings Call Transcript (Aug 22, 2024) for earlier themes
  • Q2 FY2025 Press Release (Feb 6, 2025)