Sign in

You're signed outSign in or to get full access.

PI

PELOTON INTERACTIVE, INC. (PTON)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2025 revenue of $606.9M and total gross margin of 54.1% exceeded the high end of internal guidance, driven by stronger-than-expected Peloton and Precor hardware sales; GAAP net income was $21.6M and Adjusted EBITDA reached $140.0M .
  • Versus S&P Global consensus, Peloton delivered a revenue beat ($606.9M vs $579.9M*) and a significant Primary EPS beat (0.114 vs -0.03*), reflecting margin expansion and lower operating expenses; management also highlighted a one-time subscription gross margin benefit tied to music royalties .
  • FY2026 guidance was initiated: total revenue $2.4–$2.5B, total gross margin ~51%, Adjusted EBITDA $400–$450M, and ≥$200M free cash flow, with Q1 FY2026 revenue of $525–$545M and total gross margin ~52% .
  • Strategic narrative shifted toward holistic wellness and personalization (AI-enabled coaching), with a $100M run-rate cost-savings plan targeted by end of FY2026 and upcoming product reveals before the next call—key catalysts for investor attention .

What Went Well and What Went Wrong

What Went Well

  • Outperformed revenue and margin guidance in Q4; total gross margin rose 560 bps YoY to 54.1% on both segment improvement and a one-time music royalty accrual adjustment (“excluding this… subscription gross margin would have been 69.2%”) .
  • Strong cost discipline: total operating expenses fell 20% YoY; Adjusted EBITDA improved 99% YoY to $140.0M; free cash flow was $112.4M in Q4 and FY2025 free cash flow totaled $324M .
  • Clear strategic vision and growth vectors: AI personalization, commercial expansion (Precor + Peloton for Business), microstores, special pricing programs; “we delivered what we promised operationally and then some” .

What Went Wrong

  • Subscription base declined: Ending Paid Connected Fitness Subscriptions down 6% YoY to 2.800M; Paid App Subscriptions down 11% YoY to 552K; churn seasonally rose QoQ to 1.8% .
  • Hardware softness YoY: Connected Fitness Products revenue declined 6% YoY to $198.6M despite mix benefits; Q1 FY2026 outlook points to continued YoY declines in hardware and subs .
  • Tariff and cash headwinds ahead: FY2026 free cash flow target includes ~$65M tariff exposure; Q1 FY2026 free cash flow expected slightly negative due to inventory build and restructuring cash outlays .

Financial Results

MetricQ4 FY2024Q3 FY2025Q4 FY2025
Total Revenue ($USD Millions)$643.6 $624.0 $606.9
GAAP Diluted EPS ($USD)-$0.08 -$0.12 $0.05
Total Gross Margin (%)48.5% 51.0% 54.1%
GAAP Net Income ($USD Millions)-$30.5 -$47.7 $21.6
Adjusted EBITDA ($USD Millions)$70.3 $89.4 $140.0

Segment revenue and margins

MetricQ4 FY2024Q3 FY2025Q4 FY2025
Connected Fitness Products Revenue ($USD Millions)$212.1 $205.5 $198.6
Subscription Revenue ($USD Millions)$431.4 $418.5 $408.3
Connected Fitness Products Gross Margin (%)8.3% 14.3% 17.3%
Subscription Gross Margin (%)68.2% 69.0% 71.9% (69.2% ex one-time)

Key KPIs

KPIQ4 FY2024Q3 FY2025Q4 FY2025
Ending Paid Connected Fitness Subscriptions (Millions)2.976 2.880 2.800
Ending Paid App Subscriptions (Millions)0.621 0.573 0.552
Avg Net Monthly Paid CF Sub Churn (%)1.9% 1.2% 1.8%

Consensus vs Actual (S&P Global)

MetricConsensusActual
Revenue ($USD Millions)$579.9M*$606.9M
Primary EPS ($USD)-$0.03*0.114*

Values marked with * were retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($USD Billions)FY2026N/A$2.4–$2.5 Initiated
Total Gross Margin (%)FY2026N/A~51% (incl. allocated overhead) Initiated
Adjusted EBITDA ($USD Millions)FY2026N/A$400–$450 Initiated
Free Cash Flow ($USD Millions)FY2026N/A≥$200 (incl. ~$65M tariff exposure) Initiated
Total Revenue ($USD Millions)Q1 FY2026N/A$525–$545 Initiated
Total Gross Margin (%)Q1 FY2026N/A~52% (incl. allocated overhead) Initiated
Adjusted EBITDA ($USD Millions)Q1 FY2026N/A$90–$100 Initiated
Ending Paid CF Subscriptions (Millions)Q1 FY2026N/A2.72–2.73 Initiated

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 FY2025)Previous Mentions (Q3 FY2025)Current Period (Q4 FY2025)Trend
AI/PersonalizationLaunched Personalized Plans; Pace Targets adoption; Strength+ app 220K MAUs AI-powered subtitles and personalization testing “Advanced technologies like AI” to deliver personalized coaching; 700K members using personalized plans Strengthening
Supply chain/DeliveryTread+ delivery constraints; inventory optimization benefits FCF Continued inventory optimization aiding FCF Q1 inventory build ahead of holidays; slight negative FCF Seasonal headwind
Tariffs/MacroMinimal P&L impact expected; China-related under 1% of COGS FY25 margins minimally impacted FY26 FCF headwind ~$65M; evolving tariff environment incl. aluminum content Headwind intensifies
Product PerformanceTread and premium mix improve CF margin; lower mid-range Bike sales Subscription mix aids gross margin Higher-than-expected Peloton & Precor hardware sales drive beat Mixed: higher premium, lower volume YoY
Commercial (Precor/Hotels)Precor pilots in gyms; Hilton on-demand workouts International/pricing discipline Unified commercial BU; 80K Precor facilities/60 countries; 9K+ hotels Expanding
Health features (Strength/Meditation/Sleep)Strength workouts 2M members; meditation up; 10K run program Engagement across Sleep & Recovery and Meditation rising Strength, mental well-being, sleep; nutrition content pilots Broadening
Retail/Go-to-MarketCostco partnership; improved marketing LTV/CAC Microstore pilot exceeded showroom engagement Microstores scaling to 10 by holiday; student/special pricing programs Scaling capital-light

Management Commentary

  • “We will employ advanced technologies like AI to enhance our ability to serve as personalized coaches, delivering individual insights, recommendations, and custom tailored plans” .
  • “We plan to capture an additional $100,000,000 of run rate cost savings by the end of FY26 by optimizing indirect spend, reshaping our teams… and parting ways with a number of our talented colleagues” .
  • CFO on Q4 beat drivers: “Outperformance… was primarily driven by Connected Fitness products revenue from higher than expected hardware sales of both Peloton and Precor products” .
  • CFO on margins: “Subscription gross margin benefited from a one-time balance sheet adjustment… Excluding this one-time benefit, subscription gross margin would have been 69.2%” .
  • CEO on commercial opportunity: “Commercial fitness and wellness is ours to win… relationships with close to 100,000 facilities around the world” .

Q&A Highlights

  • Revenue trajectory: Management expects inflection toward YoY revenue growth across Q2–Q4 FY2026, driven by product innovations, pricing alignment (delivery/return fees), and seasonality; more detail before next call .
  • Cost savings cadence: ~50% of the $100M run-rate savings already actioned (workforce reductions); remainder through indirect spend and relocations; ~15% from lower SBC .
  • Gross margin outlook: FY2026 total gross margin ~51% (after ~70 bps overhead assignment headwind); improvements expected in both CF and subscription segments .
  • Capital allocation/refinancing: Net debt fell ~42% YoY; term loan priced at SOFR+5.5% with 1% call penalty until May ’26; sufficient cash to address Feb ’26 converts (0% coupon) .
  • Guidance clarifications: Q1 FY2026 free cash flow slightly negative due to holiday inventory build and restructuring cash charges; tariff exposure remains dynamic .

Estimates Context

  • Q4 FY2025: Revenue beat ($606.9M actual vs $579.9M consensus*); Primary EPS beat (0.114 actual* vs -0.03 consensus*). Drivers included stronger-than-expected hardware (Peloton/Precor), mix shift to higher-margin products, and lower operating costs; subscription margin also benefited from a one-time music royalty accrual .
  • Prior quarters: Peloton modestly beat Q3 FY2025 revenue consensus ($624.0M vs $621.3M*) and beat Q2 FY2025 revenue consensus ($674.0M vs $653.3M*), while EPS trailed consensus due to holiday season dynamics and interest expense .

Values marked with * were retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term: Q4 execution was strong with margin expansion and a revenue beat; watch for Q1 seasonal softness and temporary FCF headwinds from inventory build and restructuring cash charges .
  • Catalysts: Product innovations and AI-enabled coaching to be revealed before the next call; microstores scaling and commercial (Precor + Peloton for Business) expansion can bolster hardware/brand visibility .
  • Cost discipline: $100M run-rate savings by FY2026 and overhead allocation changes underpin FY2026 margin guidance; monitor SBC reduction and G&A optimization progress .
  • Tariff risk: FY2026 FCF target (≥$200M) embeds ~$65M tariff headwind; pricing (delivery/returns fees) and sourcing mitigations are critical to preserve margins .
  • Subscription base: Declines in Paid CF and App subs create top-line headwinds; engagement, multi-modality adoption, and special pricing/student programs are tools to stabilize churn and reaccelerate additions .
  • Valuation framework: Focus on total revenue and Adjusted EBITDA guidance (primary top-line metric going forward) alongside deleveraging trajectory to assess risk/reward through FY2026 .
  • Trade setup: Near-term volatility likely around Q1 print due to seasonality; upside skew tied to product announcements, margin resilience, and commercial wins.