This morning, Peloton released their FY 2025 Q3 earnings. This is the first full quarter since Peter Stern took over as CEO on January 1st.
In a letter accompanying the results, Stern mentioned that he has laid out 4 pillars of a strategic framework the company will use moving forward. They include:
- Improve Member Outcomes
- Meet Members Everywhere
- Create Members for Life
- Operate with Business Excellence
The letter goes on to state how Peloton made some progress towards that goal, and then notes “we will further elaborate on our strategic plans by detailing some future-facing initiatives and the financial outcomes you should expect from those plans in FY26.”
This earnings call & release comes after Peloton has initiated a restructuring of their marketing department that saw their Chief Marketing Officer depart.
While Peloton’s results showed they met or exceeded their guidance for many key metrics, as well as beating many analyst expectations, the initial response to the earnings was a drop in stock price. The data shows that Peloton’s subscribers and hardware sales are continuing to decline, but, Peloton has continued to bring down their costs, meaning that Peloton’s net losses and Adjusted EBITDA continue to improve. This has led to Peloton continuing to reduce their net debt.
Analysts had expected Peloton to post a loss per share of 6 cents – but the actual results showed a loss of 12 cents.
The data released showed that Peloton’s revenue from hardware sales has continued to decline. This quarter’s “Connected Fitness Products Revenue” was $205.5 million. This was a drop from the previous quarter of $253.4 million (19% drop) and a drop from $279.9 million in Q3 2024 (a 27% year over year drop).
In addition, the number of Peloton subscribers has continued to drop – but the number of paid hardware subscribers (or “Paid Connected Fitness Subscriptions”) did trend slightly up. This quarter saw Peloton end with 6.1 million members. This number had been 6.2 million last quarter (a drop of 1%), while in Q3 2024, it had been 6.6 million.
While the overall number of members was down slightly, the number of Paid Connected Fitness Subscriptions did increase. This quarter saw Peloton end with 2.880 million paid hardware owners – an increase of 5,000 from the 2.875 million last quarter. However, this number was down from 3.051 Q3 2024. Peloton noted this increase from last quarter was “due to seasonally higher additions and lower churn.”
Peloton’s app subscriptions (which includes Strength+ only memberships) has dropped slightly as well. This quarter ended with 0.573 million paid app subscribers. This is down 2% from 0.585 million last quarter, and down 15% year over year from 0.675 million in Q3 FY24.
Overall, due to the declining hardware sales & subscriptions, Peloton did see a decline of total revenue. This quarter’s total revenue was $624 million – down from $673.9 million last quarter (a 7% drop) and down from $717.7 million in Q3 2024 (a 13% drop). Peloton’s $624 revenue beat analyst estimates of $621.3 million.
Thanks to Peloton’s continue effort to cut expenses and optimize their business, even with the drop in revenue, their net loss continued to improve (a loss of $47.7 million this quarter improved from $92 million last quarter). In addition, Peloton’s Adjusted EBITDA improved – up to $89.4 million this quarter from $58.4 last quarter.
Peloton has continued to focus on their free cash flow number – which remains positive (even while declining slightly this quarter). Peloton’s free cash flow this quarter was $94.7 million. This is down 11% from $106.0 million, but up nearly 1000% from the $8.6 million in Q3 2024.
Peloton is raising several forecasted numbers for the entire fiscal year. They state that they are “raising the midpoint of our Full Year FY25 guidance for key metrics, including Ending Paid Connected Fitness Subscriptions, Total Revenue, and Adjusted EBITDA, while maintaining guidance for Total Gross Margin. We are prioritizing these metrics along with delivering free cash flow.”
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