This morning, Peloton released their third quarter fiscal year 2026 earnings data, and the results were largely positive.
Revenue came in above both Wall Street expectations and Peloton’s own guidance, the company posted positive GAAP net income for the third time in four quarters, and they raised their full year outlook for both revenue and free cash flow.
It’s a notable contrast from last quarter, when Peloton missed revenue expectations and announced their CFO was leaving – sending the stock down nearly 25%.
Total revenue for this quarter was $630.9 million, above Peloton’s own guidance range of $605-$625 million and up 1% year-over-year. This was the first year-over-year revenue growth Peloton has reported in some time, and also above analyst expectations of $618.7 million. Peloton said they were able to exceed their guidance due to stronger-than-expected Connected Fitness equipment sales across both the Peloton and Precor brands.
Peloton posted GAAP net income of $26.4 million for the quarter, or 6 cents per share, an improvement of more than $74 million from the $47.7 million net loss in Q3 FY2025. While the 6 cents EPS came in just below the 7 cent analyst consensus, this was the third profitable quarter in the past four for Peloton. Adjusted EBITDA was $126 million, up 41% year-over-year, and Free Cash Flow was $151 million, up 59% year-over-year.
Peloton’s subscriber base continues to decline – but this is what the company has forecast. The company ended the quarter with 2.662 million paid connected fitness subscribers, which was a decrease of 218,000 (or 7.6%) year-over-year, in line with the midpoint of their guidance. However, average net monthly churn was 1.2%. This is an improvement of 7 basis points year-over-year and a meaningful drop from Q2’s 1.9% rate, which had been elevated due to the October membership price increase.
Peloton is forecasting they will end the fiscal year with subscriber numbers still declining, ending somewhere between 2.550 and 2.570 million. However, while the overall count is declining, the overall subscription revenue is increasing, ending the quarter at $428 million. This was a 4% increase in subscriber revenue from last quarter.
The one area where Peloton missed their own guidance was gross margin, which came in at 51.9% versus guidance of approximately 54%. Peloton attributed the miss to “opportunistic promotional activity” during the quarter.
Peloton’s net debt is now $173 million. This is down $412 million (or 70%) from $585 million a year ago. The company said that the deleveraging is “enabling next phase of strategic capital allocation,” suggesting Peloton may have more flexibility for investment going forward.
On the business side, Peloton highlighted a few areas of progress in the quarter, including the recently announced Peloton Commercial Series Bike and Tread (set to launch in Q2 FY27), the global Spotify partnership that launched in April, Pilates engagement up 48% year-over-year (thanks in part due to the HiLit program with Rebecca Kennedy), and the first AI-dubbed program (Andy Speer’s 5-day Advanced Split, in German and Spanish).
Peloton raised both their full year revenue and free cash flow outlook for the future. Total revenue is now expected in the range of $2.42 billion to $2.44 billion (a slight bump to the midpoint of their previous $2.40-$2.44 billion range). Free cash flow guidance was raised significantly – Peloton now expects approximately $350 million for the full year, up $75 million from their previous minimum target of $275 million. Adjusted EBITDA guidance was tightened to $470-$480 million, holding the midpoint roughly steady.
This is a developing story and will be updated
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