Executive Summary

Q3 FY2025 results landed at or above guidance on all key metrics: revenue $624.0M, total gross margin 51.0%, Adjusted EBITDA $89.4M, free cash flow $94.7M, and Ending Paid Connected Fitness (CF) subs 2.880M; operating expenses fell 23% YoY and net loss narrowed to $(47.7)M .
Versus S&P Global consensus, Peloton slightly beat revenue and was essentially in line on EPS: Revenue $624.0M vs $621.3M consensus; Primary EPS approximately in line (company GAAP diluted EPS was $(0.12); S&P “Primary EPS” actual differs due to methodology) .
FY25 guidance raised again: Total revenue midpoint +$7.5M to $2.455–$2.470B, Adjusted EBITDA +$15M midpoint to $330–$350M, Ending Paid CF subs midpoint +10k to 2.77–2.79M; free cash flow now “in the vicinity of $250M,” gross margin maintained at 50% .
Key drivers: stronger subscription mix and improved hardware unit economics, cost discipline (S&M down 46% YoY), and lower churn; catalysts ahead include potential pricing actions, accelerated cost programs, and a FY26 strategy reveal, offset by tariff headwinds (~$5M Q4 FCF) .

What Went Well and What Went Wrong

What Went Well
- Delivered at/above guidance on revenue, gross margin, Adjusted EBITDA, free cash flow, and Ending Paid CF subs; total gross margin expanded to 51.0% (+780 bps YoY) on mix and better CFP margins (14.3%) .
- Cash generation and deleveraging: Q3 free cash flow $94.7M; cash $914.3M; net debt down 35% YoY to $584.9M .
- Strategic/operational progress: improved LTV/CAC (“slightly above 2x”), AI-enabled translation and personalized plans (~500k plans started), and expanding third‑party/retail presence; CEO: “Q3 was my first quarter as Peloton CEO, and I'm pleased to share that we performed at the high end of or above guidance on our key metrics” .
What Went Wrong
- Top-line pressure: total revenue down 13% YoY; Connected Fitness Products revenue -27% YoY on lower hardware sales across categories .
- App weakness: Paid App subs fell to 573k (-15% YoY; -2% QoQ) amid constrained media spend; App churn increased QoQ (8.1%) .
- Non-GAAP vs GAAP gap and one-timers: $33.0M impairment/restructuring (mostly non-cash) and ~$21.0M executive departure costs in G&A; net loss $(47.7)M despite strong Adjusted EBITDA .

Financial Results

Headline metrics (YoY and QoQ comparisons)

Metric	Q3 FY2024	Q2 FY2025	Q3 FY2025
Total Revenue ($M)	$717.7	$673.9	$624.0
Net Loss ($M)	$(167.3)	$(92.0)	$(47.7)
GAAP Diluted EPS	$(0.45)	$(0.24)	$(0.12)
Total Gross Margin %	43.1%	47.2%	51.0%
Adjusted EBITDA ($M)	$5.8	$58.4	$89.4
Free Cash Flow ($M)	$8.6	$106.0	$94.7

Segment breakdown and margins

Metric	Q3 FY2024	Q2 FY2025	Q3 FY2025
Connected Fitness Products Revenue ($M)	$279.9	$253.4	$205.5
Subscription Revenue ($M)	$437.8	$420.6	$418.5
CFP Gross Margin %	4.2%	12.9%	14.3%
Subscription Gross Margin %	68.1%	67.9%	69.0%

Key KPIs

KPI	Q3 FY2024	Q2 FY2025	Q3 FY2025
Ending Paid CF Subscriptions (M)	3.051	2.879	2.880
Avg Net Monthly Paid CF Churn	1.2%	1.4%	1.2%
Ending Paid App Subscriptions (M)	0.675	0.579	0.573

Actuals vs Q3 guidance (issued in Q2)

Metric	Guidance (Q3 FY25)	Actual (Q3 FY25)	Result
Total Revenue ($M)	$605–$625	$624.0	At high end
Total Gross Margin %	50.0%	51.0%	Above
Adjusted EBITDA ($M)	$70–$85	$89.4	Above
Ending Paid CF Subs (M)	2.85–2.87	2.880	Above

Notes: Company migrated subscription data model effective Jan 1, 2025; prior periods restated with immaterial impact .

Guidance Changes

Metric	Period	Previous Guidance (as of Q2)	Current Guidance (Q3)	Change
Ending Paid CF Subs (M)	FY25	2.75–2.79	2.77–2.79	Raised (midpoint +0.01M)
Ending Paid App Subs (M)	FY25	0.55–0.60	0.54–0.55	Lowered/narrowed
Total Revenue ($B)	FY25	$2.43–$2.48	$2.455–$2.470	Raised (midpoint +$0.0075B)
Total Gross Margin %	FY25	50.0%	50.0%	Maintained
Adjusted EBITDA ($M)	FY25	$300–$350	$330–$350	Raised (midpoint +$15M)
Free Cash Flow	FY25	“≥$200M”	“~$250M”	Raised; note ~$(5)M Q4 tariff FCF headwind

Tariffs: minimal impact to FY25 gross margin; equipment subject to 25% tariff on aluminum content; incremental tariffs on certain China-sourced products .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1–Q2)	Current Period (Q3)	Trend
AI/personalization	Strength+ beta; testing Personalized Plans; reduced media spend to improve LTV/CAC	~500k Personalized Plans; AI-powered subtitles translating ~100 classes/day; AI “intelligent agent” for support; CEO: “AI has the potential to give human superpowers”	Expanding scope/usage
Supply chain/costs	Opex -30% YoY; restructuring for $200M run-rate savings by FY25	Opex -23% YoY; formalizing continuous cost improvement; impairment/restructuring $33M	Continued discipline
Product performance (Tread/Strength)	Tread attach improving; Pace Targets adoption; >2M unique Strength users; Costco partnership	Tread Pace Targets used by >80% running users; kettlebell programs launched; running +5% YoY, walking +11% YoY	Mix shifting to Tread/Strength
Retail and 3P channels	Microstore concept planned; Costco deal; international Amazon/FitShop	Nashville microstore outperformed avg showroom; Amazon Big Spring Sale drove YoY hardware growth	Encouraging retail tests
International	Germany retail pivot to partners; International hardware beat	Paid CF subs grew YoY; AI subtitles enable localization (EN/ES/DE)	Growing with localization
Macro/tariffs	Not highlighted	Minimal FY25 GM impact; ~$5M Q4 FCF hit; monitoring policy	Managed headwind
Community/engagement	Teams hit 70k; high engagement events (Turkey Burn)	~100k Teams; new Team Feed; higher early engagement	Rising engagement
Legal/regulatory	—	Derivative settlement notice published (governance enhancements)	De-risking governance

Management Commentary

Strategy framing: “Our approach begins with 4 objectives: improving member outcomes… meeting members everywhere… creating members for life… and operating with business excellence” .
AI and personalization: “We launched [Personalized Plans] in Q3, and we're already up to nearly 0.5 million plans… the future is bright for Peloton members with AI” .
Cost and growth balance: “We continue to track ahead of our $200 million cost restructuring plan… We see further opportunities to reduce our costs… [while] earning the right to grow” .
CFO on efficiency: “Advertising and marketing spend decreased 46% year-over-year… These efforts drove an improvement in LTV to CAC of more than 30% YoY, achieving a ratio slightly above 2x” .
Cash and leverage: “We ended the quarter with $914 million in unrestricted cash... net debt reduced $312 million or 35% year-over-year” .

Q&A Highlights

Macro: Brief late-March/early-April softness but rebound thereafter; subscription business viewed as resilient vs macro; multiple lower-priced entry options and financing to support demand .
Pricing: Continuing to evaluate equipment pricing (including tariff effects) and subscription pricing (no update; last increase nearly 3 years ago) .
FY26 free cash flow: Expect “meaningful positive free cash flow” in FY26; note FY25 benefited from working capital tailwinds that may moderate .
Balance sheet: Ample cash to address ~$200M converts due Feb 2026; priority remains deleveraging to lower cost of capital and expand optionality .
Growth algorithm: CEO articulated growth math as ARPM × Members × Years per Member; initiatives targeting each lever (pricing/mix, distribution, retention) .

Estimates Context

Q3 FY2025 vs S&P Global consensus:
- Revenue: Actual $624.0M vs consensus $621.3M* (slight beat) .
- EPS: Company GAAP diluted EPS $(0.12) ; S&P Global “Primary EPS” actual −0.0371 vs consensus −0.0350* (near inline).
- Note on definitions: Company reports Adjusted EBITDA $89.4M ; S&P Global “EBITDA” actual $21.7M vs consensus $80.4M* reflects a different (non‑company) methodology.
Values marked with an asterisk (*) are retrieved from S&P Global.

Key Takeaways for Investors

Mix-led profitability improvements are durable: subscription revenue at 67% of sales and 69% subscription GM underpin 51% total GM and strong Adjusted EBITDA; continued cost programs should support margins even if hardware remains soft .
Balance sheet de-risking continues: robust cash generation and deleveraging (net debt down ~35% YoY) reduce financial risk and cost of capital; near-term converts manageable .
2H catalysts: FY25 guidance raised again; watch for potential pricing actions, AI-driven engagement/retention benefits, and a FY26 strategy update (new hardware/software and distribution scaling) .
Monitor App trajectory: Paid App subs declining amid constrained media spend; product upgrades (Strength+, Personalized Plans) may need incremental marketing to reaccelerate .
Tariff sensitivity: Minimal FY25 GM impact expected, but ~$5M Q4 FCF headwind and policy risk warrant monitoring .
Leadership changes aimed at execution: New COO and CCO roles focus on supply chain and commercial expansion, aligning with “meet members everywhere” strategy .

Additional Context and Source Documents

Q3 FY2025 8‑K and shareholder letter: full operating metrics, P&L, cash flow, non‑GAAP reconciliations –.
Q3 FY2025 earnings call transcript: strategy, AI initiatives, pricing/macro views, FY26 FCF posture –.
Prior quarters for trend: Q2 FY2025 8‑K (holiday quarter outperformance; raised FY25 guide) –; Q1 FY2025 8‑K (cost takeout; 51.8% GM; Adj. EBITDA $115.8M) –.
Q3‑period press releases: leadership appointments (new COO, CCO) –; derivative settlement notice –; earnings date notice .

PELOTON INTERACTIVE, INC. (PTON)·Q3 2025 Earnings Summary