Strong profits can't hide the pain of users' “blood loss” Peloton (PTON.US)'s recovery path disappoints the market

The Zhitong Finance App learned that before the market on Thursday (August 6), Peloton Interactive (PTON.US) announced financial results for the fourth fiscal quarter and full year ending June 30, 2026. The fitness technology company handed over its first full-year profit report since listing in the 2026 fiscal year. Both Q4 revenue and profit exceeded expectations. However, as the 2027 revenue guidance fell short of expectations, the combined core user indicators continued to decline, and the stock price once fell more than 15% during pre-market trading.

From the “money burning machine” to the first full-year profit, Peloton handed over a pass-through questionnaire in terms of financial discipline; however, on the core battleground of user growth, the company's “blood loss” rate has not stopped, causing the stock price to plummet by more than 15% during pre-market trading.

Q4 results: Revenue exceeded expectations, but hardware “blood loss” intensified

In the fourth fiscal quarter, Peloton achieved revenue of US$608 million, an increase of about 1% year over year, exceeding market expectations of US$597 million. GAAP earnings per share of $0.13 were in line with analysts' expectations. Net profit reached US$61.6 million, a significant increase from US$21.6 million in the same period last year.

Although revenue exceeded expectations, the distribution of revenue structures was not encouraging. Subscription revenue increased 7% year over year to $437 million; however, revenue from connected fitness products (hardware) plummeted 14% to $171 million. Gross margin rose sharply by 260 basis points to 56.7% year over year — Peloton achieved short-term financial improvements through price increases and cost control, but the continued contraction in hardware sales is eroding the foundation of its user growth.

Even more worrisome is the continued loss of paid subscribers. At the end of the fourth quarter, the number of paid online fitness subscribers was 2.553 million, a year-on-year decrease of 247,000 (down 8.8%), falling within the company's previous guidelines. The overall number of Peloton members dropped 8% year over year to 5.5 million. The simultaneous contraction of hardware sales and user base poses the core challenge the company is currently facing.

The decline in hardware revenue is in stark contrast to the increase in subscription revenue, reflecting Peloton's transformation from a “selling hardware” to a “selling service” business model. Q4's profit performance also benefited from price increases for hardware and subscription plans implemented last fall.

Full year milestone: Achieving annual profit for the first time

For the full year of the 2026 fiscal year, Peloton achieved net profit of US$63.2 million, turning a loss into a profit from a loss of US$118.9 million in the same period last year. Annual revenue was approximately US$2.42 billion, and adjusted EBITDA reached US$468 million, up 16% year over year, and free cash flow increased 17% to US$378 million. CEO Peter Stern called the 2026 fiscal year a “milestone year,” marking Peloton's “financial maturity.”

FY2027 outlook: guidance falls short of expectations, and the price reduction cycle is the biggest drag

For the 2027 fiscal year, Peloton expects full-year revenue of 2.3 billion to 2.4 billion US dollars, a year-on-year decline of nearly 4% in median terms, which is lower than the market forecast of 2.42 billion US dollars. The gross margin for the whole year is expected to be around 54.0%, an increase of 140 basis points over the previous year. The adjusted EBITDA is estimated at $475 million to $525 million, with a gross margin of approximately 54%. The company expects to continue to achieve positive free cash flow in the 2027 fiscal year. In terms of Q1 revenue guidance, the company's forecast was $545 million to $565 million, below market expectations of $567 million.

Subscriber data is equally worrying. Hardware subscriptions are expected to drop 10% year over year in the 2027 fiscal year, further expanding from the 9% drop in the previous quarter.

CEO Peter Stern said that the main reason for the decline in revenue is that the company will face a high base effect of price increases for hardware and subscription plans last fall starting the new fiscal year. “We are gradually improving the trajectory of new users and online fitness sales while keeping the user churn rate stable... We have not reached the stage where all indicators have been corrected, but the trend is improving in FY2027.”

Strategic transformation: from a “fitness equipment vendor” to a “connected health platform”

Faced with the loss of core users, Peloton is trying to shift from “selling hardware” to “selling health services.” The company plans to double the number of retail stores, expand business partnerships, and invest more in strength training. Furthermore, the company is targeting GLP-1 diet drug user groups to enhance AI platform capabilities through personalized training plans based on wearable device data.

Recently, Peloton appointed Sarah Robb O'Hagan as Chief Content and Membership Development Officer and reached a content licensing agreement with Spotify. In the commercial sector, the company plans to launch its first commercial Bike and Tread products in the fall of this year. The company plans to double the number of retail stores and continue to expand new partnerships.

The goal of these initiatives is to transform Peloton from a “connected fitness company” to a “connected health ecosystem company.” However, the biggest unknown is whether this transformation can reverse the downward trend in revenue in the 2027 fiscal year.