Peloton Interactive, Inc.

Peloton Interactive sells exercise bikes, treadmills and other fitness equipment alongside paid workout subscriptions. It also sells Precor equipment to gyms and other commercial customers. The company is headquartered in New York and trades on Nasdaq as PTON.

Subscriptions supply most revenue and carry higher gross margins than equipment. Peloton earns that revenue from connected-equipment memberships, paid apps and content licensing. An individual paid connected-fitness subscription can serve several people and different Peloton devices in one household.

Results through the September quarter

Revenue growth came from subscriptions, which rose 3.1% to $410.7 million as price increases and licensing revenue outweighed fewer paid subscriptions. Equipment revenue fell 2.6% to $148.5 million, with Precor growth partly offsetting weaker sales of certain Peloton products. Paid app subscriptions fell to 487,000 from 542,000.

Product gross margin rose to 33.4% from 6.9%, helped by refunds of previously paid import tariffs and a favorable comparison with earlier Bike+ recall costs. Subscription gross margin rose to 71.3% from 68.6%, helped by pricing and lower staffing costs.

Adjusted EBITDA was $167.8 million, compared with $118.3 million a year earlier. This measure removes interest, taxes, depreciation and amortization, share-based compensation and specified other costs from net income. The operating tariff-refund benefit remains included; the documents do not quantify the refund amount.

Earlier promises and the next targets

Peloton's August forecast for Q1 FY2027 was $545 million to $565 million of revenue, about 57% gross margin and $135 million to $145 million of adjusted EBITDA. Actual revenue was within the range, while margin reached 61.3% and adjusted EBITDA exceeded the high end. Paid connected-fitness subscriptions reached the original range's high end of 2.475 million.

The November outlook for Q2 FY2027, ending December 31, calls for $625 million to $650 million of revenue, about 50% gross margin and $85 million to $100 million of adjusted EBITDA. The earnings midpoint is 14% above the prior year's $81.4 million. Paid connected-fitness subscriptions are expected to end the quarter at 2.425 million to 2.445 million.

Full-year FY2027 targets are unchanged from August: $2.3 billion to $2.4 billion of revenue, $475 million to $525 million of adjusted EBITDA and at least $350 million of free cash flow. The revenue midpoint is about 4% below fiscal 2026.

Cash and completed debt repayment

Q1 FY2027 free cash flow was $143.4 million, versus $67.4 million a year earlier. Peloton defines it as operating cash flow less capital spending. The latest quarter's operating cash flow of $145.7 million included a $39.9 million noncash share-based-pay adjustment; inventories used $21.5 million of cash and payables and accruals supplied $26.2 million.

At September 30, cash and equivalents were $1.342 billion, with a separate $40.3 million of restricted cash backing letters of credit. Term-loan principal was $977.5 million and convertible-note principal was $350 million.

On October 9, Peloton completed a voluntary $280 million term-loan repayment using cash on hand, reducing that loan to $697.5 million. The September cash balance precedes the payment. The loan matures May 30, 2029; the 5.5% convertible notes mature December 1, 2029. A separate $100 million revolver was undrawn at September 30.

Products, acquisitions and the growth test

In its August 6 results, Peloton confirmed it had completed the acquisition of Skōp, a connected Pilates business. The company said the deal would support new products and experiences. It did not disclose the price in that announcement.

In September, Peloton announced a refreshed treadmill range including the folding Tread Flex. It also began accepting orders for Peloton-branded commercial treadmills and bikes, and announced more personalized training features through Peloton IQ.

The financial recovery now has to be judged alongside subscription retention and new demand. The December outlook still points to a smaller paid connected-fitness base. Product launches and commercial growth will show whether Peloton can broaden its customer business while keeping the lower cost base.