This morning, Peloton released their first quarter fiscal 2027 earnings data, reporting a third consecutive quarter of year-over-year revenue growth and $96.2 million in net income while paid connected fitness subscriptions fell 9% year-over-year.
The results cover the three months ended September 30, 2026. They follow Peloton’s first full year of net profitability, reported last quarter.
Peloton’s earnings and revenue beat Wall Street estimates, with diluted earnings per share being 19 cents compared to the expected 11 cents, and revenue being $559.2 million vs. $553.46 million expected.
That revenue was a 2% year-over-year increase, and was within Peloton’s $545 million to $565 million guidance range.
Adjusted EBITDA, which is earnings that exclude items including interest, taxes and stock-based compensation, was $167.8 million, up 42% and approximately $23 million above the top of the $135 million to $145 million range they had forecast. Peloton said that outperformance versus guidance was primarily driven by tariff favorability and lower-than-expected recall-related costs.
Net income rose from $13.9 million a year earlier. Operating cash flow was $145.7 million, while free cash flow, which subtracts capital expenditures, more than doubled to $143.4 million.
Total gross margin was 61.3%, above the approximately 57% Peloton had forecast. Peloton says nonrecurring benefits contributed to that result.
Total operating expenses fell 7% year-over-year to $226.2 million. Sales and marketing spending increased to $76.6 million from $66.8 million, which Peloton attributes to support for the October 1 Tread launch.
Peloton ended the quarter with 2.475 million paid connected fitness subscriptions, down from 2.553 million last quarter and 2.732 million a year ago. That is a net decline of 78,000 during the quarter, though the ending total was at the top of their guidance range.
Average net monthly connected fitness churn was 1.7%, improving from 2.2% last quarter but above the 1.6% reported a year earlier. Peloton counts cancellations and pauses as churn events, with unpauses and reactivations lowering the reported figure.
Peloton said the churn trend reflects normalization of prior one-time factors as well as underlying improvement. They reiterated guidance for full-year churn to be flat year-over-year.
Paid app subscriptions fell to 487,000, down 10% year-over-year, while total members declined to 5.3 million. Members and subscriptions are different measures, with multiple people able to use one connected fitness subscription.
Subscription revenue still increased 3% year-over-year to $410.7 million. The year-ago comparison period came before Peloton’s October 2025 membership price increase. Connected Fitness Products revenue declined 3% to $148.5 million.
After the quarter ended, Peloton voluntarily paid down $280 million of their term loan. Gross principal debt outstanding following that payment was $1.048 billion, down 32% from the beginning of calendar 2026. The payment follows the repayment of $199 million in convertible notes that matured in February. Peloton has reduced gross principal debt by nearly $500 million so far this calendar year.
Peloton also shared that Pilates workouts increased 53% year-over-year in Q1, following 44% growth last quarter. Their broader strength category accounted for 30% of workouts, alongside cardio at 55%, recovery and sleep at 12%, and meditation at 3%.
Peloton acquired connected reformer maker Skōp in June to add technology and expertise to their research and development team.
Peloton said their library now includes over 65,000 classes and over 100 structured programs. They say content is localized into three languages and that they are piloting AI dubbing for more efficient translation. We previously covered the rollout of AI-dubbed classes, starting in Spanish, in April, and then AI dubbing into English last month.
The quarter included the announcement of Tread Flex, Tread Vision and Tread+ Vision, alongside new running features. The new treadmills went on sale October 1, after the reporting period ended.
The Commercial Business Unit again delivered double-digit revenue growth. Peloton highlighted the launch of the Peloton Commercial Series, a Bike and Tread built for gyms and other high-use facilities. Ten additional U.S. microstores have opened since the beginning of Q1, bringing the total to 19, compared with their previously announced goal of 20 locations in time for the holidays.
For Q2 FY2027, which ends in December, Peloton expects revenue of $625 million to $650 million. The $637.5 million midpoint would be a 3% decline year-over-year.
They expect paid connected fitness subscriptions to fall to between 2.425 million and 2.445 million, with adjusted EBITDA of $85 million to $100 million. Gross margin is expected to be approximately 50%, down from Q1’s 61.3% and the 50.5% reported in the same quarter last year.
Peloton kept their full-year outlook unchanged: revenue of $2.3 billion to $2.4 billion, adjusted EBITDA of $475 million to $525 million, gross margin of approximately 54%, and at least $350 million in free cash flow. At the midpoints, that would mean revenue declining 4% while adjusted EBITDA rises 7%.
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