Peloton (PTON) earnings Q4 2025

Peloton posted a surprise profit for its fiscal fourth quarter on Thursday and outlined its strategy to return to growth under new CEO Peter Stern. Shares rose in premarketing trading, swinging between gains of between 5% and 15%.

The connected fitness company, known for its stationary bikes and treadmills, posted a net income of $21.6 million, compared with a loss of $30.5 million in the year-earlier period. That’s thanks to better than expected sales but also, Peloton’s efforts to cut its operating expenses, which Stern said in a letter to shareholders remain too high. 

In fiscal year 2026, which began in July, the company plans to reduce run-rate expenses by another $100 million, on top of the $200 million it cut in fiscal 2025. Half of those cuts will come from indirect costs, like renegotiating contracts with suppliers, but the other half will come from cutting 6% of its staff, the company said. 

“Our operating expenses remain too high, which hinders our ability to invest in our future,” Stern wrote in the letter to shareholders. “We are launching a cost restructuring plan intended to achieve at least $100 million of run-rate savings by the end of FY26 by reducing the size of our global team, paring back indirect spend, and relocating some of our 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.”

The latest round of layoffs comes just over a year after the company announced plans to cut 15% of its staff.

For the most recent quarter, Peloton beat Wall Street expectations on the top and bottom lines. Here’s how the company did in its fourth fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

• Earnings per share: 5 cents vs. a loss of 6 cents expected
• Revenue: $607 million vs. $580 million expected

The company’s reported net income for the three-month period that ended June 30 was $21.6 million, or 5 cents per share, compared with a loss of $30.5 million, or 8 cents per share, a year earlier. 

Sales dropped to $607 million, down about 6% from a year earlier.

Ever since its pandemic heyday, Peloton has been working to cut costs, stabilize its business and generate free cash flow to ensure its business can survive. Eight months into Stern’s tenure as Peloton’s latest top executive, those efforts are starting to bear fruit. 

For the full year, the company generated $320 million in free cash flow, ahead of its own internal expectations, and its guidance implies a path to revenue growth in the back half of the year. Overall, operating expenses were down 25% in fiscal 2025, with meaningful cuts to sales and marketing as well as research and development, metrics investors and analysts have long said were too high for the size of Peloton’s business.

For the fiscal fourth quarter, operating expenses were down 20% compared to the same quarter a year prior, led by a 28% decline in sales and marketing expenses, a 20% drop in research and development costs and a 33% decline in general and administrative costs.

Peloton has also made strides in reducing its debt, which it restructured last year to stave off an imminent liquidity crunch. In fiscal 2025, its net debt declined 43%, or by $343 million, compared to the year-earlier period, bringing net debt to $459 million when cash and cash equivalents are subtracted from its total debt of about $1.5 billion.

For Peloton’s current quarter, it’s expecting sales to be between $525 million and $545 million, weaker than the $560 million than analysts had forecast, according to LSEG. However, for the full year, its expecting sales of between $2.4 billion and $2.5 billion, in line with expectations of $2.41 billion, according to LSEG. 

The current quarter is forecast to be worse than expected, largely because it falls during the summer months when people tend to pause their subscriptions and pull back on new workout gear. But the remainder of the year implies improving sales patterns in the quarters ahead. 

During the most recent quarter, Peloton sold more bikes and treadmills than Wall Street expected, posting connected fitness revenue of $198.6 million, well ahead of the $170.3 million analysts had expected, according to StreetAccount. Subscription revenue came in a bit light at $408.3 million, behind forecasts of $411 million, according to StreetAccount. 

Improving top-line metrics, which allows Peloton to better leverage its fixed costs, led to a 5.6 percentage point increase to its gross margin, which was 54.1% during the quarter, compared to 48.5% in the year ago period. 

Notably, its hardware segment, which has long been a drain on Peloton’s performance, is steadily getting more profitable. Peloton’s gross margin for hardware was 17.3%, a 9 percentage point increase from the year-ago period, driven by a shift toward more profitable products and decreases in service and repair, warehousing and transportation costs.

The company’s subscription gross margin grew by 3.7 percentage points to 71.9% but was helped by a one-time balance sheet adjustment related to music royalties costs. Excluding that benefit, subscription gross margin would have been 69.2%.

The gains that Peloton has made in improving its profits are expected to continue, but will be hampered by new 50% tariffs imposed by the Trump administration on products made with aluminum, as well as other duties that touch parts of the company’s supply chain. The company is expecting tariffs to impact free cash flow by $65 million in the year ahead and as a result, is expecting to generate $200 million in free cash flow in fiscal 2026, below what it achieved in fiscal 2025. 

In Stern’s letter to shareholders, there were no explicit plans to raise prices on subscriptions or hardware, but he said the company will rework its use of promotions and “adjust prices” to reflect its high costs. 

“For example, we will introduce optional expert assembly fees to reflect the real costs of installing our equipment, while extending free self-install to include our Tread and Row, thereby preserving Member choice and control,” Stern wrote. 

Now that cash flow and some metrics are starting to stabilize, Stern is ready to talk about growth and outlined his vision to get there in his letter to shareholders. To offset the high costs of acquiring customers online, Peloton is returning to physical retail but this time, it’ll open up micro-stores, rather than the sprawling showrooms it had in its early days. In fiscal 2025, it closed 24 retail showrooms, reducing its footprint of larger stores from 37 to 13 by the end of the fourth quarter.

Peloton plans to expand its micro-stores, from a count of one to 10, as well as grow its secondary marketplace for pre-owned hardware, Stern said. It also plans to increase the presence of its instructors at in-person events by three times this year, with the goal of increasing it by 10 times in fiscal 2027, he added.

Stern said the company will also work more closely with Precor, the fitness company it acquired under founder John Foley, by creating a “unified commercial business unit.” He also said the company will start building a plan to expand internationally – a goal that Peloton has long had but has failed to execute profitably. 

“Internationally, we plan to deliver local, in-language experiences using a mix of native instruction, AI dubbing, and more flexible approaches to music for thousands of classes,” Stern wrote. “Through partnerships, we aim to introduce the Peloton brand and experiences to millions of people around the world. Together, we believe these actions lay the groundwork for future, cost-effective launches of the full Peloton offering in new geographies.”