Peloton Interactive NASDAQ: PTON said it completed fiscal 2026 with its first full year of positive net income and operating income, while outlining new consumer and commercial product launches intended to support future growth.
Chief Executive Officer and President Peter Stern said the company generated fiscal-year net income of $63 million and operating income of $161 million. Adjusted EBITDA rose 16% year over year to $468 million, while free cash flow increased 17% to $378 million. Stern said the results reflected progress in reducing costs, including exceeding the company’s target of $100 million in run-rate savings during fiscal 2026.
The company also reported its second consecutive quarter of year-over-year revenue growth in the fourth quarter, although its fiscal 2027 outlook calls for lower revenue at the midpoint than in fiscal 2026.
Fourth-Quarter Results and Subscription Trends
Chief Financial Officer Sid Thacker said fourth-quarter revenue totaled $608 million, exceeding the high end of Peloton’s implied guidance range by $6 million and posting slight year-over-year growth. The outperformance was driven by higher connected-fitness equipment sales across both the Peloton and Precor brands.
Total gross profit increased 5% from a year earlier to $344 million, and total gross margin expanded 260 basis points to 56.7%. Adjusted operating expenses were $257 million. Excluding $24 million of non-recurring accrued legal contingencies tied to patent litigation, adjusted operating expenses declined 11% year over year.
Fourth-quarter adjusted EBITDA was $142 million, or 23% of revenue. Excluding the legal contingency, adjusted EBITDA would have been $166 million, up 19% from the prior year and $12 million above the high end of the company’s guidance range, Thacker said.
Free cash flow in the quarter was $89 million, down 21% year over year, primarily because of net working-capital timing. Peloton ended the quarter with $1.21 billion in cash, up $167 million from a year earlier, after repaying $200 million of debt in the third quarter. Net debt stood at $93 million, down 80% year over year.
Ending paid connected-fitness subscriptions were 2.553 million, within the company’s guidance range. Fourth-quarter net churn was 2.2%, up 37 basis points year over year. Thacker said roughly half of that increase was tied to one-time factors, including a change to the company’s payment-reactivation algorithm that reduced reactivations after involuntary churn.
Peloton reverted to its prior payment-recapture process and has seen involuntary churn begin to normalize, Thacker said. The company also contacted affected members and said it has had some success reactivating subscribers. Management expects full-year churn in fiscal 2027 to be roughly flat compared with fiscal 2026.
Product Pipeline and Commercial Expansion
Stern said Peloton is pursuing a strategy centered on improving member outcomes, expanding access to its offerings, building longer-term member relationships and improving business operations. During fiscal 2026, the company introduced its Cross Training Series across its bike, tread and row products and launched Peloton IQ, an artificial-intelligence-based personalized guidance feature.
More than 50% of monthly active users engaged with personalized guidance powered by Peloton IQ during the fourth quarter, Stern said. The company plans to further develop the feature through more personalized goal-setting, adaptive programming and additional wearable-device integrations.
Peloton said it will introduce additional equipment in an existing category before the end of calendar 2026. Stern also said the company plans to launch its first products in entirely new consumer categories in fall 2027, which falls in fiscal 2028. He did not provide details on those categories.
On the commercial side, Peloton plans to launch the Peloton Commercial Series, including a bike and treadmill designed for high-traffic gyms. The company’s commercial business unit recorded double-digit revenue growth in fiscal 2026 across regions and major product categories, according to Stern. He said commercial equipment typically carries higher prices and higher margins than consumer equipment, while commercial subscription revenue will build over time.
The company estimated it is approaching a 4% share of the commercial fitness-equipment market segment. It expects the new commercial equipment, sales-team investments and product development to support faster growth in fiscal 2027 and beyond.
Peloton also expanded its micro-store strategy. It ended fiscal 2026 with 10 micro stores, which Stern said have consistently outperformed the company’s former showroom fleet. Peloton recently opened three more micro stores and plans to add another seven before the holidays, which would double its micro-store footprint during the year.
Member Engagement and Partnerships
The company highlighted demand for strength and Pilates content. Pilates workouts increased 44% year over year in the fourth quarter, while Pilates workout time rose 53%. Peloton acquired Skōp, which Stern described as an early innovator in connected Pilates, to support research and development in that category.
Peloton said 316,000 members now own multiple connected-fitness products, an increase of more than 20,000 from a year earlier. Stern said those members churn at significantly lower rates than members who own one product.
The company also pointed to its partnership with Spotify, through which it offers non-equipment-based classes including strength, Pilates, barre, yoga, meditation and outdoor running and walking to Spotify premium subscribers. Stern said Mexico recently became the most engaged country outside the U.S. for Peloton content on Spotify.
Rather than building its own wearable device, Stern said Peloton intends to integrate with a broad range of wearable providers. The company has already integrated with Apple, Google and Garmin and expects to add more partners.
Fiscal 2027 Outlook
Peloton forecast fiscal 2027 revenue of $2.3 billion to $2.4 billion, representing a 3.9% year-over-year decline at the midpoint. Thacker said the outlook is affected by the comparison with the prior year’s subscription price increase, which created a one-time benefit to revenue trends in fiscal 2026.
- Fiscal 2027 total gross margin is expected to be about 54%, up approximately 140 basis points year over year.
- Adjusted EBITDA is projected at $475 million to $525 million, up 7% at the midpoint.
- Minimum free cash flow is targeted at $350 million.
- First-quarter revenue is expected to be $545 million to $565 million, up 1% year over year at the midpoint.
- First-quarter adjusted EBITDA is expected to be $135 million to $145 million.
- First-quarter ending paid connected-fitness subscriptions are projected at 2.455 million to 2.475 million.
Thacker said Peloton has begun working with bankers on a balance-sheet refinancing, with the objectives of lowering its cost of capital and gaining greater flexibility. The company received $3 million in tariff refunds from the federal government year to date and expects additional refunds, though it has not included them in its forecasts because of tariff uncertainty.
Peloton recorded a $23.8 million legal contingency accrual in the fourth quarter related to patent litigation. Thacker said the company does not currently expect potential ongoing royalty obligations to have a material impact on results.
About Peloton Interactive (NASDAQ:PTON)
Peloton Interactive, Inc operates a digital fitness platform that combines connected exercise equipment with live and on-demand workout classes. The company's core products include stationary bikes (Peloton Bike and Bike+), treadmills (Peloton Tread and Tread+), and the Peloton Row. Each device integrates a touchscreen display that streams instructor-led cycling, running, strength, yoga, meditation and other fitness classes. Peloton generates recurring revenue through subscription plans, which grant users access to its growing library of workouts, performance tracking tools and community features.
Founded in 2012 by John Foley and headquartered in New York City, Peloton set out to deliver an immersive home-fitness experience by blending hardware, software and content.
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