Peloton Stock Gives Back Gains After Upbeat Earnings Report

Key Points

• Peloton reported stronger-than-expected third-quarter revenue, returned to profitability, and raised its free cash flow outlook as the company continues working through its long-running turnaround effort.
• Peloton’s commercial business was a strong performer during the quarter, with revenue rising 14% year over year, and could become a significant long-term growth opportunity for the company.
• Although shares initially rallied following earnings, the stock later gave back most of those gains, suggesting Wall Street may be waiting for more consistent signs that Peloton’s turnaround can drive sustainable growth.

Shares of Peloton Interactive Inc. NASDAQ: PTON have been attempting a comeback after hitting a 52-week low in mid-March.

The stock has climbed more than 40% since then, as the market has seemingly begun to buy into the idea that the company’s long-running turnaround effort may finally be gaining traction.

Peloton’s latest earnings report added to that optimism, with shares rallying after the company reported fiscal third-quarter 2026 results on May 7. However, the stock has since given back most of those gains, leaving some investors wondering whether it’s actually time to get back on the bike.

Peloton Delivers Encouraging Earnings

Peloton’s Q3 results for fiscal year 2026 (FY2026) offered some encouraging signs for investors. The company reported revenue of roughly $631 million, up 1% year over year and topping Wall Street expectations by nearly $13 million. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $126 million, up 41% from the previous year, while net debt declined 70% year over year.

The company also returned to profitability, reporting net income of $26 million. Earnings per share of 6 cents improved from a loss of 12 cents in the year-ago quarter, though results came in a penny below expectations. Gross margin rose 90 basis points year over year to 52%, but came in below the company’s guidance due to promotions on its connected fitness equipment.

Commercial Business and Spotify Partnership Offer Growth Opportunities

The commercial business unit was a strong performer during the quarter, with a 14% year-over-year rise in revenue. The company is looking to build on that momentum with the release of new commercial products, including a bike and a treadmill, expected in the second quarter.

In the company’s earnings call, Chief Executive Peter Stern addressed the opportunity in the commercial space, saying, “We see tremendous upside in this category as we estimate that we have only a 3% share of the more than $10 billion and growing global commercial fitness equipment market segment.”

Peloton also announced a partnership with Spotify Technology NYSE: SPOT, which will bring more than 1,400 classes to Spotify Premium users worldwide.

Guidance Offers a Mixed Picture

Peloton updated its 2026 outlook as well, increasing the midpoint of its 2026 revenue guidance to a range of $2.42 billion to $2.44 billion, and raising its free cash flow outlook to around $350 million, up $75 million from its prior minimum target.

On the flip side, the company lowered its total gross margin outlook by 50 basis points from earlier guidance to 52.5%. The adjusted EBITDA outlook remained in line with earlier guidance at $470 million to $480 million. The company said it expects ending paid connected fitness subscriptions to decline 8.6% year over year at the midpoint to a range of 2.55 million to 2.57 million.

Wall Street Remains Cautiously Optimistic

Investors initially cheered the report, with shares rising more than 16% at one point during the session before closing up nearly 9% for the day. In the sessions that followed, however, optimism appeared to fade as shares fell in three of the next five trading days, giving back nearly 11%. Currently, shares are trading roughly around where the stock closed before the earnings report.

Following the earnings release, Goldman Sachs Group, Inc. increased its price target on Peloton to $8 from $7, while Weiss Ratings modestly upgraded the stock from Sell (D) to Sell (E+), suggesting some improvement in the company’s outlook even though the firm maintained a bearish stance on the stock.

The current consensus rating on the stock is a Hold, with eight Hold ratings, five Buy ratings, and one Sell rating.

On average, Wall Street still sees meaningful upside for the stock over the next 12 months. The average price target of $8.25 is roughly 55% above the current share price.

Based on price targets issued or updated over the last year, analyst targets range from $5 to $12, though most targets imply upside from current levels.

Short Interest Has Improved, But Skepticism Remains

Short interest in Peloton shares has declined over the last few months, suggesting at least some investors may be becoming less bearish on the stock.

Total shares sold short fell from around 67 million shares in mid-February to about 54.5 million shares at the end of April. The percentage of float sold short declined from 16% to 13% during the period.

Peloton is still working through several challenges, including declining subscriptions and margin pressure. However, the company’s latest earnings report suggested its turnaround efforts may be gaining traction, as growth in the commercial business, improved profitability, and stronger free cash flow guidance offered encouraging signs.

Still, the stock’s inability to hold onto its post-earnings gains suggests investors may be waiting for more consistent signs that the turnaround can translate into sustainable long-term growth.