0001639825-25-000185
SEC filingRevenue fell 6% YoY but net income turned positive; subscription margins improved while hardware margins were hurt by a recall.
For the three months ended September 30, 2025, Peloton reported total revenue of $550.8 million, a 6.0% decline from $586.0 million in the same period last year. The decrease was driven by a 4.5% drop in Connected Fitness Products revenue to $152.4 million and a 6.6% decline in Subscription revenue to $398.4 million. Despite the revenue contraction, gross profit fell only 6.6% to $283.7 million, with overall gross margin of 51.5% remaining relatively stable compared to 51.8% a year ago. Net income swung to $13.9 million from a loss of $0.9 million, reflecting improved operating leverage. Operating income surged to $41.3 million (7.5% margin) from $12.5 million (2.1% margin), aided by lower operating expenses. Adjusted EBITDA increased to $118.3 million from $115.8 million, and free cash flow improved to $67.4 million from $10.7 million.
Connected Fitness Products: Revenue fell 4.5% to $152.4 million due to lower demand and fewer deliveries, partially offset by higher Precor revenue. Gross margin deteriorated sharply to 6.9% from 9.2%, primarily because of a $13.5 million charge related to the voluntary recall of Original Series Bike+ seat posts. Excluding the recall, hardware margins would have improved due to a favorable product mix and lower warranty costs.
Subscription: Subscription revenue declined 6.6% to $398.4 million as ending Paid Connected Fitness Subscriptions fell to 2.732 million from 2.896 million and Paid App Subscriptions dropped to 0.542 million from 0.588 million. However, subscription gross margin rose to 68.6% from 67.8%, driven by lower music royalty costs. Subscription contribution margin (excluding D&A and stock-based compensation) improved to 72.6% from 71.7%, underscoring the scalability of the subscription model.
Peloton’s MD&A does not provide explicit forward revenue or earnings guidance. The company outlined its 2025 Restructuring Plan, which targets at least $100 million in run-rate cost savings by the end of fiscal 2026, with expected cash restructuring charges of ~$40 million and non-cash charges of ~$5 million. The plan includes headcount reductions, facility exits, and other efficiency measures. The voluntary recall of approximately 833,000 Bike+ units (U.S.) and 44,800 (Canada) may result in additional costs beyond the $16.5 million accrued. Management remains focused on improving profitability and cash flow, as evidenced by the strong free cash flow generation in the quarter. No new product launches or revenue catalysts were highlighted beyond the recently introduced Cross Training Series and Peloton Pro Series.
As of September 30, 2025, Peloton held $1,103.6 million in cash and cash equivalents, with an additional $46.0 million in restricted cash, bringing total cash, cash equivalents, and restricted cash to $1,149.6 million. Total assets were $2,170.1 million. The company's total debt, gross of unamortized discounts and issuance costs, was $1,536.5 million, comprising $199.0 million of 0.00% Convertible Senior Notes due 2026, $350.0 million of 5.50% Convertible Senior Notes due 2029, and $987.5 million outstanding under the Term Loan (due 2029). Stockholders' deficit stood at -$347.0 million, an improvement from -$413.8 million at June 30, 2025, driven by net income and other comprehensive income. Net inventory was $237.7 million, up from $205.6 million at year-end, with reserves of $113.2 million against gross inventory of $350.9 million.
The Notes disclose $60.5 million in future minimum payments under music license agreements as of September 30, 2025. Of this total, $58.7 million is due within the next 12 months (fiscal 2026 remaining), $1.3 million in fiscal 2027, $0.2 million in fiscal 2028, and $0.3 million in fiscal 2030. No other purchase commitments or contractual obligations are explicitly quantified in the Notes. The company also has a $100.0 million revolving credit facility that was undrawn as of period end.
No share buyback activity or dividend payments were disclosed. Capital expenditures totaled $4.5 million for the three months ended September 30, 2025, representing 0.8% of total revenue. Debt activity was limited to a $2.5 million principal repayment on the Term Loan. The company announced a new 2025 Restructuring Plan in August 2025, estimating additional cash restructuring charges of approximately $40.0 million and non-cash charges of approximately $5.0 million, expected to be substantially incurred by the end of fiscal 2026.
The company reports two segments: Connected Fitness Products and Subscription. For the three months ended September 30, 2025, Connected Fitness Products revenue was $152.4 million (down 4.5% YoY) with a Segment Adjusted Gross profit of $10.5 million (6.9% margin). Subscription revenue was $398.4 million (down 6.5% YoY) with a Segment Adjusted Gross profit of $273.2 million (68.6% margin). Geographically, North America contributed $494.4 million (89.8% of total revenue) and International contributed $56.5 million (10.2%). Revenue attributable to the United States was $475.3 million, or 86% of total revenue.
Operating cash flow of $71.9M far exceeded net income of $13.9M, indicating strong cash generation relative to earnings. Key non-cash add-backs included $16.8M depreciation, $47.2M stock-based compensation, and $14.8M non-cash lease expense. Working capital provided a net positive contribution, notably a $30.7M decrease in accounts receivable and a $4.7M increase in accounts payable, partially offset by a $30.0M inventory build and $21.1M lease liability payments.
Capex of $4.5M remained low relative to operating cash flow, yielding a strong free cash flow (CFO minus capex) of $67.4M. Investing activities also included $2.2M for business combinations and $0 proceeds from asset sales (vs. $4.2M prior year). Financing activities were minimal, with $2.5M in debt repayment and $0.8M net proceeds from employee stock plans. No share repurchases or dividends were paid. The company ended the quarter with $1,149.6M in cash, cash equivalents, and restricted cash, up from $1,085.8M at the start of the period.