0001639825-26-000022
SEC filingRevenue grew 1.1% YoY to $630.9M driven by subscription price increases, while net income turned positive at $26.4M vs loss.
For the three months ended March 31, 2026, total revenue increased 1.1% YoY to $630.9 million. The growth was driven entirely by Subscription revenue, which rose 2.3% to $428.0 million, benefiting from price increases implemented in Q2 FY26. Connected Fitness Products revenue decreased 1.2% to $202.9 million due to lower unit sales, partially offset by higher Precor sales. Gross profit grew 2.9% to $327.3 million, with Subscription gross margin expanding to 71.1% (from 69.0%) on price increases and lower music royalty costs, while Connected Fitness gross margin contracted to 11.3% (from 14.3%) due to promotional discounts, product mix, and tariff costs. Operating expenses fell sharply, down 21.6% to $274.8 million, driven by lower sales and marketing and general and administrative costs, including reduced headcount and stock-based compensation. Net income swung to $26.4 million from a loss of $47.7 million, and Adjusted EBITDA rose to $126.2 million from $89.4 million.
The Subscription segment remains the profit engine, with contribution margin of 74.4% (up from 72.9%) and gross margin improvement despite a decline in paid subscriptions (Connected Fitness subs down 7.6% YoY to 2.662 million; App subs down 8.9% to 0.522 million). Connected Fitness Products continue to face margin pressure from higher promotional activity and import tariffs, though the segment’s revenue decline moderated. The launch of the Cross Training Series in October 2025 has not yet reversed hardware trends. Free cash flow generation improved significantly to $150.5 million from $94.7 million, supported by working capital improvements.
Management’s outlook focuses on the 2025 Restructuring Plan, targeting at least $100 million in run-rate savings by the end of fiscal 2026 (June 30, 2026). Expected remaining cash restructuring charges of $15 million and non-cash charges of $5 million will be incurred through year-end. The voluntary recall of Original Series Bike+ seat posts continues to accrue costs, with $7.2 million reserved as of March 31, 2026. No specific revenue or earnings guidance was provided, but the company highlighted improving operating leverage and cash flow. Key risks include tariff exposure (now Section 122 at 10%, with Section 232 removed for fitness equipment) and ongoing subscriber attrition.
As of March 31, 2026, Peloton held $1,126.3 million in cash and cash equivalents, up from $1,039.5 million at June 30, 2025. Total assets were $2,017.4 million, while total liabilities stood at $2,259.3 million, resulting in a stockholders' deficit of $241.9 million (improved from a deficit of $413.8 million at June 30, 2025). Inventory net of reserves was $175.8 million, down from $205.6 million, with reserves of $88.7 million against gross inventory of $264.4 million. Deferred revenue was $95.6 million, and customer deposits were $55.0 million.
The Notes disclose $122.1 million in future minimum payments under music license agreements as of March 31, 2026. These are broken down as: $15.0 million remaining in fiscal 2026, $63.0 million in fiscal 2027, $28.8 million in fiscal 2028, $15.2 million in fiscal 2029, and $0.1 million thereafter. Additionally, debt maturities (gross of discounts and issuance costs) total $1,332.5 million, with $2.5 million remaining in fiscal 2026, $10.0 million in fiscal 2027, $10.0 million in fiscal 2028, $960.0 million in fiscal 2029, and $350.0 million in fiscal 2030.
No share buybacks or dividends were disclosed. The company repaid $199.0 million in aggregate principal of its 0.00% Convertible Senior Notes due 2026 upon maturity in February 2026. Capital expenditures were $7.6 million for the nine months ended March 31, 2026, representing 1.2% of total revenue. The company has a $100.0 million revolving credit facility that remained undrawn as of March 31, 2026.
The company reports two segments: Connected Fitness Products and Subscription. For the three months ended March 31, 2026, Connected Fitness Products revenue was $202.9 million (down 1.3% YoY) with Segment Adjusted Gross profit of $22.9 million. Subscription revenue was $428.0 million (up 2.3% YoY) with Segment Adjusted Gross profit of $304.3 million. Geographically, North America contributed $572.2 million (90.7% of total revenue) and International $58.7 million (9.3%) for the quarter. The United States alone accounted for $548.2 million (87% of total revenue).
Operating cash flow of $296.5M significantly exceeded net income of $1.6M, driven by non-cash charges including $155.6M stock-based compensation, $45.7M depreciation, and $34.7M impairment. Operating cash flow improved 37% year-over-year due to favorable working capital changes, such as $38.4M inventory reduction and $37.9M decrease in prepaid expenses. Capital expenditures remained modest at $7.6M, reflecting low asset intensity. Financing cash flow was negative $203.8M due to $199.0M repayment of convertible notes and $7.5M term loan repayment, partially offset by equity plan proceeds. The company generated strong operational cash flow but deployed it primarily to reduce debt. No dividends or share repurchases were reported.