Peloton Interactive Q1 Earnings Call Highlights

Key Points

• Peloton beat Q1 expectations: Revenue rose 2% year over year to $559 million, while adjusted EBITDA climbed 42% to $168 million. Higher margins and free cash flow also reflected lower recall costs and favorable tariff effects.
• Full-year guidance was unchanged: Peloton expects fiscal 2027 revenue of $2.3 billion to $2.4 billion, implying a roughly 4% decline at the midpoint, and adjusted EBITDA of $475 million to $525 million. It also paid down $280 million of term-loan debt after quarter-end.
• Subscriber trends and new products remain in focus: The company ended the quarter with 2.475 million paid connected fitness subscriptions, while second-quarter subscriptions are expected to decline year over year. Peloton launched a refreshed treadmill lineup and reported 13% growth in commercial revenue.

Peloton Interactive NASDAQ: PTON reported higher revenue and stronger-than-expected profitability for its fiscal first quarter of 2027, helped by subscription price increases, lower recall costs and favorable tariff effects. The connected fitness company maintained its full-year outlook, which calls for revenue to decline at the midpoint.

Revenue rose 2% year over year to $559 million, marking Peloton’s third consecutive quarter of growth and exceeding the midpoint of its guidance by $4 million. Adjusted EBITDA rose 42% to $168 million, exceeding the top of the company’s forecast by $23 million.

CEO Peter Stern said the company’s quarterly performance, debt reduction and new treadmill lineup showed progress in its financial and strategic transformation. He cautioned, however, that revenue growth would not necessarily continue at the same pace as Peloton laps last year’s subscription price increases.

Margins and cash flow improve

Gross profit increased 21% to $343 million, while gross margin rose to 61.3% from roughly 51.6% a year earlier. CFO Sid Thacker attributed part of the improvement to favorable tariffs on Peloton and Precor products and lower recall costs.

Those factors also contributed to the adjusted EBITDA beat. Excluding approximately $25 million in tariff and recall-related benefits, adjusted EBITDA would have been $143 million, or $3 million above the midpoint of guidance, Thacker said.

Connected fitness gross margin was about 33%, compared with 6.9% a year earlier. Thacker said the latest figure would have been approximately 17% without the tariff and recall-related benefits, with a shift toward higher-margin products also supporting the year-over-year improvement.

Free cash flow increased to $143 million from $67 million a year earlier, reflecting higher adjusted EBITDA and the timing of working capital. Peloton ended the quarter with $1.34 billion in cash and equivalents, exceeding its total debt.

After quarter-end, Peloton made a $280 million voluntary payment on its term loan, reducing the balance to approximately $700 million. Thacker said the company had completed meetings with ratings agencies and investors but would be patient about refinancing amid credit-market volatility.

Subscriber trends and outlook

Peloton ended the quarter with 2.475 million paid connected fitness subscriptions, at the high end of its guidance range. Net churn was 1.7%, up 11 basis points from a year earlier, though that was a smaller year-over-year increase than the 37-basis-point rise reported in the preceding quarter.

Thacker said some one-time factors that had affected churn had normalized and that underlying churn had improved. Peloton continues to expect full-year net churn to be roughly flat compared with fiscal 2026.

For the second quarter, the company expects ending paid connected fitness subscriptions of 2.425 million to 2.445 million, a decline of approximately 8.5% year over year at the midpoint. Stern said the company was working to close the gap between subscriber additions and churn, with the new treadmill lineup representing a step toward that goal.

Peloton maintained its fiscal 2027 revenue forecast of $2.3 billion to $2.4 billion, implying a decline of approximately 4% at the midpoint. It also reiterated adjusted EBITDA guidance of $475 million to $525 million, gross margin guidance of approximately 54% and a free cash flow target of at least $350 million.

For the holiday-driven second quarter, Peloton forecast revenue of $625 million to $650 million and adjusted EBITDA of $85 million to $100 million. Thacker said the outlook balanced positive feedback on the refreshed treadmill lineup with uncertainty ahead of Black Friday, Cyber Monday and the winter holidays.

New products and commercial expansion

Peloton launched its folding Tread Flex alongside the Tread Vision and Tread+ Vision. Stern said the lower-priced Flex was designed to address affordability and space constraints, while the broader lineup targets different customer needs. He declined to provide detailed sales performance, saying it was still early in the quarter.

The company plans to launch hardware in an unspecified new category in fall 2027. It also introduced new features for its AI-powered Peloton IQ system, including running analysis and personalized pace targets. Stern said more than 1 million monthly active users engaged with Peloton IQ in September.

Revenue in Peloton’s commercial business unit grew 13% year over year in the first quarter. Stern said interest in the newly launched Commercial Series Bike and Tread had exceeded initial expectations, with gym operators and hospitality partners in trials or advanced discussions.

Stern said Peloton also sees the commercial business as a way to expand its branded products beyond the six countries where they currently operate, using the distribution network of its Precor business. Commercial equipment sales typically involve a longer consideration period, he noted, with some potential customers seeking trials before a broader rollout.

About Peloton Interactive (NASDAQ:PTON)

Peloton Interactive, Inc is a connected-fitness company that combines exercise equipment, digital content and subscription services. Its product portfolio includes the Peloton Bike, Bike+, Tread treadmill, Row rowing machine and related accessories, apparel and fitness products. The company's equipment is designed to connect users with live and on-demand instructor-led workouts through integrated screens and digital platforms.

Peloton offers subscription memberships that provide access to classes in cycling, running, strength training, yoga, meditation, rowing and other fitness disciplines.

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