This morning, Peloton released their fourth quarter and full fiscal year 2026 earnings data. Peloton delivered the first full year of net profitability in company history, but the outlook they gave for the year ahead came in below what Wall Street had been expecting.
The subscriber side was a weak spot, with churn increasing to 2.2% for the quarter and Peloton guiding to another subscriber decline in the first quarter of fiscal 2027.
Peloton’s stock price (PTON) dropped roughly 12% in pre-marketing trading following the report release.
Here’s how Peloton did compared to what Wall Street was expecting:
- Earnings per share: 13 cents vs. 13 cents expected
- Revenue: $607.7 million vs. $598 million expected
Total revenue for the quarter was $607.7 million, an increase of $1 million year-over-year. For the full year, revenue was $2.446 billion, $6 million above the top of Peloton’s guidance range, which the company credited to stronger than expected equipment sales across both the Peloton and Precor brands. Full year revenue was down 1.8% from the $2.491 billion Peloton reported in fiscal 2025.
Peloton posted GAAP net income of $61.6 million for the quarter, or 13 cents per diluted share, up 185% from the $21.6 million posted in Q4 FY2025. For the full year, net income was $63.2 million, compared to a net loss of $118.9 million in fiscal 2025. Peloton says this is the first time in company history they have delivered positive net income and operating income on a full year basis. Nearly all of that annual profit arrived in the final quarter, with Q4’s $61.6 million accounting for all but roughly $1.6 million of the $63.2 million full year figure, after a $38.8 million loss in Q2.
In the earnings release, CEO Peter Stern tied the year to the cost side of the business, stating:
“Fiscal 2026 was a defining milestone as Peloton delivered its first full year of net profitability driven by our improved revenue trajectory and substantial improvements in our cost structure.”
Stern added that the company’s financial discipline “grants us greater flexibility to invest in our core strengths of premium hardware, intelligent software, and human connection.”
Peloton’s subscriber base continues to decline. The company ended the year with 2.553 million paid connected fitness subscribers, a decrease of 247,000 (or 8.8%) year-over-year, landing near the bottom of the 2.550 to 2.570 million range they guided to last quarter. App subscriptions fell 9% to 503,000, and total members (which includes all users across all products) dropped 8% to 5.5 million.
Average net monthly connected fitness churn came in at 2.2% for the quarter, up from 1.8% a year ago and a full percentage point higher than the 1.2% posted in Q3. In their earnings presentation, Peloton said one-time items had a 17 basis point impact on the quarter’s churn, but did not specify what those items were. Peloton also calculates churn net of reactivations, so any reactivations generated by the winback campaign the company ran in June, which offered some lapsed members two free months to reactivate before the quarter closed, would already be factored into the 2.2%.
In the earnings call, they stated that this increase in churn was due to a one time event. Peloton had updated their algorithms that send emails to members after failure, but found that had an adverse effect. They have since updated the frequency & timing of those emails, and found it brought churn back in line more what they were expecting.
Subscription revenue moved in the opposite direction from the subscriber count, rising 7% year-over-year to $436.6 million while the subscriber base shrank 9%. The October membership price increase more than offset the smaller base. Hardware went the other way, with Connected Fitness Products revenue down 14% year-over-year to $171.1 million.
Subscription gross margin reached 73.6% for the quarter, compared to 13.4% for Connected Fitness Products.
Total gross margin came in at 56.7% for the quarter and 52.6% for the full year, up 260 and 170 basis points respectively. Total operating expenses dropped 12% year-over-year to $263.2 million, and Peloton said they exceeded their plan to deliver more than $100 million of run-rate cost savings by the end of fiscal 2026, a target they have been working toward in part through the layoffs that affected roughly 11% of employees earlier this year.
Adjusted EBITDA was $142 million for the quarter, up 2% year-over-year, and $468 million for the full year, an increase of 16%. It also landed below the $470 to $480 million full year guidance range Peloton set last quarter. The company points to a $23.8 million nonrecurring accrued legal contingency in Q4 related to patent litigation as the drag; backing that charge out would put the figure at roughly $492 million, above the guidance range, though Peloton does not present the number that way.
During the earnings call, Peloton did identify that this $23.8 million was related to the recent case in Delaware that returned a $20.5 million verdict against Peloton in NEC Corporation’s streaming patent case on July 31. Peloton noted that they chose to do a $23.8 contingency as they see that as their “all in” cost should the ruling stand.
Free cash flow was $89 million for the quarter, down 21% year-over-year, and $378 million for the full year, up $54 million. Peloton still carries $1.299 billion in total debt, but with $1.207 billion in cash on the balance sheet, net debt has fallen to $92.6 million, down $367 million (or 80%) from $459 million a year ago. This is also the first earnings report since Sid Thacker took over as Chief Financial Officer on June 22.
On the content side, Peloton said they released 11,500 new classes in FY26, bringing the library to more than 65,000 classes, and that 69% of completed workouts during the year came from classes released in that same fiscal year. Pilates workouts were up 44% year-over-year in Q4, continuing the growth that preceded Peloton’s acquisition of connected Pilates company Skōp in June. Broken out by discipline, Q4 workouts were 55% cardio, 30% strength, 12% recovery and sleep, and 3% meditation.
Peloton also called out the Pace Your Race marathon training program and the Live Spring Cross-Training Plan, saying the two accounted for more than 850,000 completed workouts in Q4.
On the business side, Peloton’s Commercial Business Unit grew revenue double digits year-over-year in FY26 and now serves more than 80,000 facilities across 60-plus countries, with the Commercial Series bike and tread launching this fall and expected to be available in Q2 FY2027. Peloton said their microstores outperformed internal sales goals and that they plan to double the microstore fleet in fiscal 2027, after hitting their goal of 10 locations with the Denver opening last fall.
Looking ahead, Peloton is guiding Q1 FY2027 revenue of $545 million to $565 million, an increase of 0.8% year-over-year at the midpoint, with gross margin of approximately 57%, adjusted EBITDA of $135 million to $145 million, and ending paid connected fitness subscribers of 2.455 million to 2.475 million, a decline of 9.8% year-over-year at the midpoint.
For the full fiscal year 2027, Peloton expects revenue of $2.3 billion to $2.4 billion, a 3.9% decline year-over-year at the midpoint, gross margin of approximately 54%, and adjusted EBITDA of $475 million to $525 million. Peloton set a minimum free cash flow target of at least $350 million, compared to the $378 million generated in fiscal 2026.
That revenue outlook is where Peloton fell short of expectations. Analysts had been expecting roughly $2.42 billion in fiscal 2027 revenue, putting the midpoint of Peloton’s range about $70 million below the consensus figure.
The guidance continues the pattern seen in fiscal 2026: Peloton expects margins and adjusted EBITDA to improve even as full-year revenue declines, while the company did not provide a full-year subscriber forecast.
This is a developing story and will be updated.
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